How Cyient is diversifying for the post-COVID world
The engineering R&D firm in Hyderabad is eyeing new industries with two new platforms.
Cyient released an IP-based platform called CyientifIQ in late June—its second thrust in the current financial year to productise its engineering R&D services.
The Hyderabad-headquartered company had earlier launched the IntelliCyient suite in April to drive digital transformation in the manufacturing and industrial industries.
“Through CyientifIQ, we are investing in creating technology-led solutions that deliver sustainable market advantage to our customers,” said Krishna Bodanapu, CEO and Managing Director of Cyient.
Cyient’s revenue has declined for two consecutive years. However, its revenue from design-led manufacturing (DLM) rose 33 percent from Rs 532 crore in 2019-20 to Rs 709 crore in 2020-21.
It closed the 2021 fiscal with Rs 4,132 crore in revenue, 83 percent of which comes from services that declined by 12 percent. Cyient employs 12,000 employees.
COVID-19 hits Cyient’s mainstay business
One major reason for Cyient’s decline has been its exposure to commercial aviation, defence, and auto manufacturing industries that were hit by the global pandemic in 2020. Aerospace and defence contributed nearly 34 percent of Cyient’s revenue in 2020-21.
“The aerospace and defense industry is expected to be in a slow recovery mode in 2021, with global air travel expected to recover to 2019 levels by 2024,” according to Cyient’s latest annual report. “The commercial aerospace sector has been significantly affected by the COVID-19 pandemic, which has led to a dramatic reduction in passenger traffic, in turn affecting aircraft demand.”
To counter this, Bodanapu is driving the company in a new and more efficient direction.
With CyientifIQ and IntelliCyient, the company wants to grow in new industries that are primed for growth like communication, medical technology, industrial and plant engineering, and mining and natural resources.
In February, Cyient launched a Design for Circularity (D4C) engineering practice with Eolos, an industrial consultancy firm in Berlin. With D4C, it wants to win accounts in rail, automotive, aerospace, and med-tech industries with solutions centred around environmental sustainability.
Last year, Cyient also acquired IG Partners in Australia to tap the digital transformation opportunities in energy and mining industries like pipeline monitoring.
Overall, with an eye on new industries, Cyient’s management believes there are opportunities in pipeline monitoring, 5G implementation, vegetation management system, virtual assets management system, virtual walkout, and road health analytics.
For instance, a recent engagement in a 5G implementation saw Cyient solutions in the engineering and design of macrocell networks. The enterprise client needs to ensure minimal electromagnetic emission impact on users in heavily populated services.
The product and platform-led approach
However, the harder part for Cyient will be to ensure that it doesn’t have to keep adding people while growing revenues. For that to happen, the success of its new platforms is imperative.
“The offerings include smart automation and intelligent supply chain, and technologies that we bring to customers in a differentiated digital offering. We are seeing significant traction along these lines,” Bodanapu told equity analysts in April.
With the IntelliCyient solution, the company says inspection costs have reduced by 50 percent while enhancing data precision. What it will have to do is increase its marketing and branding spends to take its platforms to clients in the new industries. For now, Cyient seeks to expand its share in its large enterprise accounts.
"We believe Cyient controls client-specific issues and back with new business opportunities," stated a research report from stock brokerage Axis Securities on April 23, 2021.
“Service providers are effectively assuming a greater role in the enterprise innovation agenda by offering a combination of digital skills, domain and use -case knowhow, and frameworks/IP to accelerate time-to-market,” said Akshat Vaid, Vice President of technology client advisory Everest Group after the launch of CyientifIQ.
For Cyient, this is the real test of its IP and engineering R&D experience built over 30 years.