Orient Technologies Ltd — Q3 FY26

Orient Technologies Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=yNVq0G6yl7Y Published: 2 months ago

0:01 1 second Good afternoon ladies and gentlemen. I am Dolvin, moderator for this conference. Welcome to the conference call of Orient Technologies Limited 0:09 9 seconds arranged by concept investor relations to discuss its Q3 and 9month FY26 results. 0:16 16 seconds We have with us today Mr. Ajay Sawant Chairman and managing director, Mr. 0:22 22 seconds Shrihari, Chief Executive Officer and Mr. Gorav Modi, Chief Financial Officer. 0:30 30 seconds At this moment, all participants are in listenonly mode. Later, we will conduct a question and answer session. At that 0:38 38 seconds time, if you have a question, please press star and one on your telephone keypad. 0:43 43 seconds Please note this conference is being recorded. 0:47 47 seconds I would now like to hand over the floor to Mr. AJ Sawan. Thank you and over to you sir. Thank you Ramen. 0:56 56 seconds Good evening ladies and gentlemen. 0:59 59 seconds Thank you for joining Orient Technologies Limited's Q3 and 9month FY26 earning call. We truly appreciate 1:07 1 minute, 7 seconds your time and continued interest in our company. Firstly, I would like to give you some background about the company 1:16 1 minute, 16 seconds then move on to the highlight of the financial and operational aspect of Q3 and 9 month of FY26. 1:23 1 minute, 23 seconds Post which we shall proceed to the question and answer session wherein my colleagues shall do our best to answer your queries. 1:33 1 minute, 33 seconds Q3 was a challenging quarter due to global semiconductor shortages and supply chain disruptions 1:41 1 minute, 41 seconds which impacted hardware availability and led to pricing pressures. Despite these headwinds, we executed committed orders 1:50 1 minute, 50 seconds to maintain strong customer relationships. Though this resulted in temporary margin pressure 1:57 1 minute, 57 seconds on the services sides, the loss of a large telecom client impacted revenue and margins during the quarter. Looking 2:06 2 minutes, 6 seconds ahead, while supply side challenges may continue in the year term, our focus 2:12 2 minutes, 12 seconds remains on managed services dash cyber security and unified infrastructure management. 2:20 2 minutes, 20 seconds We are confident this strategy will support recovery and long-term sustainable growth. 2:27 2 minutes, 27 seconds Now coming to the financials on a standalone basis in Q3 FY26 revenue from operations stos at rupees 2:36 2 minutes, 36 seconds 200.10 crores compared to rupees 26.85 85 crores 2:44 2 minutes, 44 seconds of Q3 202 with respect to Q3 of FY25 reflecting a 4.17% 2:52 2 minutes, 52 seconds yearon-year decline. EBITA for the quarter was rupees 3.02 crores. The 2:59 2 minutes, 59 seconds company reported a loss before exceptional items and tax of rupees 1.41 crores and a net loss of 14.96 crores during the quarter. 3:10 3 minutes, 10 seconds For the 9 months ended FY26, revenue grew by 18.10% yearon year to rupees 683.60 3:19 3 minutes, 19 seconds crores compared to 578.85 crores in 9 month FY25. 3:25 3 minutes, 25 seconds IVITA stood at rupees 42.31 cr with profit before exceptional items and tax of rupes 31.90 crores and profit after 3:34 3 minutes, 34 seconds tax of rupes 9.24 24 crlating to an EPS of rupees 2.02. 3:41 3 minutes, 41 seconds In terms of Q3 FI26 segment mix, telecommission contributed 2.47%. 3:48 3 minutes, 48 seconds BFSI 27.39%. 3:51 3 minutes, 51 seconds Government and PSU 19.19% its 19.17% 3:58 3 minutes, 58 seconds and midmarket and others contributed to 31.78%. 4:04 4 minutes, 4 seconds which includes sectors such as healthcare, manufacturing, infrastructure, real estate, logistics and education. 4:12 4 minutes, 12 seconds During the quarter, Oriental Technology secured multiple new contracts across government, pharma, utilities, and digital commerce, strengthening its 4:21 4 minutes, 21 seconds services rate growth. A key win was a three-year managed services contract from Digital India Corporation worth 4:29 4 minutes, 29 seconds around rupees 15 crores to manage platforms such as UMG and Digilocker 4:35 4 minutes, 35 seconds reinforcing its presence in mission critical government projects. The company also secured a rupees 2.65 65 4:44 4 minutes, 44 seconds crore order from a leading pharma plant for data center storage and infrastructure upgrade and a similar 4:51 4 minutes, 51 seconds size contract from a power utility for data center expansion and disaster recovery implementation 4:58 4 minutes, 58 seconds in the quick commerce orient rupees 2.8 8 crore rupees of a SD van contract 5:06 5 minutes, 6 seconds along with an additional rupees 6 cr order for full network deployment including firewall and Wi-Fi solution. 5:15 5 minutes, 15 seconds Additionally, the company inaugurated a new service delivery center in Navi Mumbai Kurbay to enhance 24x7 monitoring 5:25 5 minutes, 25 seconds cyber security cloud and managed services capabilities. 5:29 5 minutes, 29 seconds With this I come to the conclusion of my opening remarks and open the floor for question and answer session. 5:37 5 minutes, 37 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone 5:46 5 minutes, 46 seconds telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are 5:53 5 minutes, 53 seconds requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. 6:03 6 minutes, 3 seconds Our first question comes from the line of Mahesh Kumar from MUM Invest Limited. Please go ahead. 6:11 6 minutes, 11 seconds Hello sir, thank you for the opportunity uh given to me to ask the question. Am I audible properly? Yeah, ma'am. Go ahead. I can hear you. 6:19 6 minutes, 19 seconds So yeah, so I just uh wanted to ask like Q3 saw a very sharp decline of IBIDA to 6:26 6 minutes, 26 seconds 3.95 crores uh and uh you know PBT turning negative. So could you help us understand like how much of this margin 6:33 6 minutes, 33 seconds pressure was purely supply chain driven versus the impact of hypers scale client loss and importantly when should we you know expect this margin to normalize? 6:43 6 minutes, 43 seconds Okay. So Mish uh there are two components to this. One of the component which is because of the supply chain uh 6:50 6 minutes, 50 seconds the rate contract which we have signed with the customers has the you know uh we have to execute those contracts uh at 6:59 6 minutes, 59 seconds the same price keeping in mind that our long-term association with the customers you know though the OEM has increased the prices 7:08 7 minutes, 8 seconds we have to execute the contracts at the same price which we have signed up earlier and this 7:14 7 minutes, 14 seconds is there till 31st March mean even Q4 we have that obligation and we'll be executing certain deals which are of 7:23 7 minutes, 23 seconds that size of course loss of a hypers scale customer which is there which is from a telecom segment we have you know 7:32 7 minutes, 32 seconds loss but that's a momentary one-time loss which we have incurred in Q3 7:40 7 minutes, 40 seconds okay okay and so the uh digital India corporation contract with 15 gross you know 15 plus cr average quarterly billing appears meaningful. Could you 7:49 7 minutes, 49 seconds elaborate on the margin profile of this engagement and whether this trends in the annuity and recurring uh revenue mix going forward? 7:57 7 minutes, 57 seconds Fantastic. So Mahisha of course it's a annut based contract 15 cr repeated every quarter this is happening so 8:06 8 minutes, 6 seconds yearly this may contribute or 60 cr rupes of a revenue. This is ARR and this contract is there for minimum three 8:14 8 minutes, 14 seconds years extended further. So this is annut based number one and the margin currently is fairly good and you know 8:23 8 minutes, 23 seconds it's basically on the hyperscaler. So there's no component dependency on this. 8:28 8 minutes, 28 seconds Okay. So we'll continue to get margins on this from our hyperscaler vendor. 8:34 8 minutes, 34 seconds Okay. Okay. Okay. And uh lastly sir given the continued supply side headwinds in to Q4 uh how should we 8:42 8 minutes, 42 seconds think about revenue growth in aida trajectory for FI27 and are we positioning this for recovery and margin expansion next year? 8:50 8 minutes, 50 seconds Yeah. So I'm very uh hopeful about uh you know this pressure of margin will not be there in the coming year. The 8:57 8 minutes, 57 seconds reason being by that time most of the customer will start accepting the new prices and we'll get used to it and my uh firm 9:07 9 minutes, 7 seconds contract which I have signed which is till the year end will get over as well. 9:13 9 minutes, 13 seconds Okay. Okay. Okay sir. Okay. Thank that's it from my sir. Thank you so much for answering my question. Thank you. 9:21 9 minutes, 21 seconds Thank you ladies and gentlemen. You are requested to please restrict yourselves to two questions only. You may rejoin the queue if you have follow-up questions. 9:31 9 minutes, 31 seconds Our next question comes on the line of Shashi Kant from Brightermind Equity Advisor Private Limited. Please go ahead. 9:38 9 minutes, 38 seconds Uh hi sir. Uh good afternoon. Thank you for giving me the opportunity. Uh my question is about the you know big 9:45 9 minutes, 45 seconds pipeline uh that we are having uh you know in terms of the order book for the next year April 27. 9:55 9 minutes, 55 seconds Okay. So Shashikant thanks for asking this. Uh the current order book for Q4 10:01 10 minutes, 1 second is of around 200 cr rupees which includes our infrastructure deployment projects as well as cloud and managed 10:09 10 minutes, 9 seconds services contract. While project revenue remains significant. 10:13 10 minutes, 13 seconds Currently we expect annuity style managed services share to increase going forward as knock and sock you know revenue will scale. 10:26 10 minutes, 26 seconds Okay. Uh so I mean uh are we trying to you know uh bid more of uh government 10:34 10 minutes, 34 seconds projects uh in coming years or you're looking more on the private side. 10:40 10 minutes, 40 seconds So we are not only dependent only on the government and PSUs but we are also working well with the enterprise and the 10:47 10 minutes, 47 seconds mid-market segment. Our actual sweet spot if you see in our segment make is in the mid-market segment which is contributing to more than 31.78%. 10:59 10 minutes, 59 seconds As I mentioned in my opening remarks okay uh so currently how you are saying that there are lots of hyperscaler 11:07 11 minutes, 7 seconds coming to India. So uh you know uh what is uh you know our outlook on capturing new logos from these players 11:16 11 minutes, 16 seconds in coming years? So from a GTM perspective we are working on the various front uh new hyperscalers or the 11:24 11 minutes, 24 seconds people who are trying to build hyperscalers in India is one of the focus along with uh GCC 11:32 11 minutes, 32 seconds uh you know gift cities people coming into the gift cities and the GCC are the next focus for us to increase our you know business. 11:43 11 minutes, 43 seconds Oh okay. Uh so on hardware front so uh what is the I mean current status of the semiconductor sage currently 11:53 11 minutes, 53 seconds the semiconductor challenge will be throughout 2027 okay mean the entire FY27 12:00 12 minutes is there will be a challenge okay okay thank you sir that's my 12:10 12 minutes, 10 seconds thank you our next question comes from the line of Vikas Jen and in individual investor please go ahead. 12:19 12 minutes, 19 seconds Hi sir this is Vikas. So sir my question is regarding the 14.96 cr loss which you mentioned. So 12:27 12 minutes, 27 seconds future are we expecting some recovery from this particular client? 12:32 12 minutes, 32 seconds Uh from the same customer probably we will not able to recover anything because he has moved log stock barrel 12:39 12 minutes, 39 seconds from us to directly on the hyperscaler vendor. So very obviously let me tell 12:46 12 minutes, 46 seconds you this loss I'll not able to recover it from this customer but uh we are trying to recover this loss from the 12:54 12 minutes, 54 seconds hyperscaler itself but today I will not able to promise you anything until unless I have something uh in return 13:02 13 minutes, 2 seconds from the hyperscaler vendor and once we get it we can able to vouch for it. 13:09 13 minutes, 9 seconds Answer the second question is regarding uh last in last part you mentioned that you are working in a foreign bank and so 13:17 13 minutes, 17 seconds could you please put some light on that uh foreign bank foreign bank yeah so there is a uh 13:26 13 minutes, 26 seconds already the work is in progress there we already got certain orders from that bank okay we are preparing lot of uh 13:34 13 minutes, 34 seconds reporting for them in terms of digital transformation so good amount of business we have started doing with this bank. 13:44 13 minutes, 44 seconds Okay sir. Thank you so much sir. Thank you. Thank you. 13:51 13 minutes, 51 seconds The next question comes from the line of Prim and individual investor. Please go ahead. Uh hello am I audible? 13:59 13 minutes, 59 seconds Yeah Prem you can go ahead. 14:01 14 minutes, 1 second Yeah. Thank you for the opportunity. So my first question is what is the current net debt position and debt to equity ratio as of Q3 FY26? 14:12 14 minutes, 12 seconds Can you repeat your question? 14:14 14 minutes, 14 seconds Yeah. What is the current net debt position and debt to equity ratio as of this quarter? 14:21 14 minutes, 21 seconds Bad debt position. Net debt position. 14:24 14 minutes, 24 seconds I asking debt position. Yeah. Debt position. Hello. Okay. Yes. Yes. 14:30 14 minutes, 30 seconds So currently our debt is at 5250C cr. Okay. 14:38 14 minutes, 38 seconds Okay. What else you ask? Yeah. 14:41 14 minutes, 41 seconds And Okay. And what is your debt to equity ratio? Debt to equity. Hello. 14:51 14 minutes, 51 seconds Yes. Yes. 14:53 14 minutes, 53 seconds Yeah. You you want debt to equity ratio, right? Yes. Yes. 14:58 14 minutes, 58 seconds Yeah. So if you calculate my debt is around 52.5 and if you calculate my equity currently 15:05 15 minutes, 5 seconds you know is around 340CR okay and and my second question is sir 15:13 15 minutes, 13 seconds how competitive is the midm market uh IT infrastructure space currently and are you witnessing any pricing pressure? 15:24 15 minutes, 24 seconds Uh so yes so the pricing has gone up definitely for all the components and that's why all the OEMs has increased the prices. So that's very common in our industry. 15:35 15 minutes, 35 seconds uh as far as our margins are concerned uh just to keep a relationship with the customer. Somehow we are trying to get 15:43 15 minutes, 43 seconds their uh budgets you know in accordance with the new price structure which 15:50 15 minutes, 50 seconds nobody has probably thought in while budgeting the year 15:58 15 minutes, 58 seconds the pressure is definitely there margin pressures are definitely there. 16:02 16 minutes, 2 seconds Okay. Okay. And sir uh one last question uh what is the current revenue share from cloud data center and managed services business. 16:12 16 minutes, 12 seconds So uh you can take cloud is around 250 plus crores. Uh okay managed services uh 16:20 16 minutes, 20 seconds including infrastructure managed services is around 100 plus. Okay. Uh okay that's it from my side. 16:29 16 minutes, 29 seconds Thank you. 16:32 16 minutes, 32 seconds Thank you. Our next question comes from the line of Akash Agarwal from PNB Bank. Please go ahead. 16:40 16 minutes, 40 seconds Hello. Hi Akash. Yeah. Hi. Am I audible sir? Yeah. Go ahead. 16:46 16 minutes, 46 seconds Yeah. I just wanted to ask that uh in the market currently there's AI disruption going on. So how is the company will cope up with this uh AI 16:54 16 minutes, 54 seconds disruption and will it affect the company in future? 16:59 16 minutes, 59 seconds uh I would prefer this is boon for all of us. I will not call it as a disruption as such. It is actually good 17:07 17 minutes, 7 seconds for us because that's where the business opportunities will be there you know in terms of infrastructure in terms of 17:14 17 minutes, 14 seconds managed services uh in terms of uh opportunities in terms of cyber security. I see this as a big big 17:23 17 minutes, 23 seconds opportunity and that is where we are all getting oursel skilled for and this is 17:30 17 minutes, 30 seconds where we are trying to uh take this opportunity with both hands and grab this to the and take this organization 17:38 17 minutes, 38 seconds to the next level because such in disruptions actually helped uh Orient to grow for last three decades. uh just to 17:47 17 minutes, 47 seconds tell you when we started this organization way back in 1997 the first disruption we saw was a Y2K everybody 17:55 17 minutes, 55 seconds you know uh was worried about Y2K what will happen to all their applications 18:02 18 minutes, 2 seconds and you know IT industry grew because of the Y2K then comes the DR 18:10 18 minutes, 10 seconds okay disaster recovery so you know all those buzzwords Today I feel AI is another buzz word 18:19 18 minutes, 19 seconds and that creates an opportunity for IT companies like Orient and we capitalize on to it in terms of 18:29 18 minutes, 29 seconds uh you know infrastructure sale or a managed services sale, cyber security sale and we are all prepared for it. 18:41 18 minutes, 41 seconds Okay. So thank you. Thank you. 18:45 18 minutes, 45 seconds Thank you. Our next question comes from the line of Chinmai Sha, an individual investor. Please go ahead. 18:53 18 minutes, 53 seconds Uh thanks for the opportunity. Am I audible? Yeah, go ahead. Go ahead. Go ahead. 18:58 18 minutes, 58 seconds Yeah. Yeah. Can you uh sir, can you uh give some uh color on what is your current uh sock and no center status? I mean in terms of revenue and what margin we are expecting. 19:10 19 minutes, 10 seconds Okay. So let me share the good news today is that uh our knock and sock 19:17 19 minutes, 17 seconds operations at Turb is working fully in operational. 19:23 19 minutes, 23 seconds So in the last quarter we started our business from the sock but from a 19:30 19 minutes, 30 seconds revenue quantum of revenue perspective we expect utilization and ramp up over 19:36 19 minutes, 36 seconds next 24 to 36 months as enterprise contracts and the managed services migrations complete and the new soft 19:44 19 minutes, 44 seconds deals come on board the ramp up profiles aligns with our typical managed service 19:50 19 minutes, 50 seconds contract cycles. So I I expect that 100% utilization of that knock and sock should happen in next couple of years. 20:02 20 minutes, 2 seconds Okay. Okay. Uh can you know just uh you know currently the government in recent budget have declared good amounts for data center right? So what's your view 20:11 20 minutes, 11 seconds on that how it is you know uh uh applicable or you know in revenue generation or finding a good customer in that sense. 20:18 20 minutes, 18 seconds Yeah. So government is actually uh you know doing lot of investment or allowing people to invest to build their data 20:27 20 minutes, 27 seconds centers in India because India is considered to be IT hub but that's mainly because of the application 20:35 20 minutes, 35 seconds development and a servicement uh services perspective. 20:39 20 minutes, 39 seconds We do not we are not a manufacturing hub as such. So that is where India is going 20:45 20 minutes, 45 seconds to invest in the data center business and that's where big guys are building a 20:52 20 minutes, 52 seconds data center and organization like us who will be managing those data centers in terms of managed services cyber security knock and sock. 21:06 21 minutes, 6 seconds Okay, we can answer one last question. 21:08 21 minutes, 8 seconds Now sir, can we consider the Dino system as our closest competitor? 21:16 21 minutes, 16 seconds Uh they are good friend of us. Uh naturally I I I don't consider them as a 21:22 21 minutes, 22 seconds competitor as such. Okay. Uh they are doing their business. Uh their business profile is slightly different than our 21:30 21 minutes, 30 seconds business profile. Okay. So I will not uh like to say that they are a competitor to us. 21:38 21 minutes, 38 seconds Okay. Thanks. I will join that. Thank you. 21:43 21 minutes, 43 seconds Thank you. Ladies and gentlemen, to ask a question, you may press star and one. 21:48 21 minutes, 48 seconds Our next question comes from the line of Kopa Kamar for an individual investor. Please go ahead. Hello. Am I audible? 21:57 21 minutes, 57 seconds Yes ma'am. 21:59 21 minutes, 59 seconds Good evening. Uh and thanks for the opportunity. So basically I just wanted to understand you know in terms of the semiconductor uh shortages. So I mean do 22:08 22 minutes, 8 seconds we expect this supply chain challenge to continue? 22:13 22 minutes, 13 seconds Ma'am uh with a heavy heart I'm saying this this will continue throughout the year. 22:20 22 minutes, 20 seconds All right. So I mean can you please explain the impact it would have you know going forward in our operations? 22:26 22 minutes, 26 seconds Okay. So I'll tell you the real scenario what has happened is there's a big boom coming on and around AI. 22:34 22 minutes, 34 seconds Everybody wants to do something in AI. 22:38 22 minutes, 38 seconds Okay. Whether it's a generative AR or whether it's the agentic AI, they want to do something in AI. Now AI will be 22:45 22 minutes, 45 seconds operated only on the GPUs and that's where the Nvidia plays a very important role. 22:52 22 minutes, 52 seconds There are so much of you know uh infrastructure pull on and around this 22:58 22 minutes, 58 seconds Nvidia has happened and those guys are taking lots of RAMs disk and other 23:07 23 minutes, 7 seconds components where the semiconductor industry is facing the challenge if they consume so much as you know AI 23:15 23 minutes, 15 seconds requires the huge infrastructure and that's where the shortage has come 23:23 23 minutes, 23 seconds and that has increased the prices and this you know semiconductor industry 23:31 23 minutes, 31 seconds you can't start you know overnight you need to have a minimum 8 to 10 23:38 23 minutes, 38 seconds months of time to build your own manufacturing setup of these rams or disk or anything. 23:47 23 minutes, 47 seconds So if they have to ramp up their production, they need to give at least 8 to 10 months of window. 23:57 23 minutes, 57 seconds All right. So basically it would at least take one year for things to normalize in terms of supply uh issues, right? Yeah. 24:05 24 minutes, 5 seconds Okay sir. So apart from that also just wanted to understand you know our road map regarding the geographic expansion. 24:12 24 minutes, 12 seconds So I mean as of now we are majorly focused on domestic market. So any plans on expanding you know in US market as well? 24:20 24 minutes, 20 seconds Uh absolutely no at present because uh from a infrastructure space this is not 24:27 24 minutes, 27 seconds the right time to go anywhere outside India. There's a huge huge opportunity in India. Okay. And first we need to 24:35 24 minutes, 35 seconds capitalize here then go to the developed countries. Okay. All right. That's it from my side. 24:43 24 minutes, 43 seconds Thank you so much. Thank you ma'am. 24:46 24 minutes, 46 seconds Thank you. Our next question is a followup from Chinmay Sha an individual investor. Please go ahead. 24:53 24 minutes, 53 seconds Uh thanks again for the opportunity. Uh sir just one uh query regarding our 25:00 25 minutes clients generally uh we don't have any advances or something like that with our customer or it can happen again also. 25:10 25 minutes, 10 seconds So chin this is a hyperscaler customer as you say you know so they are all pay per use 25:17 25 minutes, 17 seconds okay okay so you can't take advance no on that oh okay got it so got 25:26 25 minutes, 26 seconds yeah yeah yeah okay got uh uh as I see our last seven eight quarters we are maintaining oper operating margin of 25:33 25 minutes, 33 seconds around between 8 to you know 10% so should we consider from next quart onwards it would be the 25:40 25 minutes, 40 seconds So we don't predict any margin in the for a future business. So very honestly I not able to comment on that. 25:48 25 minutes, 48 seconds No I get it sir but uh you know this time only we have you knowh came to only operating margin of 1% due to that loss and I think maybe 4 cr is due to labor 25:57 25 minutes, 57 seconds loss right. Uh but in future one of the factor was labor laws another factor was because of this 26:04 26 minutes, 4 seconds customer. Okay, fine. Thanks. That's all exceptional. So that's right. 26:13 26 minutes, 13 seconds Yeah, just Okay. Okay. Thanks for everything. 26:20 26 minutes, 20 seconds Thank you. As there are no further questions from participants, I now hand the conference over to Mr. AJ Sawan for closing comments. Over to you, sir. 26:30 26 minutes, 30 seconds So thank you ladies and gentlemen for attending this Q3 and 9 months of FY 26 call 26:39 26 minutes, 39 seconds and thank you for taking time from your busy schedule. We assure you of the company's robust financial performance 26:46 26 minutes, 46 seconds and fundamentals. Have a good day. Over to you Domin. 26:51 26 minutes, 51 seconds Thank you on behalf of Orient Technologies Limited. That concludes this conference. Thank you all for joining us. You may now disconnect your lines.