In an interaction with Arun Krishnamurthi, CEO and MD of AXISCADES Technologies Ltd

Our strategic alignment with the Indian government's Make-In-India initiative has proven instrumental in driving demand for electronic communication and warfare capabilities, addresses Arun Krishnamurthi, CEO & MD of AXISCADES Technologies Ltd.

In Q1FY24, the company's revenue surged by 17 per cent on a YoY basis, while the company reported a net profit of 5.7 crore in Q1FY24, as against a net loss of 31.7 crore in Q1FY23. What were the contributing factors to the company's performance?

Our strong performance in the first quarter of the fiscal year 2024 can be attributed to several pivotal factors. Firstly, we achieved a solid 17 per cent increase in revenue, which can be directly linked to the exceptional performance of various sectors within our business. These include Aerospace, Defence, Heavy Engineering, Automotive and Energy verticals. The strategic diversification across these sectors allowed us to tap into multiple markets, effectively capitalizing on the burgeoning demand present. Additionally, our unwavering commitment to operational efficiency and prudent cost management led to an impressive 45 per cent growth in EBITDA. Mainly, this growth was accompanied by a 300 bps increase in EBITDA margin. 

What is the current proportion of your business represented by the defence sector? Additionally, could you provide insights into your expectations regarding the growth trajectory of the defence segment in the upcoming quarters?

At present, the defence sector comprises 30 per cent of our overall business. Our strategic alignment with the Indian government's Make-In-India initiative has proven instrumental in driving demand for electronic communication and warfare capabilities. Given the escalating Russia-Ukraine conflict, there is a heightened focus on defence capabilities. This, in turn, is expected to create substantial growth opportunities in areas such as radar, sonar, telemetry devices, and drones. Our noteworthy investments in research and development, coupled with successful prototype designs, have positioned us to transition into a phase of heightened production over the upcoming three to four years. As production scales up, we anticipate a significant upswing in both revenue and profitability within the defence sector.

What is the current competitive landscape for your company, and what are your plans for enhancing your competitive position?

The competitive landscape within our industry is dynamic and multifaceted, characterised by a multitude of players competing for market share. However, our emphasis on engineering and technology solutions across various sectors has positioned us strategically.

We are steadfastly committed to sustained investments in research and development and fostering innovation. This commitment enables us to deliver progressive solutions that resonate with our clients' evolving needs. Noteworthy is our recent acquisition of Mistral Solutions, which has bolstered our presence in the semiconductor space. This aligns seamlessly with India's aspirations to emerge as a global semiconductor hub. Our approach includes nurturing relationships with global OEMs, expanding our product range, and strategically acquiring companies that synergize with our capabilities. This comprehensive strategy equips us to not only enhance our competitive standing but also to seize emerging market prospects.

During the quarter, we also acquired add solution GmbH which strongly aligns with AXISCADES’ long-term objectives. add solutions has really good capabilities in wiring harnesses as well as software testing and these are the areas, which are growing rapidly in the automotive space. They work with the world’s largest R&D automotive player and we are hopeful that with the work that they do with this client, we can offshore some of this and therefore grow the pie. This strategic move provides a foothold in the automotive sector, enabling firm contracts with leading automotive OEMs. This also unlocks significant offshoring opportunities and the technology synergy that our partnership will create will allow us to deploy them across customers, verticals, and geographies, thereby creating a competitive advantage and having a multiplier effect in the automotive sector.

Given India's aspiration to establish itself as a global semiconductor hub and considering your recent acquisition of Mistral Solutions, how do you envision the semiconductor business opportunity impacting your revenue in the forthcoming quarters?

The semiconductor business opportunity holds vast potential for us, particularly in the wake of our strategic acquisition of Mistral Solutions. This strategic move positions us to capitalize on the growing demand for semiconductor design and development. The concerted efforts of India to establish itself as a global semiconductor hub align seamlessly with our long-term growth strategy. As the demand for semiconductors escalates across diverse industries like automotive, electronics, and telecommunications, we are uniquely poised to capitalize on this trend. The assimilation of Mistral Solutions' expertise into our framework empowers us to offer holistic semiconductor solutions, thus significantly contributing to our revenue expansion in the forthcoming quarters.

At the moment, what are your top 3 strategic priorities?

Our strategic priorities are fundamentally rooted in nurturing sustainable growth and creating enduring value. The three foremost strategic priorities guiding our actions are:

1. Diversification and Innovation: Our unwavering focus is on diversifying our portfolio and cultivating innovation to effectively cater to emergent market demands. This involves expanding our foothold in sectors like automotive and semiconductor technology, ensuring we stay at the forefront of transformative industry shifts.

2. Defence Sector Expansion: We are resolutely committed to further amplifying our presence in the defence sector. Given the current 30% representation of our business in this sector, our goal is to achieve a commendable doubling of revenue within the next three fiscal years. This endeavour is underpinned by an augmentation in production and an elevation of profit margins.

3. Operational Excellence: We are diligent in optimising our capital structure, reducing interest costs, and upholding a strong balance sheet. This financial fortitude empowers us to make more substantial investments in growth initiatives, thereby propelling our business to new heights.