Onward Technologies Ltd. — Interim / Quarterly Report 2021

Oct 25, 2021

H1 / Q2-FY22 EARNINGS PRESENTATION

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Value Proposition of Onward Tech

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The Power of One

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Revenue (INR Mn) & EBITDA Margin (%)
2,610 2,715
2,404
8.58% 1,425
8.58% 7.20%
3.72%
FY19 FY20 FY21 H1-FY22
H1-FY22 Segmental Revenue
Digital 8%
ITS, 21%
ER&D,
71%
H1-FY22 Segmental Revenue
Healthcare 7%
Others 21%
Industrial Equipment & Transportaion &
Heavy Machinery 46% Mobility, 26%
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Digital play across all lines of business

• Agile, diverse, global team of 2250+ employees

• Mechanical Engineering

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• Electronics and Embedded

• 13 Offices in 6 countries for customer proximity

• Digital Transformation

• Capacity expansions based on • Enterprise IT Customer requirements planned in India centers in FY22

2 Focused industry verticals

• Transportation & Mobility

• Global 2000 customers • Industrial Equipment & Heavy Machinery • 6 of global top-10 automotive companies • Diversification and investment in 2 high• 5 of global top-8 heavy machinery growth verticals: Healthcare & Medical Devices, Hi-Tech

• 5 of global top-8 heavy machinery companies

• Strong customer base and relationships to fuel double digit growth in top line

Strong Financial Turnaround

Geared for double-digit growth

• Net debt-free, sound balance sheet & cash reserves

• Young leadership team from tier-1 companies

• 5-year PAT CAGR at 18.16%

• 6-year track-record of consistent dividend payout

• Focused on growing existing top-25 accounts

• Margin expansion through India advantage (talent pyramid, costs)

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Who We Are – Some Key Milestones

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• Mr Harish Mehta founded Onward Technologies in 1991

• Pune city chosen for expanding operations

• • Engineering Design Services became the mainstream focus of the company

• Built a dedicated ODC in Pune for one of the company’s top 5 customers

• ISO 9001 and ISO 27001 certification for Pune Center

• Expansion in Europe by incorporating a wholly owned subsidiary in Germany & Branch office in UK

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2001
-
2010
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• An independent 50:50 Joint Venture formed with Novell Inc (Onward Novell Pvt. Ltd).

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1991
-
2000
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• Listing on Stock Exchange in India in 1995

• Mr Harish Mehta awarded CEO of the year in 1996 by World HRD Congress in India

• Expanded footprint in North America by incorporating a wholly owned subsidiary in USA

• Mr Jigar Mehta appointed Managing Director in May 2016

• Set up multiple ODCs in Pune & Chennai for American & European clients

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• Mr Harish Mehta awarded by Prime Minister Narendra Modi
2011 for his contributions to the IT Industry
- • Investments made in Embedded & Electronics, and Digital
2020
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• Investments made in Embedded & Electronics, and Digital capabilities

• Expansions planned in India (Bengaluru & NCR) as well as in North America & Europe

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Strategic Presence Across Geographies

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Stockholm
Cleveland
Chicago Troy London
Frankfurt
Toronto Amsterdam
Paris
Tokyo
NCR
Pune
Mumbai
Hyderabad FY21 Revenue Breakup – Client Location
Bengaluru
Chennai
India USA
53% 36%
Europe
5%
UK
HQ
6%
Offshore Development Centre
Office
Strategic presence across -
6 Of global top 10 automotive companies
geographies
-
5 Of global top 8 heavy machinery companies
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Growth Strategy Enablers

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• Pivot to digital engineering Focused verticals and structured

• FY 2021 services LOBs TARGET FY2025 • Invested in the digital maturity curve • Leadership team with a strong of our customers experience across verticals

• CustomersTop 10 • See a clear roadmap of growth in • Focus on Transportation & Mobility, Top 10 Customers

• (45%) digital budgets Industrial Equipment & Heavy (70%)

• Top 11-50 Customers • Witnessing a shift from POC to Machinery Top 11-50 Customers

• (41%) adoption at scale • Hi-Tech, Healthcare & Medical Devices (20%)

• Remaining Customers • Core areas include Industry 4.0, unlock new, high-growth areas Remaining Customers (14%) AI/ML, ADAS, cloud and DevOps • Digital play across all lines of business (10%) Growth in top-accounts People, policies, and performance

• Digital 2% • Suitably positioned to scale up TCV • Continue to upskill, hire the finest talent from top-25 clients in digital engineering

• • These accounts are part of Global • Agile operations with steadily increasing

• ITS 2000, projecting large R&D allocations offshore leverage driving margin Digital

• 26% • Growth/technology-partner status is expansion Transfor ER&D ER&D several accounts • HR policies, growth opportunities tuned mation 50% 50%

• 72% • Focused on long-duration contracts, to enhance career path recurring revenues, consistent billing • Benefits aligned with industry standards growth

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FINANCIAL OVERVIEW

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H1 / Q2-FY22 Key Financial Highlights
Q2-FY22 Consolidated Financial Performance Q2-FY22 Standalone Financial Performance
INR 729 Mn INR 72 Mn 9.88% INR 567 Mn INR 47 Mn 8.29%
Revenue from Revenue from
EBITDA EBITDA Margins EBITDA EBITDA Margins
Operations Operations
INR 56 Mn 7.68% INR 2.84 /Share INR 31 Mn 5.47% INR 1.57 /Share
PAT PAT Margins Diluted EPS PAT PAT Margins Diluted EPS
H1-FY22 Consolidated Financial Performance H1-FY22 Standalone Financial Performance
INR 1,425 Mn INR 53 Mn 3.72% INR 1,083 Mn INR 53 Mn 4.89%
Revenue from Revenue from
EBITDA EBITDA Margins EBITDA EBITDA Margins
Operations Operations
INR 154 Mn 10.81% INR 8.49 /Share INR 25 Mn 2.31% INR 1.36 /Share
PAT PAT Margins Diluted EPS PAT PAT Margins Diluted EPS
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H1 / Q2-FY22 Operational Highlights

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• With an aggressive focus on execution, the company was able to deliver a 21% YoY growth in Revenues, while the absolute EBIDTA grew by 26% due to better utilisations.

• Steady Growth from Top 20 customers for Digital Engineering Services across Electronics/ Embedded, Mechanical Engineering & Enterprise IT Services.

• Added 10 large customers across 3 regions in the Transportation, Mobility & Industrial Equipment verticals.

• Other Income includes the ERC incentive received from the US entity of approximately INR 28 million pertaining to the previous financial year 20-21.

• Net Addition of 150 employees in Q2 across offices, taking the Global Headcount to 2271 employees.

• The company has signed an LOI to purchase 26,000 sq.ft of additional office space in Kharadi, Pune. This design centre will be home to 300+ offshore engineers supporting our USA & European customers. This centre is both ISO and TISAX certified.

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Management Comments

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– Commenting on the performance of the Company, Jigar Mehta Managing Director said “I’m pleased with the overall team performance last quarter with record 21% YoY revenue growth. We were able to deliver continuous double-digit growth due to our focus on aligning our investments on strengthening our delivery capabilities for primary verticals Transportation, Mobility, Industrial Equipment & Heavy Machinery. From Q3, we are investing in hiring 400+ freshers in our offshore centers to expand our digital & embedded engineering capabilities with customized training programs focused on our OEM customer needs. We continue to witness strong demand for our services & capabilities and are positive on closing FY22 with record growth”

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Q2-FY22 Consolidated Income Statement (IND-AS)

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Particulars (INR Mn)	Q2-FY22	Q2-FY21	Y-O-Y	Q1-FY22	Q-O-Q
Operational Income	729	602	21.10%	696	4.74%
Total Expenses	657	545	20.55%	715	(8.11)%
EBITDA	72	57	26.32%	(19)	NA
EBITDA Margins (%)	9.88%	9.47%	41 Bps	NA	NA
Other Income	41	8	NA	155	(73.55)%
Depreciation	25	27	(7.41)%	24	(4.17)%
Finance Costs	2	6	(66.67)%	2	NA
PBT	86	32	NA	110	(21.82)%
Tax	30	8	NA	11	NA
Profit After tax	56	24	133.33%	99	(43.43)%
PAT Margins (%)	7.68%	3.99%	369 Bps	14.22%	(654) Bps
Other Comprehensive Income	(1)	(4)	NA	2	NA
Total Comprehensive Income	55	20	NA	101	(45.54)%
Diluted EPS (INR)	2.84	1.45	95.86%	5.78	(50.87)%

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H1-FY22 Consolidated Income Statement (IND-AS)

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Particulars (INR Mn)	H1-FY22	H1-FY21	Y-O-Y
Operational Income	1,425	1,162	22.63%
Total Expenses	1,372	1,068	28.48%
EBITDA	53	94	(43.72)%
EBITDA Margins (%)	3.72%	8.10%	438 Bps
Other Income	196	11	NA
Depreciation	49	55	(11.77)%
Finance Costs	5	13	(60.60)%
PBT	195	37	NA
Tax	41	9	NA
Profit After tax	154	28	NA
PAT Margins (%)	10.81%	2.42%	849 Bps
Other Comprehensive Income	1	(3)	NA
Total Comprehensive Income	155	25	NA
Diluted EPS (INR)	8.49	1.68	NA

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Q2-FY22 Standalone Income Statement (IND-AS)

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Particulars (INR Mn)	Q2-FY22	Q2-FY21	Y-O-Y	Q1-FY22	Q-O-Q
Operational Income	567	423	34.04%	516	9.88%
Total Expenses	520	361	44.04%	511	1.76%
EBITDA	47	62	(24.19)%	5	NA
EBITDA Margins (%)	8.29%	14.66%	(637) Bps	0.97%	732 Bps
Other Income	19	29	(34.48)%	10	90.00%
Depreciation	22	24	(8.33)%	22	NA
Finance Costs	2	5	(60.00)%	2	NA
PBT	42	62	(32.26)%	(9)	NA
Tax	11	14	(21.43)%	(2)	NA
Profit After tax	31	48	(35.42)%	(7)	NA
PAT Margins (%)	5.47%	11.35%	(588) Bps	NA	NA
Other Comprehensive Income	(1)	1	NA	-	NA
Total Comprehensive Income	30	49	(38.78)%	(7)	NA
Diluted EPS (INR)	1.57	3.58	(56.15)%	(0.37)	NA

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H1-FY22 Standalone Income Statement (IND-AS)

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Particulars (INR Mn)	H1-FY22	H1-FY21	Y-O-Y
Operational Income	1,083	805	34.53%
Total Expenses	1,030	704	46.31%
EBITDA	53	101	(47.52)%
EBITDA Margins (%)	4.89%	12.55%	(766) Bps
Other Income	29	36	(19.44)%
Depreciation	44	50	(12.00)%
Finance Costs	4	11	(63.64)%
PBT	34	76	(55.30)%
Tax	9	17	(47.06)%
Profit After tax	25	59	(57.60) %
PAT Margins (%)	2.31%	7.33%	(502) Bps
Other Comprehensive Income	(1)	1	NA
Total Comprehensive Income	24	60	(60.00)%
Diluted EPS (INR)	1.36	3.56	(61.8)%

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HISTORICAL FINANCIAL OVERVIEW

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Historical Consolidated Profit & Loss

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Particulars (INR Mn)	FY19	FY20*	FY21*	H1-FY22
Operational Income	2,610	2,715	2,404	1,425
Total Expenses	2,386	2,482	2,231	1,372
EBITDA	224	233	173	53
EBITDA Margins (%)	8.58%	8.58%	7.20%	3.72%
Other Income	12	11	53	196
Depreciation	57	113	104	49
Finance Costs	27	35	23	5
PBT	152	96	99	195
Tax	51	34	25	41
Profit After tax		62	74	154
PAT Margins (%)	3.87%	2.28%	3.08%	10.81%
Other Comprehensive Income	8	19	(3)	1
Total Comprehensive Income	109	81	71	155
Diluted EPS (INR)	6.17	3.76	4.35	8.49

• FY20 and FY21 numbers have been restated after inclusion of Onward eServices Ltd, a wholly owned subsidiary, which has been merged with Onward Technologies Ltd as on March 25, 2021.

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Historical Consolidated Balance Sheet

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Particulars(INR Mn)	FY19	FY20	FY21	H1-FY22
ASSETS
Non-Current Assets Property, Plant & Equipment Intangible assets Intangible assets under development Right of use asset Financial Assets	98 57 2 -	80 41 - 159	171 39 1 88	174 33 86
(i) Loans Deferred tax assets	29 17	30 28	31 33	31 36
Income tax assets (net)	158	193	111	147
Other non-current assets	6	2	-	-
Sub Total Non Current Assets	367	533	474	507
Current Assets Financial Assets (i) Investment (ii) Trade Receivables (iii) Cash & cash equivalents (iv) Bank balance other than above (v) Contract assets	489 43 8 86	498 178 44 42	1 408 285 9 134	143 454 362 9 153
(vi) Other financial assets	11	1	1	4
Income tax assets (net) Other Current Assets Sub Total Current Assets	19 44 700	- 65 828	- 64 902	- 61 1,186
TOTAL ASSETS	1,067	1,361	1,376	1,693

Particulars(INR Mn)	FY19	FY20	FY21	H1-FY22
EQUITY AND LIABILITIES
Equity
Share Capital	158	160	163	176
Other Equity	452	520	581	950
Total Equity	610	680	744	1,126
Non Current Liabilities
(i) Borrowings	6	-	6	6
(ii) Lease liabilities	-	109	55	55
Provisions	34	25	48	48
Deferred tax liabilities	5	7	-	27
Sub Total Non Current Liabilities	45	141	109	136
Current Liabilities
(i) Borrowings	155	181	146	1
(ii) Trade Payables	61	76	72	89
(iii) Other Financial Liabilities	141	133	151	172
(iv) Lease Liabilities	-	57	43	41
Provisions	10	21	14	20
Income tax liabilities	-	5	-
Contract liabilities	1	5	30	34
Other current liabilities	44	62	67	74
Sub Total Current Liabilities	412	540	523	431
Sub Total Liabilities	457	681	632	567
TOTAL EQUITY AND LIABILITIES	1,067	1,361	1,376	1,693
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Historical Standalone Profit & Loss

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Particulars (INR Mn)	FY19	FY20*	FY21*	H1-FY22
Operational Income	1,182	1,806	1,727	1,083
Total Expenses	1,032	1,660	1,531	1,030
EBITDA	150	145	196	53
EBITDA Margins (%)	12.69%	8.03%	11.35%	4.89%
Other Income	50	65	85	29
Depreciation	48	102	93	44
Finance Costs	21	33	21	4
PBT	131	75	167	34
Tax	37	21	40	9
Profit After tax	94	54	127	25
PAT Margins (%)	7.95%	2.99%	7.35%	2.31%
Other Comprehensive Income	(4)	3	1	(1)
Total Comprehensive Income	90	57	128	24
Diluted EPS (INR)	5.70	3.26	7.50	1.36

• FY20 and FY21 numbers have been restated after inclusion of Onward eServices Ltd, a wholly owned subsidiary, which has been merged with Onward Technologies Ltd as on March 25, 2021.

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Historical Standalone Balance Sheet

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Particulars(INR Mn)	FY19	FY20	FY21	H1-FY22
ASSETS
Non-Current Assets
Property, Plant & Equipment Intangible assets Intangible assets under development Right of use asset	75 56 2 -	70 41 - 146	164 39 1 83	166 33 72
Financial Assets
(i) Investments	388	121	121	136
(ii) Loans	20	29	-	-
(iii) Other Financial Assets			28	29
Deferred tax assets	5	27	23	32
Income tax assets (net) Other non-current assets Sub Total Non Current Assets	101 4 651	193 1 628	111 - 570	146 - 615
Current Assets
Financial Assets
(i) Investments			1	143
(ii) Trade Receivables	215	339	283	322
(iii) Cash & cash equivalents	21	75	119	158
(iv) Bank balance other than above (v) Contract assets (vi) Other financial assets	3 36 21	42 32 3	10 127 2	9 167 7
Other Current Assets	33	58	61	59
Sub Total Current Assets	329	549	602	865
TOTAL ASSETS	980	1,178	1,172	1,480

Particulars (INR Mn)	FY19	FY20	FY21	H1-FY22
EQUITY AND LIABILITIES
Equity
Share Capital	158	160	163	176
Other Equity	454	455	573	810
Total Equity	612	615	736	986
Non Current Liabilities
(i) Borrowings	1	-	6	5
(ii) Lease liabilities	-	104	55	47
Employee benefit obligations	21	25	46	54
Sub Total Non Current Liabilities	22	129	107	106
Current Liabilities
(i) Borrowings	161	68	-	1
(ii) Trade Payables	46	96	78	88
(iii) Other Financial Liabilities	79	92	126	131
(iv) Lease Liabilities	-	48	38	35
Provisions	9	20	11	10
Contract liabilities	24	58	28	82
Other current liabilities	27	52	48	41
Sub Total Current Liabilities	346	434	329	388
Sub Total Liabilities	368	563	436	494
TOTAL EQUITY and LIABILITIES	980	1,178	1,172	1,480

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Consolidated Financial Highlights

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Revenue (INR Mn) EBITDA (INR Mn) PAT (INR Mn)
154
2,610 2,715 101
2,404 224 233
1,425 8.58% 8.58% 173 62 74 10.81%
7.20%
3.72% 3.87% 3.08%
2.28%
53
FY19 FY20 FY21 H1-FY22 FY19 FY20 FY21 H1-FY22 FY19 FY20 FY21 H1-FY22
EBITDA EBITDA Margin PAT PAT Margin
Net D/E (x) DSO ROE and ROCE (%)
27.36%
0.18
73.97 75.53
71.43
67.43
15.97%
14.22%
53.43
62.96
62.20 16.61%
(0.06) (0.19) 56.86
(0.27) 9.16% 9.85%
FY19 FY20 FY21 H1-FY22 FY19 FY20 FY21
FY19 FY20 FY21 H1-FY22
DSO with Unbilled in Days Billed DSO in Days RoE (%) RoCE (%)
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Revenue Metrics (Consolidated)

Revenue by Business

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2% 8%
31% 27% 26% 21%
69% 73% 72% 71%
FY19 FY20 FY21 H1-FY22
ER&D ITS Digital
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Revenue by Industry
4% 5% 8% 7%
34% 27% 26% 21%
26%
26% 24%
26%
36% 42% 42% 46%
FY19 FY20 FY21 H1-FY22
Industrial & Heavy Machiner y Transpor tation & Mobility Others Healthcare
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Revenue by Contract Type

Revenue by Engagement Model

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26% 22% 25% 24%
74% 78% 75% 76%
FY19 FY20 FY21 H1-FY22
Time and Material Fixed Time, Fixed Price
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30% 32% 30% 33%
70% 68% 70% 67%
FY19 FY20 FY21 H1-FY22
Onsite Offshore
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Customer Metrics (Consolidated)

Client Deal Size Breakup

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1
5
2
8 9
4 3 9 10
FY19 FY20 FY21 H1-FY22
USD 3 Mn > USD 1 Mn > USD 3 Mn USD 500K > USD 1 Mn
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Revenue by Client location

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11% 8% 11% 13%
37% 41% 36% 33%
52% 51% 53% 54%
FY19 FY20 FY21 H1-FY22
India USA Europe
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Revenue of Major Clients
14%
8% 12%
7%
29% 32% 31% 31%
46% 47% 45% 47%
FY19 FY20 FY21 H1-FY22
Top 10 Clients Top 5 Clients Top Client
Strategic Global Customers Added Headcount
5 3 3 2
FY19 FY20 FY21 H1-FY22
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Employee Metrics (Consolidated)

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Headcount by Location
128
120
111
114
2,429 2,377 1,973 2,160
FY19 FY20 FY21 H1-FY22
India Headcount Headcount Outside India
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Headcount by Business

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102 105
126
6 46 108
233
197
1,466 1,397
806
824
983 949 958 1,106
FY19 FY20 FY21 H1-FY22
ER&D IT Service Digital Transformation G&A
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Headcount by Function

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102 105
38 32 108 126
26 32 44
38
23 39
2,391 2,328
1,918 2,062
FY19 FY20 FY21 H1-FY22
Billable Bench (Unbilled) Sales G&A
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Hedging & Other Metrics

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Other Ratios	FY19	FY20	FY21	H1-FY22
Carpet Area	70,873	71,948	65,285	65,285
Number of seats	889	906	847	847
PBT to Revenue%	5.82%	3.55%	4.08%	13.77%
Number of active clients	199	210	184	210
Hedging Details for H1-FY22*	Actual Hedge Rate	Hedge Amount (Mn)	Actual Rate Achieved	Gain Over 50% Hedge rate (INR, Lakh)
USD	74.48	1.77	74.55	1.04
EUR	88.77	0.51	88.03	(1.98)
GBP	101.82	0.54	102.77	4.40

*The performance is benchmarked against a 50% hedge rate - average of Day 1 forward rate and spot on maturity/current MTM for outstanding exposure.

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Capital Market Data
350% Dividend per Share (INR)
300%
250%
200% 3.00
150%
100%
1.50 1.50
50% 1.00
0%
Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21
-50%
Onward Sensex FY18 FY19 FY20 FY21
Price Data (As of 30th September 2021) Shareholding Pattern (as on 30th September, 2021)
Face Value 10.0
Market Price 230.3
52 Week H/L 283.8/57.6 Public
42.49%
Market Cap (INR Mn) 4,027.8
Promoters
Equity Shares Outstanding (Mn) 17.4
57.51%
1 Year Avg. Trading Volume ('000) 171.3
1 Year Avg. Net Turnover (Mn) 22.4
Source: BSE and NSE
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Disclaimer

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Onward Technologies Limited

No representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness, or correctness of the information or opinions contained in this presentation. Such information and opinions are in all events not current after the date of this presentation. Certain statements made in this presentation may not be based on historical information or facts and may be "forwardlooking statements" based on the currently held beliefs and assumptions of the management of Onward Technologies Limited, which are expressed in good faith and in their opinion reasonable, including those relating to the Company’s general business plans and strategy, its future financial condition and growth prospects and future developments in its industry and its competitive and regulatory environment.

Forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results, financial condition, performance, or achievements of the Company or industry results to differ materially from the results, financial condition, performance, or achievements expressed or implied by such forward-looking statements, including future changes or developments in the Company’s business, its competitive environment, and political, economic, legal and social conditions. Further, past performance is not necessarily indicative of future results. Given these risks, uncertainties, and other factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements. The Company disclaims any obligation to update these forward-looking statements to reflect future events or developments.

This presentation is for general information purposes only, without regard to any specific objectives, financial situations, or informational needs of any particular person. This presentation does not constitute an offer or invitation to purchase or subscribe for any securities in any jurisdiction, including the United States. No part of it should form the basis of or be relied upon in connection with any investment decision or any contract or commitment to purchase or subscribe for any securities. None of our securities may be offered or sold in the United States, without registration under the U.S. Securities Act of 1933, as amended, or pursuant to an exemption from registration therefrom.

This presentation is confidential and may not be copied or disseminated, in whole or in part, and any manner.

Valorem Advisors Disclaimer:

Valorem Advisors is an Independent Investor Relations Management Service company. This Presentation has been prepared by Valorem Advisors based on information and data which the Company considers reliable, but Valorem Advisors and the Company makes no representation or warranty, express or implied, whatsoever, and no reliance shall be placed on, the truth, accuracy, completeness, fairness, and reasonableness of the contents of this Presentation. This Presentation may not be all-inclusive and may not contain all of the information that you may consider material. Any liability in respect of the contents of, or any omission from, this Presentation is expressly excluded.

Valorem Advisors also hereby certifies that the directors or employees of Valorem Advisors do not own any stock in personal or company capacity of the Company under review.

For further details, please feel free to contact our Investor Relations Representatives:

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Mr. Anuj Sonpal Valorem Advisors Tel: +91-22-4903 9500 Email: onward@valoremadvisors.com

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