KPIT Technologies Ltd (NSE: KPITTECH) Q4 2025 Earnings Call dated Apr. 28, 2025
Corporate Participants:
Unidentified Speaker
Rahul Jain — Analyst
Sunil Phansalkar — Head of Investor Relations
S.B. (Ravi) Pandit — Chairman
Kishor Patil — Co-founder, CEO and Managing Director
Kishor Patil — Co-founder, CEO and Managing Director
Kishor Patil — Co-founder, CEO and Managing Director
Kishor Patil — Co-founder, CEO and Managing Director
Kishor Patil — Co-founder, CEO and Managing Director
Priya Hardikar — Chief Financial Officer
Anup Sable — Chief Technology Officer
Analysts:
Unidentified Participant
Abhishek Kumar — Analyst
Karan Uppal — Analyst
Sandeep Shah — Analyst
Bhavik Mehta — Analyst
Nitin Padmanabhan — Analyst
Chandramouli Muthiah — Analyst
Ruchi Mukhija — Analyst
Ankur Pant — Analyst
Bharat Shah — Analyst
Presentation:
operator
IT. Will SA. Ladies and gentlemen, good day and welcome to KP IIT Technologies Q4FY25 earnings call hosted by Daulat Capital Markets Private Limited. As a reminder, all participant lines will be in the lesson only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Rahul Jain from Dalat Capital India. Thank you. And over to you sir.
Rahul Jain — Analyst
Thank you. Good evening everyone. On behalf of Dalwat Capital, I would like to thank KPIT Technologies Limited for giving us the opportunity to host this earnings call. Now I would like to hand the conference to Sunil Francalkar who is Vice President’s Reference and Head of Investor Relations. At KPIT to do the management introductions. Over to you, Sunil.
Sunil Phansalkar — Head of Investor Relations
Thank you, Rahul. Good evening and a very warm welcome to Everybody on the KPIT Technologies Q4FY25 and FY25 earnings conference call. On the call today we have Mr. Ravi Pandit, co founder and chairman. Mr. Kishore Patil, co founder, CEO and MD Mr. Sachin Tikekar, president and joint MD Mr. Anoop Sabre, board member and CTO Priya Hardikar, CFO and Sunil from IR. As we always do, we would have the opening Comments made by Mr. Ravi Pandit on the performance of the company for the year and during the quarter and the way forward. And then we’ll have the floor open for questions.
So now I will hand it over to Mr. Ravi Pandit.
S.B. (Ravi) Pandit — Chairman
Good evening and welcome to our fourth quarter. What I would like to do is to first talk about the financial results that we have declared which are in your hand. And then I would like to talk about the broad movement in our area of work. So coming to the financials first, if you look at the on the quarter basis, if you look at the top line, the year on year growth in constant currency has been 15% and quarter on quarter growth has been 3%. The EBITDA this quarter was 21.1% where the year on year growth on this quarter has been 18.5 and quarter on quarter has been 3.5.
For net profit we have given two numbers this time. The year on year growth in net profit has been for this quarter has been 48.9% but includes some one time incomes which we have detailed in our investor presentation. If you exclude that then the growth has been 34.9% and on a quarter on quarter basis it’s 30.9% and without the exceptional it is 18.5%. I believe that the results growth in quarter, on quarter EBITDA as well as on net profit has been quite healthy. We had during this quarter of total closures of $280 million. We ended the year with a healthy cash conversion with cash on hand of rupees 15.8 billion.
If one way to look at the year part on a constant currency basis, the top line growth has been 18.7%. EBITDA is 21% growth in that has been 24%. The net profit has been 41.2% rise and without considering the one time it is 29%. You know, we had given a certain revenue guidance which we are within that. We had also given some EBITDA guidance in the first place, which was 20.5% which we later on increased to 21%. And we have kind of met that on the basis of the results that we have. We are proposing a dividend for the AGM at 6 rupees per share.
And if that gets approved, then the final dividend will be 8.5 rupees per share, which will be a 27% growth over the last year. So that is a broad financial picture. What I would however like to do is to talk to you about what’s happening in the marketplace and how do we see things happening in our presentations to you. All along we have been talking about three main drivers for our future growth. And I want to do a bit of a deep dive in each one of them so that we understand where we are on that.
We talked about three basic drivers. One was geographical adjacency, the second is offering expansion, and the third one was vertical adjacency. And we have talked time and again about the work that we are doing in China. As things are becoming more and more clear, we see four buckets of opportunities for us. And you know, we have been doing extensive work in China now, really understanding the market very well. And therefore we have come to a conclusion that we can possibly look at four ways in which the work can be in which we can use China for our growth.
There are some significant learnings from China and we believe that those learnings are going to be extremely relevant to the global OEMs. And those include new features, they include cost reduction. And we believe that we have an opportunity of taking these learnings from China and take them to our global OEMs, which should help them to become better in their products, in cheaper and also in their faster delivery. Secondly, we are also working with our existing OEM clients to remain relevant in China. And we are finding that especially in the area of architecture, the work that we do globally with our global clients could be inducted in the China market.
And that is something that can give them some edge in that market. Third thing is that, and we all know what the current political conditions are, but we see a possibility that we can take the offerings of the China OEMs to go global. And lastly, and not the least, we believe that we can help China in China, the Chinese OEMs. That’s because of the tools and the PTS that we can bring to the table and all put together, we see that there is a possibility for us to grow in China. We are also working outside of China in some markets.
But as we come to a more definitive work on that, we will come back to you. The second area has been the, the work on the offerings. You know, the extraordinary work that has been done in China by the Chinese OEMs have actually gotten all the OEMs to think about some serious work on cost reduction. You know, how can they consolidate their hardware or software or configurate differently so that the cost can come down? And that’s an area where we see a lot of opportunity. We are also seeing opportunity and this is a global opportunity in the area of cyber security.
And we are building some muscle in that. We have added some people in that area and we think that we have some interesting offerings to give. And also considering the fact that the speed at which the new vehicles are going to be launched in the years to come, there is a need for end to end validation. And that’s an area where we have been investing our time and money and we see a possibility of growth in that area. The third dimension has been the area of vertical adjacency. And we have spoken about this earlier that we want to look.
Currently we are looking at the entire spectrum of mobility. But our main thrust has been in the area of Pascar. And we talked earlier that we want to look at both commercial vehicles as well as off highway. And last time, in our last presentation we talked about eight new clients with whom we are having positive conversation. And out of them we have started already working with four, which.
operator
Ladies and gentlemen, thank you for patiently waiting. We have the management line reconnected and we can continue with the Q and A session.
S.B. (Ravi) Pandit — Chairman
So.
Kishor Patil — Co-founder, CEO and Managing Director
Hello.
Sunil Phansalkar — Head of Investor Relations
I think when Mr. Pandit was speaking the line got dropped and people could not hear what he said, at least for the last five minutes. So what we want to do is we want him. I mean, he will do it again and then we can have the Q and A session.
S.B. (Ravi) Pandit — Chairman
Would you. Could you hear till the end? I said, thank you, operator. Hello, can you hear us now?
Sunil Phansalkar — Head of Investor Relations
Yes, yes, I can hear you now, sir.
S.B. (Ravi) Pandit — Chairman
Hello, how much did you hear when I was talking last?
operator
We were going to start with the. Q and A session, but did the others hear completely? Because some of us didn’t hear that. Now, those of us who were kind of listening in from outside, would you want to ask one of your listeners.
Sunil Phansalkar — Head of Investor Relations
So, I mean, I’ve got messages where they have said last five, six minutes at least. They were not able to hear.
S.B. (Ravi) Pandit — Chairman
Okay, all right.
Kishor Patil — Co-founder, CEO and Managing Director
Restart the Q A. I mean, no.
Sunil Phansalkar — Head of Investor Relations
No, no, no, no, no, wait. We will, we’ll have the opening comments again. I think financials have been done. Post financials will have the opening comments again and then we can have it open for Q and A, please.
operator
Okay,
S.B. (Ravi) Pandit — Chairman
let me start with that. Are we on or you are not connected? Have you connected with them?
operator
Yes, yes, we are connected on the main call, sir.
S.B. (Ravi) Pandit — Chairman
You’re connected on the main call. Yeah. Hi everyone. I understand that somewhere in the conversation we got disconnected. And so what I would like to do is to bring out the points that I wanted to make. And so first I covered the quarterly and the yearly financials, which I understand were heard by all. Then I talked about how do we see the thing, the current market opening up. And as I said in Q2, we talked about certain uncertainties. In Q3, we gave confidence regarding how things are moving today. We are far more clear regarding how the market is moving and how we will perform in this market.
So let me talk about the broad drivers of our revenue and go a little bit deeper into that. In all our past three investor updates, we talked about three leverages that we wanted to use. One was the look at geographical adjacencies. The second was look at broader offerings to service our clients. And the third one was to look at vertical adjacency. So these are the three levers that we were looking at. Coming to the first one on geographical adjacency. We have been talking about China for quite some time and now it seems that the picture relating to what we can do in China is getting clearer and clearer.
And we are seeing four possible avenues for us to work. And let me take you very quickly through the four avenues. One is that over our work in China and our partners work in China now we have realized what are the learnings which are from China which we can take to our global clients. And we believe that that will help our global clients to do work at lower cost, with better quality, more features, et cetera. And that’s what, that’s one thing that we see happening, especially in the area of autonomous L2 part as well as in the area of digital cockpit.
And we see our global clients can help from our work in this area. Secondly, we believe that we can help our existing OEMs to remain relevant in China, especially on account of the extra work that we have been doing, the specialized work that we have been doing in the area of architecture. And that’s an area where we have some definitive edge. And that is something that can be used by our global clients to operate in China. The third thing is about taking some pieces of work which has been done by Chinese OEMs and take them global.
This of course, depends on the various political situation, but we believe that there are parts of the world that we can take from China to US to the global market. Last and not the least, is helping the Chinese OEMs to work in China. This is especially in the area of where we have some extremely good tools and the PTAs, etc. And we see there is a possibility for us to help them. So this is our first axis of operation or first leverage. The second one has been on the additional offerings, and we believe our three major offerings, namely the cost reduction, cyber security and end to end validation, will be of relevance in the current pitch period.
The third thing that we talked about was the vertical adjacency. And you would recollect we had talked last time, that there are eight new clients with whom we are having positive conversations. Out of those eight, we have started working already on four. And out of them, two are commercial vehicles and one is off highway, and the last one is of course, Pascal. So we are seeing growth in our vertical adjacencies. We have created specific administrative structure for that and we are progressively seeing growth in that area. We are also beginning to see that many OEMs, especially the European OEMs, are now doing a substantial consolidation of vendors.
And we see that there is a possibility that we will have some piece of the cake, clearly, because we believe that we have more expertise than most others can offer and we will become very natural partners to these OEMs. So we see this as an overall traction. If you were to look at our deal closures over the last four quarters, you would see that consistently on quarter, on quarter basis, they are going up. So in the first quarter of this year, we had the deal closures were $202 million in second quarter, 207 in the third quarter, 236.
And in the last quarter that Q4, our deal closures were 280. So the point that we are trying to make is that we believe that this industry will continue to go for transformation. We believe that we have established our reputation as good dependable suppliers of software integration for them. We believe that we have some extraordinary offerings for them. And this should actually see us through in the years to come. So with these opening remarks, I’ll be happy to. We’ll be happy to take any questions from you over to you now.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. We will wait for a moment while the question queue assembles. The first question is from the line of Abhishek Kumar from JM Financial. Please go ahead.
Abhishek Kumar
How much is this uncertainty which is kind of stopped?
Sunil Phansalkar
Abhishek, are you able to hear. Not able to hear you from the initial from the start. Could you just repeat your question from the start?
Abhishek Kumar
Yeah, sure. Is this better?
Sunil Phansalkar
This is better. Thank you.
Abhishek Kumar
Yes. So, hi, good evening. My first question is on the dichotomy between the deal that we have seen building throughout the year and, you know, the decision to not give guidance. But if you could just help us. Understand, you know, how much, you know, you know, how difficult it is, what the kind of visibility we have right. Now getting into a site mandatory.
Kishor Patil
Overall, as we have said that there are clear areas where we are engaging with the client and we have seen the traction, we have seen pretty reasonable results for Q4 also. At the same time, there are a lot of things which are changing currently and we think it is in the process of settling down. I mean, for example, everybody is aware about tariffs and I think many of these areas, I think from that perspective, the speed at which the things will get executed is still not fully clear in the short term, while we believe it is a question of a quarter or two at the most.
And that is the reason. One reason is that’s why we do not know how the conversion of orders into revenue will happen. At the same time, I must tell you that many of these larger deals which we have got, many of them are already in the transition phase. Many of them are started scaling up, but slowly than what we would have liked from the client perspective. So the clients have been a bit cautious at this stage and all our discussions with the clients tell us that and the governments and the industry that the trade agreements will get settled in next three to four months and every day you see a better environment.
So with that we believe we should be in a position to move on quickly from there.
Abhishek Kumar
Okay, my second question is on this collaboration with Mercedes Benz. Now, Mercedes, you know, their strategy was to do their, you know, vehicle operating system, which was called NB os, if I’m not wrong, all in house. So do you see any change in stance by Mercedes in this case and in general, you know, across OEMs who are now more open to collaborating and offshoring events, their SDB programs, especially the German OEMs.
S.B. (Ravi) Pandit
So absolutely, I think we have been working with German OEMs, as you know, that’s the last part of our plans too. But recently what we have seen is there are two things they are seeing and it is related with their local ecosystem, which has not been very cost competitive, number one, which has been slow in some sense, the kind of work environment they have, number of hours they have, and also the way in which they have been innovating for the future. So with all this together, many European OEMs are absolutely looking at how they can very quickly catch up.
Naturally, you know, we are in a specific situation where specifically in SDB or some of these areas, we are very well entrenched. We have many platforms, many PTAs as we call, we can accelerate this growth. From that perspective. We got engaged and you will see that from many companies in Europe so that their response can be improved. The main thing for them is typically their SDV programs have been delayed for most of them and they want to catch up on that where they see the opportunity, where a company can step in and help them to do that.
I think that’s where now they are moving. Did I answer your question?
Abhishek Kumar
Yeah, hi, sorry. Yeah, that’s all from my side. Thank you so much and all the best.
Kishor Patil
Thank you.
operator
The next question is from the line of Karan Upal from Philip Capital India. Please go ahead.
Karan Uppal
Yeah, thanks for the opportunity. First question is again on let’s say FY26. So assuming there is some certainty to tariffs in next three to four months, will that be a trigger for auto companies to start resuming the spends and also will that have an impact on the growth trajectory through FY26? Absolutely. So. And we believe that it’s not something which we will start from there. We are already started walking, we’ll start running after that. So I just want be very definitive in saying this. Basically it is not a question that you know, we start the process from there on in terms of this.
We are already in the process of most of the clients we are talking about in terms of either transitioning or getting more clearer in terms of to deliver and already started in some way. The point is how quick when to scale on a large scale, which I think will happen. Okay, thanks for those comments. Secondly on Mercedes, so congratulations on that deal. So just wanted to understand the size of this engagement. Is it similar to our previously announced SEV deals like of Honda or of Renault? And also if you can mention the tenure offer. Yeah, so absolutely it is a similar scope we are doing.
But I think we came a little bit late. But absolutely it is the same contour and it will be a longer term deal. It’s a multi year deal which we are looking at three to four years deal. So this engagement is there and naturally it’s being a strategic partner for them in these areas. So that’s what we are looking for. And last question is on Europe. So there was a sharp drop in Q4. What led to that. And also related to that is in FY25 we saw majority of the growth. Being led by asia. So in FY26 can we expect a Broadway sort of a growth?
Kishor Patil
I think if in a quarter or two anything happens. But we have already mentioned that in the pipeline we have, the largest pipeline we have is from Europe and many of these opportunities we have started is from Europe. And actually as we have also mentioned last time, some of these engagement like Mercedes Benz as a European client we start get reflected sometimes in Europe or outside depending upon how it is, how it gets staged. But we see that there are different opportunities in different regions.
And Mr. Pandit talked about it. But I think in Europe we believe these speed to catch up is important and we are a very well established as well as acknowledged player in that area. So the situation is in terms of how quickly they can do it, how reliably they can do it. I think from that perspective we are in a prime position.
Karan Uppal
Okay, thanks. And all the best.
Sunil Phansalkar
Thank you.
operator
Thank you. The next question is from the line of Sandeep Shah from iCVirus securities. Please go ahead.
Sandeep Shah
Yes, thanks. Thanks for the opportunity sir. Just wanted to understand your comments indicates some growth slowness in the first half with expectation of pickup in the second half. So just wanted to understand the first half growth on a Q on Q basis you believe because of macro pressure it could be even negative or you believe it could be marginally positive with growth momentum to pick up in the second half.
Kishor Patil
We don’t talk about quarter to quarter growth, but it would be positive.
Sandeep Shah
Okay. And second, in terms of this kind of a difficult macro situation, maintaining margins could be a difficult task for the industry. So how do you see the FY 2026 EBITDA margin versus FY 26, FY 25?
Kishor Patil
See what we intend to do during this year is so first thing is you have seen that if you look at even last year, if I’m correct, most of the companies, their margins have dropped as long as I know almost all and fortunately for the last quarter for sure, I think we have been in a position to maintain our margins through multiple ways and we believe that we are in a good position to do that. There are many things we have focusing a lot on things such as platforms, the automation as well as AI together and that is a more, a much more compelling reason than a pure AI based solution.
And this can give a, you know, disproportionate productivity for us which will be great for the client and for us both in terms of time and the quality. So we believe that many of these things will help us because not only we want to, not only that we want to continue having the having the margins, same margins, but we would like to invest in terms of many areas for future and really making a transition to the new models, business models. And that’s why we feel that there is a good possibility for us to manage the margins while we are not giving any particular time.
But I would also say that during the year as the things settle, we will certainly come back and give the outlook for the rest of the year. And during this time we intend to give at least once in quarter in between some more updates so that we keep engaged with you and you keep on getting more updates frequently.
Sandeep Shah
Oh thanks. Thanks. That would be helpful. And just the last question, Kishore sir, in your presentation comments you have mentioned apart from other factors, a potential acquisition would also be one of the growth drivers for medium term. So any update on MNA and versus QIP announcement which we had two quarters back and whether the potential MNA at advanced stage and will it be financed through internal accruals, debt or.
Kishor Patil
Yeah. So first thing is yes, I think we have been talking about the areas and especially in the areas which are becoming more and more important as Mr. Pandit talked about the cost reduction part or cyber security and these where we already have the offerings but where we can. We really want to catapult into again the leaders in this area very clearly in that aspect. We may look at. We are looking at certain acquisitions also in advanced stages of discussion. But till it doesn’t happen, it doesn’t happen. So we are. So those opportunities are there.
The idea is not really for a growth as we always say, it is about more a strategic intention. And the strategic intention will be whether it is adjacency of vertical or adjacency of offering. And I think that’s what we will be, you know, we will do the acquisition for these matters.
Sandeep Shah
Okay, thanks. I will come in the follow up. All the best.
Sunil Phansalkar
Thank you.
Rahul Jain
Thank you. The next question is from the line of Bhavik Mehta from JP Morgan. Please go ahead.
Bhavik Mehta
Yeah, thank you. So questions. Firstly, you did mention that there have been some delays in ramp up of the projects. But have you seen any ramp down the cancellations since the tariff announcements on second April?
Kishor Patil
We have seen certain projects which we are expecting not coming up and some small way where the projects got closed. They did not continue with some of this. So that has happened but nothing on a significant scale.
Bhavik Mehta
Okay. The second question is on the Mercedes deal. Firstly a clarification. Is it part of the 280 million TC we have announced for the quarter? And secondly, how should we think about. The margins on this deal given that you’re working with the India R D center of Mercedes?
Kishor Patil
So I think two things I would say is this was already factored in the last win for the last quarter. We were transitioning in this area. We are completing the transitioning and closing those formality. So it is not a part of this. And the second thing is we had covered it in the earlier part. Some part of it was covered in the earlier part and the other areas. I may say that the. I mean we have been working with India centers earlier too. So we will continue to look at the margin in a holistic way.
Bhavik Mehta
Okay, thank you.
operator
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan
Yeah. Hi, good evening. Thank you for the opportunity. Had a couple of questions actually. The first is this quarter we saw a decline in task cars but growth was primarily driven by the other segment. Could you give some context as to what kind of work actually drove growth there?
Nitin Padmanabhan
Yeah. Is it better?
Sunil Phansalkar
Yes, now it’s better.
Nitin Padmanabhan
Okay, great. Sorry,
Sunil Phansalkar
question was.
Nitin Padmanabhan
So my question. My question was that during the quarter we saw a sequential decline for passenger cars and growth was largely driven by the other segment. So could you give some context on what kind of work actually drove this?
Kishor Patil
Yeah, I mean actually it was a marginal number so we’ll come out and we’ll check it out but it should be something to do with either the commercial and off highway or semiconductor company. So we will check that but I think that’s what we.
Nitin Padmanabhan
Sure that that’s helpful. The second is this time the share of profit from associates is around 14 crores. Is that some correct and is this sort of a sustainable number we should think about?
Kishor Patil
I think yes, absolutely. It is from Codex and actually it is from both. I think we also had a profit in entry also. So it is a profit from both. In terms of curex, I don’t think it’s something sustainable. We have to look at it more. On a yearly basis.
operator
And can you go through this because there is much noise.
Nitin Padmanabhan
I don’t know why that.
Kishor Patil
Thank you. So I think if you look at the Forex, every quarter the profit there was a certain loss during the last year but this made it up largely for the profit. So I think it’s a product business. So there will be quarter to quarter variation but I’m sure as a year we should be in a position to do.
Nitin Padmanabhan
Perfect and hope the audio is better now.
Kishor Patil
Yes.
Nitin Padmanabhan
So how should we think about margin going forward? So last year we had the ESOP cost which sort of tempered margins a bit. So you think if you could give some context on how much of a tailwind that could be this year.
Kishor Patil
No. So I think we’ll come out with as I mentioned that once there are, I would say down the line we would come up with a more specific number. But right now there is nothing to assume either way. So I think that’s what I would just say at that point.
Nitin Padmanabhan
Perfect. And just two quick questions. So in the last quarter you mentioned a 20% sequential increase in deal pipeline and lot of that was from Europe. How is it now post the wins that you have had and any update on the large deal that you have spoken about in the past.
Kishor Patil
All right Nitin, so Europe pipeline looks solid. The two truck OEMs that Mr. Pandit talked about, they are from Europe. The passenger car OEM also happens to be from Europe. The pipeline keeps getting better. So we remain. The outlook for Europe for this year remains encouraging for us. Nitin, what was your second question, the outlook for Europe?
Nitin Padmanabhan
The second one was earlier we mentioned a couple of large deals and so I mean last deals in the pipeline, so how are they stacking up at the moment and yeah, that’s kind of.
Kishor Patil
Yes, yes, thank you. So that tracking really well and you know we do hope to have a closure on at least one of them during this quarter. So they’re tracking well and as the dust settles down, hopefully there will be some acceleration in the next couple of quarters.
Nitin Padmanabhan
Perfect, that’s very helpful. And then just one last one if I may squeeze in. How are you thinking about the wage increase cycle this quarter? Do you any thoughts on holding it back or. It should be a normal cycle in Q2.
Kishor Patil
So I think we are changing a lot of things in the company and the way we are working specifically with the AI. So for sure for the year we would have increments specifically but those would be if I would say more linked with certain performance specifically we want to ensure that direction in terms of AI and overall productivity or the end to end solutions. So how the people deliver on the overall productivity we would have more incentive based payments and the fixed increments will be smaller.
Nitin Padmanabhan
Perfect. That’s very helpful. Thank you and all the very best. I’ll get back into the queue.
Kishor Patil
Thank you.
operator
Thank you. The next question is from the line of Chandra Modi Mutiya from Boland’s Goldman Sachs. Please go ahead.
Chandramouli Muthiah
Hi, good evening and thank you for taking my questions. My first question is just around passenger vehicle versus off highway and commercial vehicle. So I think we have been trying to build up the business potential within commercial vehicles given that it is little more intelligent driving and adas friendly so far the last couple of years I think passenger vehicles has come to be outgrown commercial vehicles. So just trying to understand over the next one to two years how you see commercial vehicle as a driver and when you see more meaningful growth potential there.
Kishor Patil
So from the point of view of if you see the wind, some of this, I mean we look at commercial vehicles as well as I mean automotive or five way commercial together as a segment. So we do see that there will be, we have one win, meaningful win in the more strategic win. And we believe that this is something which will take off during the year. We may not have significant numbers to add but reasonably growth in this year we would build a base and from the next year we will see meaningful growth is what we see as of now.
And Pascar of course that will remain as an engine for years to come. As I have always said that we believe that there is a lot of headroom for us to grow in the passenger car. As Mr. Pandit also mentioned and Mr. Tikekar mentioned last time that we are already in discussions with multiple clients and we are seeing a great conversion on the new clients we have shown about the Mercedes Benz. I think that those were some of the concerns earlier whether you will get SDB programs for the new amps. And I must say that actually There are many OEMs which we were not working or for the reason that they were not really driving this in a holistic way this program, many of them are coming back to us right now.
So and from there that’s how we have started the traction in this area. So absolutely we believe in medium term the passenger car vehicle growth will be always there from this year, next year onwards.
S.B. (Ravi) Pandit
Chandru Another way to look at it is from off highway we had five OEMs in mind that are of meaningful size and on the truck side there were four OEMs. What we have done is two out of the four we have already signed up with and I think over the next several quarters we’ll start to engage with them more meaningfully. Out of the five on off highway we have started an engagement with. Having said that, there are two others that we hope to start engagements with in the next quarter. So you know, in order to have a broad based growth which is across the three geographies and across the three verticals, I think we are setting ourselves reasonably well and we’ll be able to do so during the H1 so that our growth going forward in the second half of this year and in the midterm, it will be more balanced across the geographies as well as across the sub verticals.
So reasonable progress from that perspective.
Chandramouli Muthiah
Got it. That’s helpful. My second question is just around the focus on China. So in the global EV market, this is the set of OEMs from China that seems to be rapidly gaining market share and entering more and more markets which are accessible to the Chinese OEMs. So I think KPIT over the past couple of years has been focusing more on trying to build a bigger base and closer relationship with some of the Chinese OEMs that are going global. So just trying to understand, are there any sort of early examples or early wins that you’re able to share with us which you think can germinate into larger opportunity sets? Just to see, you know, over the past couple of years the efforts you’ve been putting, if there’s sort of any early indications of what sort of direction and trajectory this may be more thematic shift in the global EV industry could take and benefit you?
Kishor Patil
Yeah. So as Mr. Pandit talked about, our China strategy and what are the three, four angles which we have in terms of our China strategy? So we are first, I must say that for a sustainable growth, growth for long term, we have to build organization. And we are in that process where we have had people from the technology side who can bring our learning from China to here. We are building a local, stronger presence who can meaningfully engage with China in China. And of course, we have moved some people from outside China to there Chinese people who can really engage with us in terms of global union.
So we have actually first established the structure. I may say that we have established some partnerships there at this point of time. I believe in the later part of this year we should have something going, but we are progressing on some conversations there. I would not say anything concrete beyond that, but there are certain conversations which are progressing positively. And the first part for us was to really create, you know, as you know, we are not there to just go and sell first we have to build an organization, we have to build offering which makes significant sense to the OEMs for the long term and strategically.
So that is something. We have built some of these partnerships and the conversation with the end consumers. And we see that, I would say better confidence in penetrating in that market.
Chandramouli Muthiah
Got it. That’s helpful. And my last question is just around pricing in the market as well as sort of profitability metrics. When I look at your EBITDA per employee, it continues to grow on a yoy basis. So just trying to understand from a pricing standpoint, even though the macro is a little more of a pause kind of situation at this stage, what sort of negotiations are you having on pricing? Are you able to take price hikes the way you were able to take one or two years back? Or is there maybe sort of a pause on sort of pricing trends as well? And just related to that, on the margin side, I think part of this was asked earlier.
Last year we did have meaningful ESOP headwind, in spite of which I think the company was able to expand margins by OI this year there’s much less of an ESOP headwind. And you have spoken about more offshoring. So I just want to understand directionally, is there some color you’re able to share on margin and pricing?
Kishor Patil
Yeah. So I think we look at. I think it is better to look at the. Holistically, the way we look at it as a company. I mean, there are many things, right. We continue to invest and continue to do. One is in the people, right. Last time, like stock options, we invested quite a Bit we invested quite a bit into market expansion and we will continue during this year also to invest more meaningfully into markets. We will also we are making a meaningful investment into AI transformation. It is in terms of hiring the team then also really building our really as I said AI is not by just AI because that’s any company can come up with.
We are looking at how we can make a very automotive specific or mobility specific AI agents, platform tools and along with our along with our accelerator it creates the end to end solutions. So we would like to accelerate that part of the journey also during this year. So and of course to your point in some customers we have got the increment increase rates in some customers and of course there are clients which are coming back for a better cost effective solution. Currently our approach is take this opportunity to change the business model and really find better way to give them benefits as well as maintain the margin if not increase it.
Right now that is what we have been doing. So to answer your question will take a whole we will manage our margins based on the kitty we have and where we are making the investments. So that’s what I would put it.
Chandramouli Muthiah
Got it. That’s very helpful. Thank you very much and all the best.
Kishor Patil
Thank you.
S.B. (Ravi) Pandit
Thank you.
operator
Thank you. The next question is from the line of Ruchi Mukhija from ICICI Securities. Please go ahead.
Ruchi Mukhija
Good evening. Thank you for the opportunity. Now most of question have been answered just to double click on China strategy. Do you think localization partnership ecosystem and special solution Will it have some implications on margin for KPIT and now how flexible we are if it requires some balance sheet commitment to build China business for us.
Kishor Patil
I mean it will be part of our kitty we talked about. Right. We’ll develop invest in the market so China will continue to it it’s a little longer again and but I think we believe that in the this should be in a as in any market like including India we have been in a position to have a reasonable margin. So it’s something we have to do and I think I must say that with AI we believe more confident actually with the overall platforms and solutions we are seeking to compete in any market. So I think I won’t say that whether it is accretive margin for this or that but right now it will be it’s a little medium term gain at least in China but it’s very strategic so we will continue to do that and we’ll find our way to improve the margin.
Ruchi Mukhija
In the presentation prepared a comment mentioned that transformative largely we Expect to contribute revenue in H2. Just to clarify here are the ramp up timeline have been planned like that or because of the tariff situation. This is some delay that we anticipate.
Kishor Patil
I think we believe these two or three bigger opportunities which we have. It’s nothing planned or this but I think some of these, as I mentioned earlier we have already started in some small way. I think it will take some time to scale during this part. That is one part and couple of things. I think they are in that natural process they will realize that around that time.
Ruchi Mukhija
Okay. And last bit more accounting. One, the profit from JV14 crore received. You did mention that there will be some fluctuation around the Q rate. But can you give some broad sense? Are we confident that the next year we would still make positive for the year or still we are in the experiment season There could be negative or losses in the JV effort.
Priya Hardikar
So there could be like Mr. Patil mentioned earlier, there will be quarter on quarter variation. Because it’s a product company Codex itself. We do believe that in coming times, in medium term it will be positive. Cannot say right now whether it will be one year or two years.
Ruchi Mukhija
Understood. Thank you for patiently answering all the questions.
Kishor Patil
Thank you.
operator
Thank you. The next question is from the line of Ankur Pant from iifl. Please go ahead.
Ankur Pant
Hi, good evening sir. Thank you for the opportunity. I have a few questions. First is Asia has been a key growth driver for us over the last several quarters post the tariff announcements. Have you seen more caution in your clients in Asia as well which might lead to some tapering of growth in 1H. Like how are the conversations changed there?
Kishor Patil
Asia is a fairly broad market. So we look at Asia as Japan, Korea one bucket, China one bucket and India one bucket. And what we are trying to do is we want to have more broad based growth in Asia from and I think the efforts are on. And you know, as Mr. Patil mentioned earlier on, you know I think it’ll be quarter on quarter there will be fluctuations. But year on year we’ll continue to see growth coming from Asia. In fact we do hope that this year the growth will be broad based in the sense that all three geographies will be firing in the same direction.
S.B. (Ravi) Pandit
At a high level. Maybe if I may add, India will be a growth market. We see a reasonable growth in India. We see. I mean China has been a small part. So we will see at least something positive there than what it was last year. Japan will be also positive and Korea is probably flattish as of now. And we’ll see where it goes. So. But there are other markets in Asia where we see some growth opportunities and that we expect to grow during this year.
Ankur Pant
Sure. And then talking about these geographies, how is the demand environment, if you could just elaborate and different in US versus Europe, for example, Asia you have already explained. But how are I thinking differently in US and Europe?
S.B. (Ravi) Pandit
So I’ll generalize for each of the geographies. You know, we just talked about Asia and we also talked about Europe earlier on. There are German OEMs who have, who are trying to, they know what they want, they’re trying to consolidate business and they’re looking for a partner who will sort of help them accelerate some of these programs. And as Mr. Pandit explained earlier on, we are in a position to capture growth from them as far as the US is concerned. We’ve started an engagement with a new OEM in US which is a good thing for us and we believe that will grow, we’ll have substantial growth from that particular Pascar oem in the US and the existing OEMs that we have both on Pascar as well as trucks will have growth.
Having said that, we do hope to have more growth coming in the US from off highway. There are two or three really large off highway players, you know, and we’ve started an engagement with one of them this year. So we do believe that growth in US will also come back. It’s just that it’ll be broad based. It’ll be across Pascal, off highway and trucks for the US Whereas in Europe it’s going to be mostly Pascal and trucks and Asia, primarily the Pascal, you know, supported by trucks in some ways, if that’s helpful in any way.
Ankur Pant
Yeah, definitely. Another question is now there is heightened uncertainty is are there any specific types of programs that you are seeing delayed and some and any specific types of projects which, which you are seeing that are going as as planned and specific programs which are getting delayed. Just wanted some color around what kind of programs are being delayed.
Kishor Patil
I will start for this and then maybe ANUP can talk about it. I think as we mentioned there is a bigger Most of the OEMs are closer to production program for the new production program in next year and year after. And so this is a very important stage for the integration and many OEMs are lacking behind and that’s where we have a very differentiated solution to help them. Maybe Anup, you can elaborate on this.
Anup Sable
Yeah. So typically the programs of the OEM fall in multiple categories which are going from urgent to important. The current programs which basically deal with the next release of vehicles, right? Startup production are the most critical ones. They are urgent and important. Both subsequently after that there is a new platform development or a new next generation platform which is critical. After that, any R and D or group of concepts activities that are important. So I think if you look at, when you look at tightening of situations, some of these further in the timeline activities start falling into discretionary activity, then they start getting tuned.
They’re not necessarily cancelled, but they start getting tuned in terms of deferment, what to do now, what to do later, 2/4 later, etc. I think all the programs that were taken in the last generation will basically hit production. Some in the current year, some some in the next year and some year after that. So from a calendar year 25, 26 and 27, many of the current programs will get delivered. And as time goes by, as the production gets closer, the programs also start getting into challenges from an integration perspective. And that is where normally, because we have domain as well as technology expertise and we bring to the table the full solutions, we start getting engaged also significantly, even at those stages, even at the last stages of the delivery.
So I think more or less this is the explanation.
Kishor Patil
So from that perspective, validation is an area where we see a significant growth and integration which will happen. And we believe we have a very differentiation solution which we can take to many clients and take the full ownership of this program. That’s the area of growth. We see the other areas of growth Mr. Pandit talked about in terms of both autonomous and digital cockpit area which are critical apart from the cyber security. So these are the areas which will be more important. So I must say that some of the smaller discretionary expenses will go down, but these are the areas which companies will double down.
Ankur Pant
And finally, one last question from my side is that a couple of quarters back you had highlighted that the clients want increased offshoring. Are you still seeing that happen? Would that be a margin you are going into next year? And what about the revenue declaration impact?
Kishor Patil
Absolutely. It’s one of the area when we are moving towards fixed price. There are many areas how we can do it, but in many areas we can do that. It depends upon the stage of the program. I mean, if we take a very large program initially still you will have to deliver at least have some people on site, but in six to eight months we can move them offshore. That has what has happened even in the past. So most of the time we do believe that people are open for a large scale cost effective solution.
We want to move as we always move away from on site or offshore. But we are in a position to put a model based on productivity offshoring. Our, our PTAs as we call platform tools, accelerators and based on that give a cost effective solution.
Ankur Pant
But would there be any revenue depletion from that?
Kishor Patil
Yeah. So from that perspective, if you look at it, I think in case of our current engagement, I think there will be marginal if at all it happens over the period. But hopefully we are taking more work from the OEMs from that perspective. So that is not something we believe. But in the new deals or new clients which we are taking, we are as we mentioned, we are trying to take away from the Europeans or local companies. Perfect.
Ankur Pant
Thank you very much. All the best for successful siddp.
Kishor Patil
Thank you.
S.B. (Ravi) Pandit
Thank you.
operator
Thank you. The next question and the last question is from the line of Bharat Shah from ask Investment Managers Ltd. Please go ahead.
Bharat Shah
Yeah, this is less on TPIT, but broadly in the what is happening in the world in the automobile arena. So Bindi, it is the impression I get is when I look at what is happening in China, especially on the passenger vehicle side, it is explosion of innovation at a scale, I mean number of new products, different features, variety, kind of stylizing and customer choices. There is such a dramatic proliferation which has occurred in a relatively short period of time. And Europe, like most things in life, Europe is behind by a big margin. America also barring Tesla to an extent that innovation is not to be heard and even Japan seems to be fairly behind.
So given that kind of context of that industry, if I’m right in my judgment, what it means is despite the highly questionable trade practices and commercial behavior of China, so it will raise the heckles of other countries into the barriers like we are witnessing. But that kind of innovation can kind of damage the brand equity. I mean, if Mercedes charging hell of a lot of price but offering inferior features, suddenly the brand equity gets eroded. When you find far more basically priced vehicles with so many features that Mercedes simply doesn’t offer, don’t you think that kind of a risk seems to be around? And given your business being predominantly in these geographies.
Kishor Patil
You are right in your observations about how China has significantly changed in the last years. And I agree that it has taken all other OEMs by complete surprise. And it is also true that the rest of the countries are putting up kind of temporary trade barriers. You know, Europe has done that, America is talking that, et cetera. But you know, I mean that cannot be a long term solution. Because the customers would like to have good products. And of course the Chinese OEMs can open their operations in multiple locations and so to say get around these legal barriers.
But the fact of the matter is that now that these extraordinary new offerings which have come from China are now being seen by the European and American OEMs, they are in a rush to make sure that they catch up. And so the China cost, the China quality, the China speed is kind of becoming like a mantra with the remaining OEMs. And we really do see a tremendous potential in that. And you know, in the original remark, in the opening remark that I made, you know, I talked about learning, taking learnings from China and taking them to our global clients.
But this is what we exactly MEANT and as Mr. Patil mentioned, that this whole about the tariff etc between us and China may kind of unwind over a period of time, but that is the time that the American OEMs will try to see how they can use that time to kind of match up. And we really do see opportunity in that area. And you know, I mean the way we look at it is that in this whole bargain the consumers are getting a better deal and which is how things should be. And we should be like the catalyst for making that happen to us.
It’s a very good opportunity for growth.
Bharat Shah
I understand you try even when your customers are in trouble, because otherwise their survival is at a stake and therefore they will need to invest. But if your customers or primary customers are usually behind the curve, doesn’t it affect you over a period of time that also makes you behind the curve at some stage?
S.B. (Ravi) Pandit
No, not, I mean, good question. But you know, a couple of things. It is not safe to assume that the Chinese OEMs are ahead of the remaining and ahead of us in every department of software. I believe that we are good in architecture and that’s something that I mentioned earlier we could possibly take to China. There are some areas like we talked about, the autonomous, these are the areas where the Chinese have done well because of the extraordinary amount of data that is available to them which is not available. And so some, some, some strengths that they have got are the strengths that they have got from their environment.
And that doesn’t in any way put us as KPIT kind of behind.
Bharat Shah
But you know, from customers points, point of view, it is those features, the dramatic kind of new offerings which customers may not have even thought about. I mean, auto parking, vehicles parking.
S.B. (Ravi) Pandit
No, none of these offerings are what customers did not think about. These are the offerings available also in some Cars outside of China. It’s not such a sweeping difference between China and the rest of the world as it sometimes felt. There are avenues where they are good and we talked about that, like the digital cockpit and some part of autonomous. That’s where they’re ahead. And so it’s not an insurmountable lead.
Bharat Shah
I see. And there are Chinese behind if there is any.
Bharat Shah
architecture.
S.B. (Ravi) Pandit
I mentioned
Kishor Patil
cybersecurity, cyber security.
Anup Sable
Again, China leadership right now is China OEMs for China. This is where they are dominating, you know, from world. Of course they are getting in different countries, but it’s an insignificant amount in terms of number of vehicles, even though they are going up. The concerns that the global consumers have about Chinese vehicles, they work really well in China because some of the reasons that Mr. Pandit talked about it will take quite some time for them to localize them for each of the countries in which they need to operate. And also after sales has been so A, the quality of the vehicle and the offerings and B, the after sales and dealer network, that is also something that the traditional OEMs have very well established.
So you know, as Mr. Pandit said, it’s not everything lost. The way we see it is Tesla disrupted everybody and then Chinese caught on. They have disrupted Chinese. Learn from Tesla, will learn from China and so will the global OEMs. Right. So I think that it’s a great wake up call and opportunity for everybody to sort of get their act together and move on.
Bharat Shah
No appreciate that means even though Europe remains somewhat legacy driven and sleepy in general, you still believe it is not a lost course.
Anup Sable
Everybody is woken up now, I don’t think.
Kishor Patil
On a parting note, I may say I was very impressed with the current Mahindra vehicle 9. I think it gives me hope that in few years India will have vehicles which can compete with China.
Bharat Shah
Yes. Now on that good note, thank you so much.
Kishor Patil
Thank you very much. Thank you.
Okay, thank you.
S.B. (Ravi) Pandit
Do we close with that?
Kishor Patil
Hello. Hello.
operator
Thank you ladies and gentlemen. With this we conclude the Q and A session and I now hand the conference over to the management for the closing comments.
Kishor Patil
Thank you very much. We appreciate your participation on the call and have a great evening. Bye bye.
Kishor Patil
Thank you.
operator
On behalf of Dalat Capital Markets Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.