Onward Technologies Ltd. — Investor Presentation 2021

Jul 16, 2021

EARNINGS PRESENTATION Q1-FY22

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Snapshot

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Legacy

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Execution Capabilities

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Team Strength

Ø 30 years of delivering value to customers

Ø Founder, Mr. Harish Mehta also cofounded NASSCOM Ø Global Footprint

Ø Over 9,000+ Projects Delivered Ø Over 50 Million Hours of engineering services work Ø One of the leading ER&D and Digital outsourcing service providers in India

Ø Dynamic & Experienced Leadership Team

Ø 2,100+ experienced employees Ø Continuously investing in training for upskilling and reskilling in latest technologies

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Flexible Business Model

Marquee Clientele

Key Financial Metrics

Ø Onsite / Offshore blended services Ø Ability to ramp up globally to meet client demands

Ø Agility & Speed in Execution

• Ø Enviable Customer base of Fortune 1,000 companies

• Ø Preferred partner to the worlds leading Transportation & Mobility and

• Industrial Equipment companies

Ø 5-year PAT CAGR: 18.16% Ø FY21 ROE: 9.85%, ROCE: 14.22% Ø Net Debt Free

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Company Overview

Key Business Segments

• Established in 1991 Onward Technologies Ltd is a leading player today in Digital, ER&D and Information Technology outsourcing services.

• Headquartered at Mumbai, the company caters to a wide set of customers who are leading global players in their respective areas and is a trusted service provider for companies across sectors like Transportation & Mobility, Industrial Equipment & Heavy Machinery, Pharma, Healthcare & Medical Devices and Hi-Tech.

• The company prides itself in possessing high-end capabilities and providing flawless execution across the Digital transformation suite and ER&D services.

Engineering Research & Development (ER&D)

• The Company offers wide range of engineering design services including product design, electronics and embedded engineering, engineering analysis, engineering documentation and maintenance and manufacturing solutions.

Digital Transformation

• Onward has a strong team of 2,100+ experienced employees operating from multiple offices and client locations across India, USA, UK & Europe.

• With the changes occurring in the global manufacturing space, Onward Technologies enables companies become more dynamic, flexible, and efficient while optimising costs significantly.

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Revenue & EBITDA Margin (INR Mn)
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FY21 Segmental Revenue
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3,500 2,610 2,715
2,404
2,236 2,445 Digital, 2%
8.58% 8.58% 6.00%
7.20%
1,500 5.01% 4.58% ITS, 26%
1.00%
EDS, 72%
-500 FY17 FY18 FY19 FY20 FY21 -4.00%
Revenue EBITDA Margin
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• With the Industry 4.0 revolution, digital transformation is the newest but fastest growing vertical, with services like digital factory, data architecture design & modelling, big data and advanced analytics, IoT, cloud services, automation and data visualization.

IT Services (ITS)

• The IT consulting vertical also provides application management services, database maintenance support, technical helpdesk support, infrastructure support and retail banking solutions.

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Geographical Presence

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Cleveland
Chicago Troy London
Frankfurt
Toronto Amsterdam FY21 Revenue Breakup – Client Location
USA
36%
Pune
Mumbai
Bengaluru
Chennai India Europe
53% 5%
UK
6%
HQ
Offshore Development Centre
Office
Large Customers with more than 10 Years of Association 7
Large Customers with more than 5 Years of Association 10
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Key Strengths

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Ø

Proven expertise in delivering digital transformation and engineering outsourcing services for fortune 1000 companies

Ø Ability to ramp-up on-demand across the globe on a short notice

Ø Flexible business and engagement model to provide agility and cost effectiveness

Ø Right size organization to provide stability as well as responsiveness

Ø Agile, young and dynamic team with a hunger for excellence, supported by experienced and respected promoters & board of directors

Ø Paying dividends consistently for the past 6 years with a commitment to continuously improving shareholder value

Ø Robust cash generation achieved in FY19-21, with clear visibility of cash generation over the next 3-5 years

Ø Net Debt Free

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Strategic Transformation
FY2021 TARGET FY2025
Top 10 Top 10
Customers Customers
(45%) (70%)
Top 11-50 Customers Top 11-50 Customers
(41%) (20%)
Remaining Customers Remaining Customers
(14%) (10%)
Digital 2%
ITS
Digital
26%
ER&D Transfor ER&D
72% mation 50%
50%
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• Ø Over its 3-decade legacy, Onward Tech has developed an enviable working relationship with prestigious global clients across India, North America and Europe, many of which are Fortune 500 companies.

• Ø Onward Tech is consciously transforming its service offering from low margin traditional IT Services to high margin, high tech services in ER&D and Digital Transformation.

• Ø IT services clients are being transitioned to Digital services gradually, and clients spend is increasing on digital transformation, which will also lead to margin expansion.

• Ø The company’s clear future growth strategy is to entrench deeper into the existing customers by investing in people and enhancing its capabilities and contributing more deeply towards their complex high tech digital transformation, mechanical engineering and embedded technology requirements.

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Future Growth Strategy

New Capabilities

Focus

• Focus on newly established capabilities in Digital Transformation, AI/ML, and Industry 4.0

• Build capabilities in sector agnostic practices

• We continue to make significant investments in digital technologies in demand and hiring experienced professionals:

• People: reskilling and upskilling, hiring as per industry and customer needs

• Process: constant upgrade of internal systems to automate and improve efficiencies towards becoming 100% digital

• Clear strategy for winning larger deals from existing customers and new customers in target markets: (North America, Europe & India)

• Focus on Operational excellence through Automation & simplifying our business model

• Bring the DSO down to 60 days in line with industry levels

• Deepen existing customer relationships, leverage “digital” into ER&D to become a one-stop-shop solution provider with end-toend capabilities

• Exclusive focus on design thinking, digital transformation and product engineering

• Technical collaborations & partnerships

Margin Expansion

• Higher margin business opportunities in sales funnel with focus on new Digital and ER&D practices

• Increase the wallet share from the large 25 OEMS

• Win more clients in Healthcare & Hi-tech segment

International Business

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

• Robust pipeline for new deals with large global manufacturers

Financials

• Increase wallet share from existing clients

• M&A – capability acquisition strategy

• Positive cash flow over the years

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Q1-FY22 FINANCIAL OVERVIEW

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Q1-FY22 Key Financial Highlights

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Q1-FY22 Standalone Financial Performance Q1-FY22 Consolidated Financial Performance
INR 516 Mn INR 5 Mn 0.97% INR 696 Mn INR (19) Mn NA
Revenue from Revenue from
EBITDA EBITDA Margins EBITDA EBITDA Margins
Operations Operations
INR (7) Mn NA INR (0.37)/share INR 99 Mn 14.22% INR 5.78/share
PAT PAT Margins Diluted EPS PAT PAT Margins Diluted EPS
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Q1-FY22 Operational Highlights

• The company achieved a YoY growth of 24% in Consolidated Revenues.

• There has been good Growth from the offshore business coming from US, EU and UK geographies.

• Signed 3 new customers, and various large new contracts during the quarter, which will further drive financial growth.

• There has been significant addition in total headcount primarily with around 90% of employee under the age of 40 making it a young, dynamic and agile team.

• There were various exceptional items in Q1-FY22 that need to be further highlighted, Based on these exceptional items, after excluding them, the adjusted EBITDA amount is INR 30 Mn, representing an EBITDA Margin of 4.34%:

• The increase in Other Income is on account of a loan obtained under Paycheck Protection Program ("PPP") in the USA of INR 150 Mn and the interest amount on the same, which was granted forgiveness by the Small Business Authorities (SBA).

• The increase in Other Expenses is on account of provision made due to uncertainty on account of delay in announcement by government relating to the export incentives recognized, amounting to INR 20 Mn under the Service Exports from India Scheme, 2015 (SEIS Scheme) for services exported till March 31, 2020.

• The increase in Employee Benefits Expense is on account of a provision made for a one-time incentive for the employees amounting to INR 28.5 Mn, to compensate for the reduced salaries of employees in the last financial year 2021 due to the COVID-19 outbreak.

• Significantly reduced total borrowings further to negligible levels.

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Q1-FY22 Standalone Income Statement (IND-AS)

Particulars (INR Mn)	Q1-FY22	Q1-FY21	Y-O-Y	Q4-FY21	Q-O-Q
Operational Income	516	382	35.08%	497	3.82%
Total Expenses	511	343	48.98%	456	12.06%
EBITDA	5	39	(87.18%)	41	(87.80%)
EBITDA Margins (%)	0.97%	10.21%	(924 Bps)	8.25%	(728 Bps)
Other Income	10	5	100%	25	(60.00%)
Depreciation	22	26	(15.38%)	22	NA
Finance Costs	2	6	(66.67%)	4	(50.00%)
PBT	(9)	12	NA	40	NA
Tax	(2)	3	NA	11	NA
Profit After tax	(7)	9	NA	29	NA
PAT Margins (%)	NA	2.36%	NA	5.84%	NA
Other Comprehensive Income	0	0	NA	1	(100.00%)
Total Comprehensive Income	(7)	9	NA	30	NA
Diluted EPS (INR)	(0.37)	0.55	NA	1.75	NA

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Q1-FY22 Consolidated Income Statement (IND-AS)

Particulars (INR Mn)	Q1-FY22	Q1-FY21	Y-O-Y	Q4-FY21	Q-O-Q
Operational Income	696	560	24.29%	663	4.98%
Total Expenses	715	523	36.71%	625	14.40%
EBITDA	(19)	37	NA	38	NA
EBITDA Margins (%)	NA	6.61%	NA	5.73%	NA
Other Income	155	3	NA	20	NA
Depreciation	24	28	(14.29%)	25	(4.00%)
Finance Costs	2	7	(71.43%)	4	(50.00%)
PBT	110	5	NA	29	NA
Tax	11	1	NA	8	37.50%
Profit After tax	99	4	NA	21	NA
PAT Margins (%)	14.22%	0.71%	NA	3.17%	NA
Other Comprehensive Income	2	(1)	NA	3	(33.33%)
Total Comprehensive Income	101	3	NA	24	NA
Diluted EPS (INR)	5.78	0.23	NA	1.27	NA

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HISTORICAL FINANCIAL OVERVIEW

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Historical Standalone Profit & Loss

Particulars (INR Mn)	FY18	FY19	FY20*	FY21*	Q1-FY22*
Operational Income	1,066	1,182	1,806	1,727	516
Total Expenses	1,030	1,032	1,660	1,531	511
EBITDA	36	150	145	196	5
EBITDA Margins (%)	3.38%	12.69%	8.03%	11.35%	0.97%
Other Income	65	50	65	85	10
Depreciation	46	48	102	93	22
Finance Costs	22	21	33	21	2
PBT	33	131	75	167	(9)
Tax	11	37	21	40	(2)
Profit After tax	22	94	54	127	(7)
PAT Margins (%)	2.06%	7.95%	2.99%	7.35%	NA
Other Comprehensive Income	(1)	(4)	3	1	0
Total Comprehensive Income	21	90	57	128	(7)
Diluted EPS (INR)	1.33	5.70	3.26	7.50	(0.37)

• 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		Particulars (INR Mn)	FY19	FY20	FY21
ASSETS					EQUITY AND LIABILITIES
Non-CurrentAssets					Equity
Property,Plant & Equipment	75	70	164
					Share Capital	158	160	163
Intangible assets	56	41	39
					Other Equity	454	455	573
Intangible assets under development	2	-	1
					Total Equity	612	615	736
Right of use asset	-	146	83		Non Current Liabilities
Financial Assets					(i)Borrowings	1	-	6
(i) Investments	388	121	121		(ii)Lease liabilities	-	104	55
(ii)Loans	20	29	23		Employee benefit obligations	21	25	46
Deferred tax assets	5	27	23
					Sub Total Non Current Liabilities	22	129	107
Income tax assets(net)	101	193	111
					Current Liabilities
Other non-current assets	4	1	5
					(i)Borrowings	161	68	-
Sub Total Non Current Assets	651	628	570
					(ii)Trade Payables	46	96	78
Current Assets
Financial Assets					(iii)Other Financial Liabilities	79	92	126
(i)Trade Receivables	215	339	283		(iv)Lease Liabilities	-	48	38
(ii)Cash & cash equivalents	21	75	119		Provisions	9	20	11
(iii)Bank balance other than above	3	42	10
					Contract liabilities	24	58	28
(iv)Contract assets	36	32	127
					Other current liabilities	27	52	48
(v)Other financial assets	21	3	2
					Sub Total Current Liabilities	346	434	329
Other Current Assets	33	58	61
					Sub Total Liabilities	368	563	436
Sub Total Current Assets	329	549	602
TOTAL ASSETS	980	1,178	1,172		TOTAL EQUITY and LIABILITIES	980	1,178	1,172

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Historical Consolidated Profit & Loss

Particulars (INR Mn)	FY18	FY19	FY20*	FY21*	Q1-FY22*
Operational Income	2,445	2,610	2,715	2,404	696
Total Expenses	2,333	2,386	2,482	2,231	715
EBITDA	112	224	233	173	(19)
EBITDA Margins (%)	4.58%	8.58%	8.58%	7.20%	NA
Other Income	48	12	11	53	155
Depreciation	55	57	113	104	24
Finance Costs	30	27	35	23	2
PBT	75	152	96	99	110
Tax	8	51	34	25	11
Profit After tax	67	101	62	74	99
PAT Margins (%)	2.74%	3.87%	2.28%	3.08%	14.22%
Other Comprehensive Income	1	8	19	(3)	2
Total Comprehensive Income	68	109	81	71	101
Diluted EPS (INR)	4.07	6.17	3.76	4.35	5.78

• 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		Particulars(INR Mn)	FY19	FY20	FY21
ASSETS					EQUITY AND LIABILITIES
Non-Current Assets					Equity
Property,Plant & Equipment	98	80	171		Share Capital	158	160	16
Intangible assets	57	41	39		Other Equity	452	520	58
Intangible assets under development	2	-	1		Total Equity	610	680	74
					Non Current Liabilities
Right of use asset	-	159	88
					(i)Borrowings	6	-
Financial Assets
					(ii)Lease liabilities	-	109	5
(i)Loans	29	30	31
					Employee benefit obligations	34	25	4
Deferred tax assets	17	28	33
					Deferred tax liabilities	5	7
Income tax assets(net)	158	193	111
					Sub Total Non Current Liabilities	45	141	10
Other non-current assets	6	2	-
					Current Liabilities
Sub Total Non Current Assets	367	533	474
					(i)Borrowings	155	181	14
Current Assets
					(ii)Trade Payables	61	76	7
Financial Assets
					(iii)Other Financial Liabilities	141	133	15
(i)Trade Receivables	489	498	408
					(iv)Lease Liabilities	-	57	4
(ii)Cash & cash equivalents	43	178	285
					Provisions	10	21	1
(iii)Bank balance other than above	8	44	9
					Income tax liabilities	-	5
(iv)Contract assets	86	42	134
(v)Other financial assets	11	1	2		Contract liabilities	1	5	3
Income tax assets(net)	19	-	-		Other current liabilities	44	62	6
Other Current Assets	44	65	64		Sub Total Current Liabilities	412	540	52
Sub Total Current Assets	700	828	902		Sub Total Liabilities	457	681	63
TOTAL ASSETS	1,067	1,361	1,376		TOTAL EQUITY AND LIABILITIES	1,067	1,361	1,37

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Consolidated Financial Highlights

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EBITDA (INR Mn) PAT (INR Mn)
224 233
173 101 99
8.58% 8.58%
112 7.20% 74
67
62
14.22%
4.58%
3.87%
-19 2.74% 2.28% 3.08%
-2.73%
FY18 FY19 FY20 FY21 Q1-FY22 FY18 FY19 FY20 FY21 Q1-FY22
EBITDA EBITDA Margin PAT PAT Margin
1 0 . 0 DSO ROE and ROCE (%)
9 . 0 0
8 . 0 0 75.18 73.97 75.53 72.80 27.36%
67.43
7 . 0 0 19.64%
6 . 0 0 52.97 15.97% 14.22%
63.05 62.96
5 . 0 0 62.20 56.86 16.61%
4 . 0 0 13.49% 9.16% 9.85%
3 . 0 0
FY18 FY19 FY20 FY21 Q1-FY22 FY18 FY19 FY20 FY21
DSO with Unbilled in Days Billed DSO in Days RoE (%) RoCE (%)
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Revenue (INR Mn)
2,715
2,610
2,445 2,404
696
FY18 FY19 FY20 FY21 Q1-FY22
0.23 Net D/E (x)
0.18
(0.06)
(0.19)
FY18 FY19 FY20 FY21
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Key Metrics (Consolidated)

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Revenue by Business Revenue by Industry Revenue by Contract Type
2% 2%
4% 4% 5% 8% 7%
33% 31% 27% 26% 22% 38% 34% 27% 26% 21% 31% 26% 22% 25% 23%
26% 24% 30%
26%
27%
67% 69% 73% 72% 76% 69% 74% 78% 75% 77%
42% 42% 42%
31% 36%
FY18 FY19 FY20 FY21 Q1-FY22 FY18 FY19 FY20 FY21 Q1-FY22 FY18 FY19 FY20 FY21 Q1-FY22
ER&D ITS Digital
Industrial & Heavy Machinery Transportation & Mobility Time and Material Fixed Time, Fixed Price
Others Healthcare
Revenue by Client Revenue Mix Employees Metrics
134 128 120
7% 8% 12% 13% 30% 30% 32% 30% 34% 114 113
7%
29% 32% 31% 31%
26%
70% 70% 68% 70% 66%
40% 46% 47% 45% 46%
2,357 2,429 2,377 1,973 2,008
FY18 FY19 FY20 FY21 Q1-FY22 FY18 FY19 FY20 FY21 Q1-FY22 FY18 FY19 FY20 FY21 Q1-FY22
Top 10 Clients Top 5 Clients Top Client Onsite Offshore India Headcount Headcount Outside India
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31% 26% 22% 25% 23%
69% 74% 78% 75% 77%
FY18 FY19 FY20 FY21 Q1-FY22
Time and Material Fixed Time, Fixed Price
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Disclaimer

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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