In conversation with Shashidhar SK, CFO of AXISCADES Technologies Ltd

Our strategic focus in the short to medium term is to de-risk the business with a three-pronged approach of vertical diversification, customer diversification and digital-first, states Shashidhar SK, CFO of AXISCADES Technologies Ltd

In Q3FY23, net sales of the company surged by 26.1 per cent driven by double-digit growth across the verticals but the company reported a net loss of Rs 10.2 crore. What factors contributed to the company's performance in this quarter?  

 For Q3 of FY '23, our consolidated revenue stands at Rs 213.4 crore, the highest ever revenue recorded in any quarter of the financial year in the history of the company. In fact, in the last 5 quarters the company has recorded upwards of 26 per cent growth year-on-year in every single quarter. During the quarter the company has taken an exceptional charge of Rs 23.6 crore in the consolidated financial results. This is solely related to the Mistral acquisition and pertains to the additional consideration and the interest paid to Mistral and the interest accrued on optionally convertible debentures, which is not part of the original purchase consideration of Mistral. Excluding exceptional charges our net profit stands at Rs 13.4 crore during the quarter compared to Rs 7.9 Crore Q3FY22, a growth of 70 per cent Y-o-Y.  

Could you provide more information on your order book and any upcoming orders?  

As of December 31, 2022, we have a confirmed order book of USD 75 million and the order pipeline, at various stages, in all entities, excluding Mistral is about USD 280 million. Mistral alone has an order pipeline of Rs 4,000+ crore, concerning qualified design wins and prototypes, which will result in production orders, in the coming years. The nature of the Defense business is such that once the designs and prototypes get qualified, the orders are more or less crystallized, however, they get phased out over 5-8 years, depending on the requirements and priorities of the defence forces. 

We continue to see good traction in our new verticals, such as Automotive, Energy, Payment Solutions and Medical. We are positioning ourselves to become a preferred and strategic partner in these sectors. Our engagement with our automotive and energy customers is ramping up as per our expectations. The revenues from this segment, which are currently in the single digit, will form a significant portion of our revenue in the next 2-3 years. 

What were the main reasons for acquiring Mistral Solutions Private Ltd, and how does this acquisition fit into the company's long-term strategic goals?  

AXISCADES completed the acquisition of Mistral in December 2022. Mistral is a leading global player in system engineering and product design and is focused on the embedded space with a successful track record, spanning over two decades. They service marquee customers in the product solutions space, homeland security and the growing area of defence. With the completion of the Mistral acquisition, AXISCADES strengthens its position as a technology leader, providing cutting-edge product design and development services to its customers for a wide range of applications. Mistral is a perfect complement to AXISCADES’ portfolio, and with the resulting synergies, the company seeks to unlock diversified opportunities and foresees significant upside to both revenue and margins.  

AXISCADES, is already a preferred partner in the defence industry. The collaboration with Mistral will provide us complementary customer base and opportunities to cross-sell and expand our product and service portfolio, along with the ability to offer the latest technologies in embedded electronics and chip design to our global clientele,  

The aerospace division of your company saw a YoY growth of 42.4 per cent. How do you anticipate the performance of this business segment over the next 2-3 years?  

The Aerospace vertical, which was adversely impacted during Covid has returned to normalcy and pre-covid levels. We are witnessing Q-o-Q revenue growth in this vertical in the last 5 quarters. While we working with both OEMS and Tier1 in the Aerospace vertical, specifically, we are a trusted partner with Airbus for more than 15 years and for the fourth time, the company was awarded a multi-year contract by Airbus, with significantly enhanced scope, following a rigorous Joint Sourcing Optimisation campaign. 

This contract renewal will entail niche engineering services on product development and plant engineering space, across Fuselage & Wings, covering different locations and divisions. For the next 2-3 years, we project a double-digit growth in this segment.  

Currently, what are the top three strategic priorities for your company?  

 As has been repeatedly articulated, our strategic focus in the short to medium term is to de-risk the business with a 3-pronged approach of vertical diversification, customer diversification and digital-first, with a singular objective of growth in Revenue and Profitability. The company has made considerable progress on all 3 fronts by diversifying our revenue streams from new verticals, expanding our client base and bringing digital and automation to the forefront. 

We continue to invest in technologies of the future, such as embedded software, AIML, PLM on the Cloud and Industry 4.0. We have strengthened the marketing team, both in India and overseas, who are working towards creating more strategic logos, expanding our customer base as well as leveraging the competencies of Mistral. You are already seeing the results of these initiatives in our quarterly numbers