Onward Technologies Ltd. — Annual Report 2020

May 18, 2020

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(BSE: 517536, NSE: ONWARDTEC)

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Business Overview

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Onward Technologies: At a Glance

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Who is Onward?

For large global manufacturers, Onward is the Technology Services provider that translates vision into reality with flawless execution and capabilities across digital transformation suite, embedded systems, engineering services, data analytics, AI and ML

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Global Presence India | Americas | UK | Germany

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Execution Capabilities

• 8,500+ Projects Delivered

15 Million Hours of Performance Delivered

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Employee Strength

+2,500 Employees

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Key Financial Metrics

• 5 year Total Income CAGR: 7%

• 5 year EBITDA CAGR: 13%

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Business Snapshot

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What we do

Deliver Experience across:

• ❑ Connected Systems

• ❑ Engineering R&D

• ❑ Digital Transformation

Industries we serve

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Automotive Consumer & Healthcare
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Off - Highway Industrial
BFSI Heavy Engg.
Locomotive
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Aerospace
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Focus Areas

Product Lifecycle Management (PLM)

Internet of Things (IoT)

Analytics Artificial Intelligence (AI) Robotic Process Automation (RPA) Machine Learning

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Execution Capabilities – example 1

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World’s largest off highway and construction equipment manufacturer

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Design

2D and 3D engineering drawing supported with engineering services

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Design

NPI Programs – Engineering services offered through CAD/CAM and CAE

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Digital

Automated engineering design framework with container architecture on cloud

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Digital

Machine learning models from IOT systems to give feedback to business

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Decision

Process efficiency, cost savings and productivity improvement

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Decision

NPI program feedback and better product designs

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Execution Capabilities – examples 2 and 3

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German based auto OEM

US based medical technology firm

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Design

Diverse sales and marketing data with no insights derived

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Design

Re-engineered the entire hospital bed and suggested massive improvement

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Digital

Analytics platform built for sales and marketing function on azure data lake

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Digital

Reverse engineered solution, added electronics and manufactured using 3D printing

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Decision

Better data insights improved sales performance

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Decision

Patient safety factors improved designed around patient comfort

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Execution Capabilities – example 4

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Transportation and Diesel Locomotive Company

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Design

Cost engineered every part of the locomotive and suggested lowest cost possible

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Digital

Cost Engineering; BI dashboards to see where cost was more

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Decision

4 mn in overall savings to customer’s business operations

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Business Growth Drivers

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New Capabilities

Higher Revenues

Margin Expansion

International Business

• Focus on newly established capabilities in Digital Transformation, Industrial IoT, and Industry 4.0

• Build capabilities in sector agnostic practices

• Increase wallet share of existing clients

• 70% revenues from Top 20 clients. Balance from new deals

• Technical collaborations & partnerships

• Higher margin paying practices in EDS and Digital ER&D suite

• Strict focus on further improvement of bottom line

• Increase share of overseas business from well established US, UK, and Germany offices

• Robust pipeline for new deals with large global manufacturers

• M&A – capability acquisition strategy

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FY20 Financial and Business Highlights

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Managing Director’s Message

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Jigar Mehta Managing Director

‘’I’m pleased to share the FY 19-20 annual performance of the company where we achieved our top primary goal of Net Debt Zero at a consolidated level. This was possible with the phenomenal effort of our entire team globally with high level focus on customer service & providing superior quality deliverables on time- every time.

We achieved the Zero Net Debt goal in early Q3 & since then aggressively started investment in hiring large number of talented people for new practice lines. Covid-19 took us by complete surprise & we were not prepared for the total client shutdown in March and early Q1 of FY 2021. This had a major impact on our Q4 performance along with the one-time hit of pre-planned closure of loss-making initiatives. Since then, we have taken corrective steps of bringing down the operation and infrastructure costs quickly to provide the flexibility and adaptability our clients expect from us.

Work from home (WFH) as engagement model is becoming new normal and our customers are accepting the change. We have successfully put entire ODCs under this model & are delivering with same effectiveness. This needed special focus on trainings, team and work management, data security aspects in terms of protecting customer IP, and necessary compliance agreements. The quick and bold BCP initiatives received lot of our client’s appreciation including new client wins which will help strengthen our relationship in the long run“

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FY20 Financial Highlights

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• ➢ Onward Technologies Limited is now a long term debt free company

• ➢ Onward eServices Limited, a 100% subsidiary, repaid working capital facilities through internal accruals and is 100% debt free

• ➢ At a consolidated level, turned around the net debt position from (Rs. 12.6 crores) to positive net cash of Rs. 3.9

• crores

• ➢ Cash/share increased from Rs. 3.3 in FY19 to Rs. 14.0 in FY20

• ➢ Book Value/share increased from Rs. 39.1 in FY19 to Rs. 42.9 in FY20

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FY20 Business Highlights

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Marquee clients added:

• Leading US based Life Sciences Company

• German Luxury Car Manufacturer, one of the World’s Largest Car Maker

• World’s largest auto tier 1 supplier

Region wise updates:

Vertical		Key initiatives
	•	Deepened presence into food processing and manufacturing industry in the mid west region – a large food
US Business		supply chain hub
	•	Increased revenue share from one of our large clients, one of the big three auto OEMs
OeSL Domestic	•	Deployed resources from data analytics team, one of the newer practices, into industries spanning across
Business		automotive, pharmaceuticals, shipping and logistics etc.
Germany Business	•	Achieved significant breakthrough with two large auto OEMs. Expect work to begin in product design and automotive interiors in existing product range and in the area of autonomous vehicles

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FY20 Business Highlights

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Client		Solution
	•	For one of their premium models, supported design and development of interior & exterior parts for
UK based Luxury		their facelift and future models
Automotive OEM	•	Support provided right from feasibility of concepts, design & development of various parts, for tool
		kick-offs and then for series production
Leading Global Industrial	•	Automation of their engineering drawings using technologies to reduce cost and bring in efficiencies
Equipment Conglomerate	•	Built a thermal analysis simulation for a nickel sodium based battery for one of their companies to analyse how temperature is distributed across their battery

Leading US based Life sciences and Lab furniture product company	• •	Engineering design services for biological safety cabinets, laboratory work stations & fume hoods, - 80°C lab freezers, also known as ultra-low temperature freezers (ULT) Solutions for equipment and instruments used in labs working towards fighting covid-19

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FY20 Business Highlights

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Client Solution

• Leading US based child • Involvement right from development of concepts, detail design and supporting this design to series seat manufacturer production

Leading US based medical technology firm

• Reverse engineered the entire hospital bed basis on only the photo of the hospital bed without any CAD models/drawings

• Applied the reverse engineering concept, added new embedded electronic part to make the bed go up and down as per patient weight automatically. Designs were compatible with 3D printing

• Leading Transportation • Cost engineered their entire diesel locomotive to manufacture in the lowest possible cost and also company helped them in finding vendors who can manufacture them at the lowest cost

• Design & development of advanced driver assisted system functions for the vehicles with trailers

• Leading tier 1 supplier in Germany • Detection of various types of trailers, sufficiency of sensor systems and simulations for park assists

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Consolidated Profit and Loss Statement

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Details (Rs. cr.)	Q4 FY20	Q4 FY19	YoY (%)	FY20	FY19	YoY (%)
Income from operations	65.6	65.7	(0.1)%	271.5	261.0	4.0%
Other Income	0.2	0.9	(74.3)%	1.1	1.2	(10.6)%
Total Income	65.8	66.5	(1.1)%	272.6	262.2	4.0%
Cost of Income	56.0	48.5	15.4%	211.4	193.1	9.5%
Cost of Income (%)	85.1%	73.0%	1,214 bps	77.6%	73.6%	391 bps
Other Expenses	10.2	11.7	(13.0)%	36.7	45.5	(19.2)%
EBITDA	(0.4)	6.3	-	24.4	23.6	3.5%
EBITDA Margin (%)	(0.6)%	9.5%	(1,002) bps	9.0%	9.0%	(4 bps)
Depreciation and Amortisation	2.7	1.3	106.1%	11.3	5.7	100.1%
EBIT	(3.1)	5.0	-	13.1	17.9	(26.9)%
EBIT Margin (%)	(4.7)%	7.5%	(1,216) bps	4.8%	6.8%	(203) bps
Finance Costs	0.8	0.8	1.6%	3.5	2.7	26.4%
Profit Before Tax	(3.9)	4.2	-	9.6	15.2	(36.6)%
PBT Margin (%)	(5.9)%	6.3%	(1,219) bps	3.5%	5.8%	(226) bps
Tax Expenses	(0.9)	1.0	-	3.4	5.1	(32.8)%
Effective Tax Rate (%)	23.1%	23.7%	61 bps	35.3%	33.3%	199 bps
Net Profit	(3.0)	3.2	-	6.2	10.1	(38.4)%
Net Profit Margin (%)	(4.5)%	4.8%	(934) bps	2.3%	3.9%	(158) bps
Basic EPS (Rs.)	(1.9)	2.0	-	3.9	6.5	(39.5)%

Note:

1) Impact of adopting IND AS 116 has resulted in an increase in finance costs by Rs. 1.8 cr, increase in depreciation and amortisation expenses by Rs. 6.2 cr and decrease in other expenses by Rs. 6.7 cr for the twelve months ended March 31, 2020

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Consolidated Financial Summary – FY20

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In Rs. cr.

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Total Income EBITDA PAT
9.0% 9.0% 3.9%
272.6
262.2
2.3%
23.6 24.4 10.1
6.2
FY19 FY20 FY19 FY20 FY19 FY20
EBITDA MARGIN PAT MARGIN
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*EBITDA = PBT + Interest + Depreciation

Consolidated Balance Sheet

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In Rs. cr.

ASSETS FY20 FY19 EQUITY AND LIABILITIES FY20 FY19	ASSETS FY20 FY19 EQUITY AND LIABILITIES FY20 FY19	ASSETS FY20 FY19 EQUITY AND LIABILITIES FY20 FY19	ASSETS FY20 FY19 EQUITY AND LIABILITIES FY20 FY19	ASSETS FY20 FY19 EQUITY AND LIABILITIES FY20 FY19	ASSETS FY20 FY19 EQUITY AND LIABILITIES FY20 FY19
Non-current assets			Equity
PP&E	8	10	Share Capital	16	16
Intangible Assets	4	6	Other equity	52	45
Intangible Assets under dev.	-	0	Sub total - Shareholders' fund	68	61
Right of use asset	16	-	Non-current liabilities
Financial Assets			Financial Liabilities
Loans	3	3	Borrowings	-	1
Deferred Tax Assets	3	2	Other Non Current Liabilities
Income Tax Assets	19	16	Lease liabilities	11	-
Other Non-current Assets	0	1	Employee Benefit Obligations	2	3
Sub total - Non current assets	53	37	Deferred Tax Liabilities	1	1
Current Assets			Sub total - Non current liabilities	14	5
Financial Assets			Current liabilities
Trade Receivables	50	49	Financial Liabilities
Cash and Cash Equivalents	18	4	Borrowings	18	15
Bank Balances other than above	4	1	Trade Payables
Contract Assets	4	9	a) Total Outstanding Dues of Micro Enterprises and Small Enterprises	0	0
Other Financial Assets	0	1	b) Total Outstanding Dues of Other Creditors	7	6
Income Tax Assets	-	2	c) Other Financial Liabilities	13	14
Other Current Assets	6	4	d) Lease liabilities	6	-
			Employee Benefit Obligations	2	1
			Income Tax Liabilities	1	-
			Contract Liabilities	0	0
			Other Current Liabilities	6	4
Sub total - Current assets	83	70	Sub total - Current liabilities	54	41
TOTAL 136 107 TOTAL 136 107

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Consistent Operating Performance – Last 5 years

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In Rs. cr.

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Total Income EBITDA
262 273
226 249 24 24
191 200
15 16
13 14
FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20
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Dividend/Share (in Rs.)
1.5 1.5
1 1 1
FY15 FY16 FY17 FY18 FY19 FY20
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Calculation Methodology: 1) EBITDA = PBT + Interest + Depreciation

Robust Balance Sheet – Last 5 years

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In Rs. cr.

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Net Worth Book Value/Share (in Rs.) Net Debt
43
39 23
32
28 17 16
22 24 12 13
68
61
50 (4)
32 36 42
FY15 FY16 FY17 FY18 FY19 FY20 FY15 FY16 FY17 FY18 FY19 FY20
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Cash/Share (in Rs.)
14
5
3
2
2 2
FY15 FY16 FY17 FY18 FY19 FY20
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Calculation Methodology:

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1) Net Debt = Long Term Borrowings + Short Term Borrowings – Cash 2) Cash includes cash equivalents and bank balances

Investor Snapshot

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Market Data	As on 15.05.2020 (BSE)
Market Capitalisation	Rs. 65.5 cr.
Market Capitalisation Free Float (~35%)	Rs. 22.9 cr.
Closing Price	Rs. 40.7
No. of shares outstanding	1.6 cr.
52 week High – Low (Current Price % of high)	Rs. 76.9 – 36.0 (~53%)
Promoter Pledge	Nil

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Shareholding Pattern (%)
37.8%
62.2%
Promoters Public
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Promoter Shareholding Trend (%)
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62.2%
59.0%
55.0%
FY18 FY19 FY20
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Disclaimer

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This presentation contains statements that contain “forward looking statements” including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Onward Technologies future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development ofour business, a number ofrisks, uncertainties and other unknown factors could cause actual and results to differ from our developments materially expectations. These factors include, but are not limited to, general market, macro-economic, governmentaland regulatory trends, movements in currency exchange and interest rates, competitive in the financial conditions of third pressures, technological developments, changes parties dealing with us, legislative developments, andother key factors that couldaffect our business andfinancial performance. OnwardTechnologies undertakes no obligation topublicly revise any forward-looking statements to reflect future / likely events or circumstances.

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2nd Floor, Sterling Centre, Dr A.B. Road,

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