Future growth expectations in sales/revenue/volumes?

The company is targeting revenue of Rs. 760 crores for the financial year 2022-23 with a 15% EBITDA margin. Q1 showed 12% year-on-year growth in revenue, indicating positive momentum. New lines of business and investments, including cybersecurity operations, cloud transformation, and 5G-related services, are expected to contribute significantly. The company has a healthy sales funnel and secured intentions to expand in existing US accounts and signed eight new logos in Q1 with potential to scale to million-dollar accounts. Management is confident of closing large deals, including India

Future growth expectations in earnings/operating earnings/profits/EPS?

Management targets revenue of Rs. 760 crores and Rs. 15 crores profit for the financial year 2022-23. Q1 showed a 12% year-on-year revenue growth and positive operating PBT of Rs. 0.3 crores. Expect cost optimization actions from Q1 to positively impact margins in Q2 and beyond. Management is confident of delivering profitability quarter-on-quarter without relying on foreign exchange gains. The company aims to build a strong order book of Rs. 100-150 crores from new high-value businesses, especially in cloud transformation and cybersecurity. Incremental revenue growth from recent new logos and

Current/ Expected Orderbook/ Pending Orders?

The company is focusing on building a strong order book of around Rs. 100 to 150 crores from next-generation, high-value deals. Several large deals in Indian PSUs related to infrastructure management services are in high-probability stages. In the global market, the focus is on existing accounts for cloud transformation and cybersecurity operations, with potential deals valued around $10-15 million over three years. Around eight new logos were signed in Q1, each with potential to scale up to a million-dollar account. The company has secured additional business expansions in its top 2-3 US cust

Any current/future capex/capital investment/strategic investment?

Q1 CAPEX was around Rs. 6.8 crores. Continued investments in building cognitive computing service platforms, 5G lab as a service, and Oracle COE. Launched a Center of Excellence at IIT Research Park, Chennai, focusing on cognitive computing and 5G lab. Established Oracle COE in Tirunelveli with 100 engineers being trained. Investments in US-based company Exium and partnerships like CoreStack to boost technology offerings (5G as a service, cloud-powered services). A separate "build" business unit led by a senior leader with independent P&L to drive these investments towards monetization. Target

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3i Infotech LtdQ2 FY22IT - Software

3i Infotech Ltd Q2 FY22 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹17.2P/E: 6.2Market Cap: ₹362 CrSector: IT - Software

Management growth scorecard

Revenue

Category 3

Margin

Category 1

Fundraise

N/A

Order

Yes

Capex

Yes

3 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→The company is targeting revenue of Rs. 760 crores for the financial year 2022-23 with a 15% EBITDA margin.
→Q1 showed 12% year-on-year growth in revenue, indicating positive momentum.
→New lines of business and investments, including cybersecurity operations, cloud transformation, and 5G-related services, are expected to contribute significantly.
→The company has a healthy sales funnel and secured intentions to expand in existing US accounts and signed eight new logos in Q1 with potential to scale to million-dollar accounts.
→Management is confident of closing large deals, including Indian PSUs and global cloud transformation projects valued at $10-$15 million over three years.
→Growth is expected to come from building scale, enhancing margins, and accelerating as a challenger through structured investments and new P&L units focused on monetizing innovations.
→The company sees an order book target of Rs. 100 to 150 crores from next-generation deals this year.
→Efforts on controlling attrition and building capacity in Tier-2/3 cities aim to strengthen resources and sustain growth.

Margin guidance

Category 1

→Management targets revenue of Rs. 760 crores and Rs. 15 crores profit for the financial year 2022-23.
→Q1 showed a 12% year-on-year revenue growth and positive operating PBT of Rs. 0.3 crores.
→Expect cost optimization actions from Q1 to positively impact margins in Q2 and beyond.
→Management is confident of delivering profitability quarter-on-quarter without relying on foreign exchange gains.
→The company aims to build a strong order book of Rs. 100-150 crores from new high-value businesses, especially in cloud transformation and cybersecurity.
→Incremental revenue growth from recent new logos and upselling in existing accounts anticipated to improve earnings.
→Focus on achieving predictable revenues and profits to attract institutional investors for long-term partnerships.
→Employee cost control efforts and attrition mitigation expected to improve operational efficiency and margins.
→Profitable ongoing operations and positive EPS expected by end of Q2 or shortly thereafter.

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Fundraise plans

- There is no mention of any new long-term debt being taken by the company recently. - The company is managing its cash flows effectively and has been able to pay employees without cash flow issues. - The company is engaging with institutional and anchor investors, with renewed interest in the business. - Management expressed confidence that as profits become more predictable, these investor interests may convert into long-term partnerships or investments. - No specific plans for fresh fundraising through equity or debt were stated during the call. - Employee stock options schemes exist but no substantial new allocations have been made recently to avoid significant dilution. Some small measured allocations may continue for talent retention. Overall, no concrete announcements about impending fundraise via debt or equity were disclosed as of this call. The company is focused on profitability and operational momentum before pursuing such steps.

Order book

Yes

→The company is focusing on building a strong order book of around Rs. 100 to 150 crores from next-generation, high-value deals.
→Several large deals in Indian PSUs related to infrastructure management services are in high-probability stages.
→In the global market, the focus is on existing accounts for cloud transformation and cybersecurity operations, with potential deals valued around $10-15 million over three years.
→Around eight new logos were signed in Q1, each with potential to scale up to a million-dollar account.
→The company has secured additional business expansions in its top 2-3 US customers.
→Overall, Q1 saw good momentum with a healthy pipeline worth $5-7 million in cybersecurity, cognitive computing, cloud-first, and automation-led services.

Capex plans

Yes

→Q1 CAPEX was around Rs. 6.8 crores.
→Continued investments in building cognitive computing service platforms, 5G lab as a service, and Oracle COE.
→Launched a Center of Excellence at IIT Research Park, Chennai, focusing on cognitive computing and 5G lab.
→Established Oracle COE in Tirunelveli with 100 engineers being trained.
→Investments in US-based company Exium and partnerships like CoreStack to boost technology offerings (5G as a service, cloud-powered services).
→A separate "build" business unit led by a senior leader with independent P&L to drive these investments towards monetization.
→Targeting around Rs. 100 crores of order book from these new investments/business lines.
→Setting up indigenous sovereign cloud in Malaysia in partnership with Oracle and the Malaysian government.
→Focus on Tier-2 and Tier-3 cities for talent pool expansion to manage attrition and cost.

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13i Infotech Ltd

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