Cyient’s revenue from its design, engineering, and technology (DET) segment, which accounts for 80% of its total revenue, saw a slight sequential decline in the January-March quarter due to seasonality and changes in customer purchasing patterns. Multi-year purchase orders have been replaced with shorter, more cautious commitments, Karthik Natarajan, executive director and CEO, told FE.
“(Earlier), customers were willing to give us purchase orders (PO) for three-four years upfront. But in Q4, they were willing to give us a one-year PO, saying that they would replenish the order during part of the execution in the next year,” Natarajan said.
The engineering and tech services company reported its Q4 earnings for FY24 last week. The company’s operating revenue rose to Rs 1,860.7 crore in the March quarter against Rs 1,821.5 crore reported in the preceding quarter, while profit after tax increased to Rs 189.2 crore from Rs 147.2 crore.
Additionally, the connectivity sector, a significant component of Cyient’s portfolio, faced headwinds in January-March due to customers delaying significant projects. This included postponing the construction phases of fibre rollout, impacting the immediate revenue potential despite robust design phase completions in previous periods.
However, the aerospace, sustainability, and automotive sectors have shown robust growth, with achievements like a 20% increase in aerospace over the last fiscal. Natarajan remains optimistic about these areas, indicating ongoing growth despite occasional fluctuations.
Further, even as the company added 25 new clients in FY24, the rate of addition varied, reflecting a strategic selectivity in pursuing clients who offer longer-term growth potential rather than short-term gains. Natarajan clarified, “We are being more selective, focusing on clients who can support a three-five-seven-year growth trajectory rather than those offering only a 12-month visibility.”
Despite these challenges, Cyient anticipates a high single-digit revenue growth in FY25. The company’s order book has shown resilience with a 15% growth in order intake on a like-to-like basis in FY24. However, until global central banks cut their rates, discretionary spending will be limited, he said.
“Whatever capital customers had, they were able to spend it during the lower interest rate regime. As the interest rate has gone up in the last 18 months, it is not something that is going to go away. And for customers wanting to acquire new debt, at elevated interest levels it is not going to be easy for them to go and secure that. So, they will probably wait for a few more months,” Natarajan said.
Looking ahead to FY25, Cyient sees potential growth areas in sustainability and parts of aerospace and automotive sectors, while expecting challenges in high-tech and rail sectors. Geographically, Europe is poised for stronger growth compared to North America, aligning with the company’s strategic focus areas.
Cyient plans a conservative approach to hiring, with a focus on integrating automation and AI to enhance productivity and efficiency. The company has trained 1,070 technical leaders in GenAI, aiming to leverage these skills to improve operational efficiencies and decision-making processes.
Cyient is exploring new opportunities in GenAI across various customer support roles. An example of this is a project with a European automotive OEM to integrate WhatsApp with their application.