Black Box: Black Box headed for next phase of growth with revamped GTM strategy: Ventura Securities

Muted sales growth in FY24 notwithstanding, Black Box is poised for its next growth phase aided by a growing deal pipeline, revamped go-to-market strategy, and focus on data centres, according to a report by brokerage firm Ventura Securities. Black Box, an Essar Group company, is a digital infrastructure integrator. Its portfolio includes data centre solutions, advanced networking solutions, AI-powered analytics and IoT-enabled devices. “Despite muted sales growth in FY24, primarily due to delays in project execution and decision-making, Black Box is poised for next growth phase,” it said, adding that the firm has revamped its strategy by focusing on the top 300 customers and exiting less profitable long-tail customers, as they do not contribute to margin growth.

Black Box plans to concentrate on data centres, primarily in North America and India, Ventura said.

Data centres constitute about 20% of the company’s revenues.

With a customer base that includes major hyperscalers like Meta, Amazon, and Microsoft, which are expected to significantly invest in data centre buildouts, it said the contribution to revenues of Black Box from data centres is expected to grow to Rs 1,994 crore by FY27 at a CAGR of 15 %.

“The anticipated data centre build-out in India over the coming years is substantial, with projections nearing 3,000 megawatts. The typical expenditure for building data centre capacity is estimated between 50 crore and 60 crore per megawatt, indicating significant investment potential,” the report said.

The company sees India as a hyper-growth market, where they are constructing a strategy to be a significant player, it added. Moreover, Black Box’s experience in large-scale operations across North America is expected to give it a competitive advantage in the Indian market. The company intends to collaborate with its global clients who are looking to enter India, while also exploring potential partnerships with local businesses, it said.

Black Box reported a 60 % jump in consolidated net profit to Rs 51.14 crore for the July-September quarter. Its revenue for the quarter under review declined 4.89 % to Rs 1,497.2 crore from Rs 1,574.3 crore in Q2 FY24.

“We expect revenues to grow at a CAGR of 8 % from Rs 6,281.6 crore in FY24 to Rs 7,996 crore by FY27.

“The company has a strong (deal) pipeline of USD 2 billion, and plans to increase the conversion rate to 25 % from current 20 %,” Ventura said.

Black Box caters to five verticals — banking, finance, healthcare, technology and industrial. It has a network of 75 delivery centres, of which 21 are in the US and 14 in India. Globally, the company has a workforce of over 4,000 across 35 countries.