KPIT Technologies Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from KPIT Technologies Ltd (KPITTECH) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:13:42] Chandramouli Muthiah from Goldman Sachs enquired about the nine month organic constant currency growth. Sunil Phansalkar Head of IR answered that YTD growth in constant currency terms was 24%.

• [00:20:23] Vimal Gohil of Alchemy Capital enquired about the seasonality difference in Technica as December is weak generally but for Technica it’s strong. Kishor Patil MD answered that it’s related to lot of European clients also having lot of spin and they having some product and infra that they provide to the clients.

• [00:21:39] Vimal Gohil of Alchemy Capital asked about attrition dropping by 3 percentage points and if hiring intensity will remain the same.  Kishor Patil MD answered that KPITTECH plans to continue strong hiring over the next year, taking into account revenue visibility and attrition. KPITTECH plans it based on these two factors every two quarters.

• [00:23:26] Karan Uppal at PhillipCapital asked about the type of work engagements driving TCV that’s being stronger in last 3 quarters. Kishor Patil MD said KPITTECH is seeing balanced growth across the three areas of feature development, integration, and architecture in middleware and the cloud base. The company also have seen this trend for the last few quarters and expect it to continue into the early part of next year.

• [00:28:13] Mohit Jain from Anand Rathi asked about anticipated intangible write-off and if there is something similar planned for 4Q23 or FY23. Kishor Patil MD said the Technica acquisition includes a period of 1 year to recognize any intangible assets that can reduce the goodwill on the books. This exercise is currently being done and it is possible that the assets for Technica could be accounted for in 4Q or 1Q, depending on the purchase price allocation of Technica.

• [00:29:03] Mohit Jain from Anand Rathi enquired about the deal pipeline as there was strong booking in 3Q23. Sunil Phansalkar Head of IR replied that the trend over the last seven to eight quarters has been strong growth, and this quarter was no exception with 70-80% growth. There is strong demand continuing into FY24, and more of it is coming from existing strategic accounts.

• [00:30:41] Mohit Jain from Anand Rathi queried that assuming favorable conditions next quarter, if margins would head towards above 20% level in FY24. Kishor Patil MD said KPITTECH’s biggest focus is best execution for its clients. The company remains range-bound and trying to allocate for better execution or growth when it can.

• [00:41:39] Dipesh Mehta from Emkay Global enquired about the challenges in FY24, if it’s on demand or supply. Anup Sable CTO answered that going forward, it’s surely an issue of supply. From a supply perspective, getting the right people, making sure that they have the right competencies, and then delivering and focusing on the execution of that is the biggest challenge.

• [00:42:02] Dipesh Mehta from Emkay Global asked about deal TCV, if it includes new portion or new and renewal. Kishor Patil MD answered that the TCV number includes both renewals as well as new.

• [00:43:48] Dipesh Mehta from Emkay Global asked about the demand outlook on the commercial vehicle side. Kishor Patil MD clarified that KPITTECH’s business over the last two years has grown consistently in commercial vehicles, and expects it will continue to grow.

• [00:48:16] Sandeep Shah from Equirus Securities asked about the client behavior considering the macro scenario. Kishor Patil MD answered that the clients are becoming more cautious about their spending, but KPITTECH’s programs have not been affected in the immediate future.

• [00:51:48] Saurabh Sadhwani of Sahasrar Capital enquired about employee expenses not growing as much as revenue. Kishor Patil MD answered that with growth and improved productivity KPITTECH intends to have that number to be in the same range or slightly lower moving ahead. Also, it’s a faction of the freshers being recruited over the last 3-4 quarters.

• [00:56:31] Karan Jenti asked if there is any integration risk with the Technica acquisition. Sunil Phansalkar Head of IR answered that KPITTECH does a risk assessment before acquiring a company and have regular meetings to mitigate any risks found. So far, the company hasn’t seen any major risks.