Ramco Systems turns EBITDA positive, guided for quarterly progression
Q3 FY24 EBITDA at ₹1.4 cr, order book up 28% QoQ, but revenue growth marginal at 2% YoY and management refuses to give margin targets
What's new
- EBITDA turned positive to ₹1.4 cr from Q2 loss, driven by eliminating loss-making projects and improving resource utilization.
- Order book rose 28% QoQ to ₹296.3 cr, with ACV up 35% QoQ to $11.8M.
- Cloud migration reached 60% of customer base, with target to expand to 80%+.
- Product innovation: Ramco Discover AI engine for natural language ERP queries.
Themes from the call
Demand
Order book growth of 28% QoQ and ACV growth of 35% QoQ provide revenue visibility, but global macro uncertainty weighs on customer spending.
Margins
EBITDA turnaround driven by eliminating loss-making projects and improving resource utilization to high 80s%; management sees utilization as primary profitability lever.
Capital allocation
Rights issue raised ₹112 cr; cash at $36M earmarked for product development, cloud migration, and selective niche hiring.
Guidance watch
- EBITDA positive trajectory every quarter from Q3 onward — directional, no specific margin targets.
- Resource utilization target to 85%+ from current 80-82%.
- Cloud migration customer base target to 80%+ in coming quarters.
- 30-40% of Q3 order book expected to convert to revenue in next 2-3 quarters.
Risk flags
- Revenue growth marginal at 2% YoY; profitability only just starting.
- Management refused to guide on specific revenue, EBITDA margin, or PAT targets.
- Global macroeconomic uncertainty and competitive intensity remain headwinds.
Key quotes
-
"The intent is to move towards positive EBITDA with every passing quarter. We have done that in Q3 and we will be building on that in the subsequent quarters."
— Sundar Subramanian, CEO -
"Typical deal size 500K-1.5M USD across Greenfield and replacement projects; 60% from new logos, 40% existing customers."
— Sundar Subramanian, CEO
The brief
Ramco Systems delivered its first EBITDA-positive quarter in FY24: ₹1.4 cr, compared to a loss in Q2. The improvement came from a zero-tolerance policy on loss-making projects and tighter resource utilisation, now in the high 80s and with a target above 85%. The order book supports the optimism: ₹296.3 cr, up 28% sequentially, with ACV jumping 35% to $11.8 million. But revenue growth remains tepid, just 2% year-on-year, and the company declined to give any margin target for FY24 or FY25. Profitability has arrived, but barely. Product innovation in AI (Ramco Discover) and cloud migration (60% migrated, target 80%+) are strategic positives, yet the path from a small profit to significant EBITDA margins is unguided. The risk is that macro uncertainty and competitive pressure from global vendors cap the revenue acceleration needed to scale profitability.
A credible turnaround signal, but the profit trajectory needs a gear shift in revenue to be sustainable.