💰 Financial Performance

Revenue Growth by Segment

The Industrial Equipment & Heavy Machinery (IEHM) vertical contributes 57% of overall revenues, while the Transportation & Mobility (T&M) vertical accounts for 38%. The newly established Healthcare & Life Sciences (HCLS) vertical generated 4% of revenue in the last fiscal year. The company is targeting to scale HCLS by converting 1-3 clients to the $1 million+ annual revenue bracket within three years.

Geographic Revenue Split

The company operates across North America, Europe (UK, Germany, Netherlands), and India. While specific percentage splits per region are not disclosed, the company is expanding its international workforce to 500 employees to support growth in North American and European markets.

Profitability Margins

Profitability has seen recent compression; the Operating Profit Margin declined to 9.1% in FY 2024-25 from 11.1% in FY 2023-24 (a 17.7% variance). The Net Profit Ratio also fell to 5.5% from 7.2% (a 23.24% decrease) due to increased operating costs associated with growth investments and talent acquisition.

EBITDA Margin

The company reported an OPBDIT/OI margin of 4.1% in FY2023, down from 8.4% in FY2022. Management has committed to achieving double-digit EBITDA growth in FY2025 and FY2026, with a long-term target of reaching 15% EBITDA margins by FY2027 as utilization of new hires improves.

Capital Expenditure

The company's growth is supported by a significant fund infusion of INR 70 crore from Convergent Finance LLP. These funds are being utilized to bolster international teams and enhance digital capabilities in AI, Cloud, and Data Centers.

Credit Rating & Borrowing

ICRA reaffirmed ratings at [ICRA]BBB(Stable)/[ICRA]A3+. The company maintains a debt-free position with a comfortable liquidity profile. Interest coverage ratio stood at 10.4x in FY2023, though it declined to 1.3x in FY2024-25 on a consolidated basis due to lower net profits.

⚙️ Operational Drivers

Raw Materials

As a service-based ER&D firm, the primary 'raw material' is human capital. Employee benefit expenses represent the largest cost component, supporting a workforce of 2,581 employees as of March 31, 2025.

Import Sources

Not applicable for software services; however, talent is sourced primarily from India (offshore capability centers) and local markets in the US, UK, and Germany.

Key Suppliers

Not disclosed as the company provides intangible engineering and digital services rather than manufacturing products.

Capacity Expansion

Current capacity is distributed across 14 offices in 6 countries. Expansion plans include growing the international team to 500 employees in North America and Europe to handle increased offshore and onsite project demand.

Raw Material Costs

Employee costs are the primary driver. Increased operating costs led to a 29.5% drop in Return on Equity (to 12.55%) and a 23.21% drop in ROCE (to 17.3%) in FY 2024-25, reflecting the high cost of specialized engineering talent.

Manufacturing Efficiency

Efficiency is measured by employee utilization. Margin recovery is expected as recently hired employees are fully deployed on high-margin service offerings.

Logistics & Distribution

Not applicable; services are delivered digitally or via onsite consulting.

📈 Strategic Growth

Expected Growth Rate

15%

Growth Strategy

The company plans to achieve 15% revenue growth by FY2027 through a '100% customer focus' strategy, scaling the HCLS vertical, and investing in AI and Data Center capabilities. They are also expanding their international presence to 500 employees to capture higher-value onsite R&D spending in the US and Europe.

Products & Services

Digital and Engineering Research and Development (ER&D) services, including embedded systems, mechanical engineering, and software outsourcing for the Transportation, Mobility, Industrial, and Healthcare sectors.

Brand Portfolio

Onward Technologies, Onward Tech.

New Products/Services

New focus on AI-driven engineering services and Data Center/Cloud migration services for European manufacturing clients, expected to drive double-digit growth.

Market Expansion

Expansion into the Netherlands and Canada via new subsidiaries, alongside strengthening existing footprints in the US, UK, and Germany.

Market Share & Ranking

Not disclosed; however, the company is noted as a smaller player compared to 'much larger peers' in the ER&D space.

Strategic Alliances

Strategic investment and partnership with Convergent Finance LLP, which provided INR 70 crore to fund growth initiatives.

🌍 External Factors

Industry Trends

The ER&D industry is shifting toward AI, electrification in automotive, and digital health. Onward is positioning itself to capture this by investing in these specific competencies to move from single-digit to double-digit growth.

Competitive Landscape

Faces intense competition from large-scale Indian IT majors and global engineering firms who have better economies of scale and pricing flexibility.

Competitive Moat

The moat is built on long-standing relationships with global OEMs and deep domain expertise in niche verticals like Heavy Machinery. Sustainability depends on the ability to scale the HCLS vertical and successfully transition to AI-led engineering.

Macro Economic Sensitivity

Highly sensitive to global R&D spending cycles. A slowdown in US/European manufacturing capex would directly reduce demand for ER&D services.

Consumer Behavior

Clients are increasingly demanding 'offshore-onsite' hybrid models and faster turnaround times for digital transformation projects.

Geopolitical Risks

Exposure to 'Trump tariffs' and US trade policy; however, management views the current US environment as 'progressive' with companies increasing R&D and innovation spending.

⚖️ Regulatory & Governance

Industry Regulations

Compliance with global data privacy laws (GDPR), industry-specific regulatory standards for healthcare engineering, and immigration/visa restrictions for onsite employees.

Environmental Compliance

The company monitors ESG risks as part of its enterprise-wide risk management strategy, though specific INR costs are not disclosed.

Taxation Policy Impact

The company follows standard corporate tax rates in India and respective international jurisdictions; specific effective tax rate % is not disclosed.

Legal Contingencies

The company maintains a global compliance framework to manage regulatory requirements; no specific high-value pending court cases or INR values for legal disputes were disclosed in the provided documents.

⚠️ Risk Analysis

Key Uncertainties

Attrition and talent acquisition risks are primary; high demand for engineers from GCCs could increase wage costs by double digits, impacting the 15% margin target.

Geographic Concentration Risk

Significant revenue concentration in North America and Europe; economic downturns in these regions would disproportionately affect the order book.

Third Party Dependencies

Dependency on global payroll experts and external auditors (BSR & Co. LLP) for operational integrity.

Technology Obsolescence Risk

Risk of falling behind in AI and Cloud competencies; the company is mitigating this by investing in new capabilities for the 2026 runway.

Credit & Counterparty Risk

Receivables quality is considered healthy given the 'reputed' and 'multinational' nature of the 80-client base, though debtors turnover slowed slightly to 4.5.