Tata Elxsi Ltd (NSE: TATAELXSI) Q1 2026 Earnings Call dated Jul. 10, 2025
Corporate Participants:
Manoj Raghavan — Chief Executive Officer and Managing Director
Unidentified Speaker
Analysts:
Shashank Ganesh — Analyst
Bhavik Mehta — Analyst
Manik Taneja — Analyst
Muzafar Sheikh — Analyst
Debashish Mazumdar — Analyst
Mohez Chandani — Analyst
Ashish Dhash — Analyst
Vimal Jamadas Gohil — Analyst
Karan Upal — Analyst
Unidentified Participant
Rohan Nagpal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Tata LXE Q1 FY 2025-’26 Earnings Conference Call hosted by Tata LXE Limited. As a reminder, all participant lines will be in the listen-only mode. Should you need assistance during this conference, please signal the operator by pressing star and then zero on your touchstone phone. Please note that this conference is being recorded. Thank you.I now hand the conference over to Mr Shashank Ganesh from ENY.
Shashank Ganesh — Analyst
Thank you, and over to you, Mr Ganesh. Thank you very much. Good evening to all the participants on the call. Good morning if you’re joining from the West. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties and other factors. Therefore, it must be viewed in conjunction with the business risks that could cause further results, performance or achievements that differ significantly from what is expressed or implied by such statements.
To take you through the results and-answer your questions today, we have the senior management of Tata, represented by Mr Manoj Ragawan, Managing Director and CEO; Mr Nitin Pai, Chief Marketing and Chief Strategy Officer; Mr Gaurav Vajaj, Chief Financial Officer; and Ms Nehavi, Company Secretary. We will start the call with a brief overview of the past quarter by Mr Ragavan, followed by a Q&A session. We would appreciate your cooperation in restricting yourself to two questions to allow participants an opportunity to interact. If you have any further questions, you may join the queue and we will be happy to respond to them if time permits.With that, I would like to hand over the call to Mr. Manoj Ragavan.Over to you, Manoj.
Manoj Raghavan — Chief Executive Officer and Managing Director
Thank you,. So very good evening to all of you and thanks for joining us today for the Q1 FY ’26 earnings call. I hope that you and everyone in your family is safe and healthy. For the first-quarter of FY ’26, we reported an operating revenue of INR892.1 crores. EBITDA margin stood at 20.9% and PBD margin was reported at 21.1%.
This quarter was challenging across key regions with geopolitical uncertainty and industry and customer-specific issues impacting R&D spend and deal closures across geographies. Our transportation business that represents over 50% of our overall revenues did well to exit flat in constant-currency terms. The automotive industry is still in a state of flux with the China business and tariff-related uncertainties, casting a cloud on R&D strategy and spend, while the Tier-1 supplier business continues to be challenged.
We had announced large deals in the previous quarter in SDV vehicle engineering for Benz, a European OEM and Suzuki. These are now ramping-up and we have the necessary capacity and capability to service them and grow over the next few quarters. Our largest customer is stabilizing in the outlook and revenues and we expect to stay steady for the rest of the year. We are in discussions for some large strategic deals with OEMs, including some new logos in Japan, US and Europe. I’m pleased to report our continued progress in the adjacency strategy with two strategic deal wins from the off-highway segment in and connected vehicles.
We are confident of the continued recovery and growth of our transportation business through the rest of the year, backed by deals that we have won, a healthy pipeline of large deals and a new customer logos. Our Media and Communication business reported a decline of 5.5% Q-o-Q in constant-currency. The large consolidation deals we announced at the end of Q4 FY ’25 will contribute to revenue growth in the upcoming quarters. The transition investments that are part of such consolidation deals has largely contributed to this dip in this quarter.
While the overall business environment in this industry continues to be subdued, we have been working on shaping some large deals both for consolidation and existing clients and some strategic AI and automation-led large deals with new logos. I’m also pleased to announce a strategic multimillion dollar design digital deal with a US tech giant for next-generation AI and product feature development. We expect to bring back growth in this vertical in Q2 on the back of the deal ramp-ups and healthy deal pipeline. Our Healthcare and Life Sciences segment declined 6.7% quarter-on-quarter in constant-currency, primarily affected by tariff-related impact on medical devices with two key customers in the US, which is a primary market for this vertical.
This has impacted R&D and discretionary spend in the short-term and we expect recovery in the service line in the second-half of FY ’26. We are expanding our customer-base across geos and I’m pleased to report two key wins, including a global pharma and biotech leader from Europe and a medtech leader from Japan. On the talent front, we’ll continue to add to our talent base with over 400 fresh engineers planned in this quarter. We expect a steady improvement in bottom-line and margin even as our two largest businesses, Transportation and Media and Communications returned to growth in Q2 FY ’26 and beyond and utilization improves on the back of ready capacity and capability we have invested in over the past few quarters. Before I conclude, I’d like to announce the launch of our new reimagined website, which went live earlier this week.
I encourage all of you to visit our new website that positions at the forefront of an AI-first design-led proposition for brands and businesses to deliver reimagined products and experiences, improve their efficiencies and time-to-market.
Thank you. And with this, I hand it over back for the Q&A session.
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 their touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to please use handsets while asking a question.Ladies and gentlemen, we will now wait for a moment while the question queue assembles, our first question comes from the line of Bhavik Mehta from JPMorgan. Please go-ahead.,
Bhavik Mehta
Thank you. So a couple of questions. Firstly, on the auto vertical, can you comment in terms of how the demand pattern has changed over the last three months, both in terms of deal closures as well as deal ramp-ups? Are the clients still in wait-and-watch more given the tariff situation or are we seeing them restart their spend going-forward?
And the second question is on healthcare. Can you talk about or actually can you give more color on the two client-specific issues? Is this cancellation of projects or was something ramped down or we should come back-in the second-half? Thank you.
Manoj Raghavan
Okay. Thanks. Thanks, Bhavik. On the auto — on the auto sector, you know, we see — I mean, we see deals coming through in the Europe and the APAC region, right? And some of the deals that we have won in the previous quarters, the ramp-ups were a little bit slow. That ramp-up has started accelerating.
So in the last quarter, we did see good ramp-ups of the deals that we had closed in the previous quarters and that trend continues — that trend we expect to continue in the upcoming quarters as well. So our US market is still a little bit slow, but other markets, we see a much better visibility, deal closures as well as ramp-ups happening. Regarding the healthcare, you know, these are primarily US customers, two large customers of ours, wherein some of the new projects that we are expecting to ramp-up in the quarter, that was put on pause primarily because of lack of clarity, given all the uncertainties in their own business and so on.
However, we expect that to get started in the coming quarter. And so we are expecting that some of this will get started immediately in Q2 itself. However, we also have a set of other new logos that we have opened in the healthcare space. These are still small businesses for us, but we expect continued growth of that. And we expect in H2, we will be able to ramp-up a Much bigger business with some of the new logos that we’ve opened Bhavik, does that answer your question? Yes. Thank you. Thank you.
Operator
Our next question comes from the line of Manik Taneja from Axis Capital. Please go-ahead.
Manik Taneja
Hi, thank you for the opportunity. Manoj, I basically had two questions. The first question was with regards to the business outlook within the top single customer, which has continued to do very well. And given some of the annual report disclosures, it appears you expect further growth in this account in FY ’26, if you could clarify on that front. And the second question was with regards to the way our margins have shaped up through the course of recent quarters.
While I do understand there is some element of — of limited revenue growth at play. But how should we be thinking about spare capacity in the context of the fact that over the course of four of the last five quarters you cut headcount and still your margins have been down and do you now really think our margins can claw-back to what we used to report in FY ’23 or ’24 or we might probably need to adjust to a new normal in terms of margins? Thank you.
Manoj Raghavan
Sure. Thanks, Manik. Regarding JLR, yes, I mean the situation at JLR is a little fluid, right, given their own you know sales and other-related issues that they have. However, from our perspectives, I believe that, look, we will be able to maintain at the current level. We may not — we may not have an aggressive growth there, but I think we have enough visibility to maintain our business and also have some incremental growth there.
Coming to the — coming to the margins, of course, as you rightly said, we — a lot of the margin situation is because of the drop-in the revenues. And no, definitely as the revenues pick-up, we are confident of getting back to the margin profile. We foresee that over the next 3/4, we will gradually be able to pull-back the margins. It’s not going to happen all of a sudden, but all efforts are on to really look at all the levers that are available to us and to focus on margin improvements in the coming quarters, right?
So yeah, I think if you look at it because of the Q1 current situation, maybe from a financial year perspective, we could end-up with a margin which is lower than what we have, you know, performed in the last financial year. But I think we should be able to pull-up the margin gradually over the next 3/4.
Manik Taneja
Manoj, my question was more for the medium-term, you used to operate at about 29% 30% EBITDA margins. Do you think that’s a margin we should probably think about as the business improves, not just in this year, but beyond this year?
Manoj Raghavan
Yeah, yeah, that is. That is exactly what we are aiming for. We definitely need to get back to those margin profiles. In the medium-term, definitely that’s what our focus is.
Manik Taneja
Sure. And how should we be thinking about for us given typically we used to give wage hikes in Q2 for the junior folks? Any comments that you could share with regards to what you’re thinking about for this year so
Manoj Raghavan
Most probably those hikes will happen from Q3 onwards, October timeframe.
Manik Taneja
Okay. But as of now, you’re still planning for.
Manoj Raghavan
Yeah, yeah.
Manik Taneja
Sure. Thank you and all the best-in the future.
Manoj Raghavan
Thank you.
Operator
Thank you. Thank you. Ladies and gentlemen, if you wish to ask questions, you may please press star and 1 on your touchstone telephones. Our next question comes from the line of Muzafar Sheikh, an Individual Investor. Please go-ahead.
Muzafar Sheikh
Hello, am I audible?
Operator
You are audible, sir. You may proceed.
Muzafar Sheikh
Yeah, thank you. I would like to ask about the government PLI scheme and the factory which is coming up in Gujarat. So where are we on that? And do we see it coming in the coming quarters? Thank you.
Manoj Raghavan
Sorry, that the semiconductor factory in Gujarat in is actually Tata Electronics, right? Tata has nothing to do with that factory. However, Tata Electronics is a customer of us and we continue to support them in some of the projects that we are doing, but we are not really involved in the factory.
Operator
Yeah, okay. Thank you. Thank you. The next question is from the line of Debashish Musandar from Swan Investments. Please go-ahead.
Debashish Mazumdar
Good evening to the management team. So the one follow-up question, which Manik was earlier asking about margin. So if I understand correctly, one of the reason Tata used to report very strong set of margin because our focus on offshore-centric deals. But over the last two to 3/4, what we have seen is it’s a consistent fall in margins, right?
So is it like we have shifted our focus from more into on-site focused deals also their margins are initially low and will be able to kind of catch-up later or it is like a normal process of business, which is impacting our margins?
Manoj Raghavan
No. So our offshore-centric business continues. There is no change in that. A majority of our business continues to be — more than I think 76% continues to be offshore. So there, there is no change. However, I think the margin is more to do with the top-line degrowth that we are seeing. Once we get back to our growth, our margin profiles will come back. Of course, also the type of deals that are there, the consolidation deals, the large deals that we have signed-up, a lot of it also puts a little bit of a pressure on our margins and that is something that we are working to see how we can improve using operational efficiencies.
Debashish Mazumdar
Yeah. Okay. And of the last quarter, the deals last to last quarter, the deals that you have won, which is ACS specific. So when those deal ramps-up happening, we are seeing some margin pressure. So is it like those deals are of those deals are such a way that it will kind of lower-margin business for us?
Manoj Raghavan
Yeah. It’s not lower-margin business, but in some cases, we need to take-over you take-over and manage the transition in some of those cases, we may not get revenues in the initial period. However, the revenues will start ramping-up once the steady-state happens and so on. So we have some of those deals also affecting us at this point in time.
But however, as the deals ramp-up and so on and when we take overall control of it, the margins will definitely come back. Sure, sure. Understood. But you are confident of kind of operating at 29%, 30% kind of EBITDA margin in medium-term. In the medium-term, yes.
Debashish Mazumdar
Okay. And one last question from my side. You normally provide a good color around Tier-1 OEMs and Tier-1s in transportation and also off-market and passenger vehicle. So if you can give some idea around the different segments, how different segments are doing for us and as an industry overall.
Manoj Raghavan
Yeah, as I said, right, automotive industry, I mean if you look at our transportation business, you know in natural currencies, we have shown strong growth, but in constant currencies, we have ended flat. I think that’s a fantastic performance. Almost 72% to 75% of our revenues now come from OEM which is the passenger car makers.
The Tier-1s you know have you know sort of reduced which is which is in-line with what we see in the industry right moving forward. From an adjacency perspective, we continue to see deals — deal closures happening. I think we have announced some of the deals also, both in off-road segment and commercial vehicle segments.
Our investments in aerospace and defense, we continue to build teams. We have still not announced any large deals there, but I think those are all-in works. And hopefully, in the subsequent quarters, we should be able to announce some large deal wins there as well.
Debashish Mazumdar
Sure, sure. Thank you so much for answering my question.
Operator
Thank you. Thank you. The next question comes from the line of Manik Taneja from Axis Capital. Please go-ahead.
Manik Taneja
Hi, Manoj, while you partially alluded to the investments in defense and aerospace. But if you could help us understand the likely investments that we will make in terms of expanding our GTM in these segments? And will that probably create more headwinds in the near-term from a margin standpoint or these are limited investments and thereby you can manage to other operating levers? Thank you.
Manoj Raghavan
No, so we have already ramped-up almost 150 people team in this space. We have invested in-building in capabilities. We have — for example, we have built our own capabilities in drones. We have built capabilities in EV tolls. We have — if you actually come to our campus, you can see some of these actually flying, right? We have shown demos to, you know, global players. We have — we have been working with HAL, NAL and some of the defense labs in Bangalore. A lot of interesting work actually happening. I wish we were in a situation to really convert some of this into deals and bring in revenues. I think we’re almost there, we should be able to hopefully announce some deals there some very, very good discussions happening with potential customers, both the large players in US as well as defense labs and DRDOs and ISROs in India. By the nature of the business, these are all long-lead time, you know the businesses. But the capability that we have built is fantastic. And why I’m saying that is because of the real interest that some of the folks that we have shown some of these technologies, right, what we see from them, rather interest that we see from them. So yeah, I think — I think we are not expanding the investments further. We really would want to close some deals and get into a revenue situation before we start investing again.
Manik Taneja
Okay. And any medium-term revenue targets that you would want to share with regards to these incubated segments?.
Manoj Raghavan
I wouldn’t want to put a number there, but I would say at least you would like to make a start this quarter, right? And you know, what we’re looking at is anywhere between INR50 crore of revenues this year, right, to get started. But also in the subsequent couple of years or three years from now, hopefully, we will be able to ramp-up significant business in this domain.
Manik Taneja
Sure. Thank you and all the best.
Operator
Thank you. Thank you. Our next question comes from the line of Mohez Chandani from Ambit Capital. Please go-ahead.
Mohez Chandani
Yeah. Good evening and thank you for taking my question. My question was on the Media and Communications segment. So there, you said that the industry has been subdued for several quarters now. But anything incremental that you’ve seen on Q1 versus where you were, say, a couple of quarters back? And what needs to change for this segment to really revive in terms of growth? I know that you’re expecting growth to come back-in Q2, but really, where do you see the industry going-in the medium-term and you see a material acceleration in terms of growth there.
Manoj Raghavan
Yeah. Yeah, I think this industry globally has been very subdued, right? And it’s not only for us, if you look at most players in the media and telecom market are reporting very, very muted numbers. There are — there are structural issues in the industry as well, right? If you look at it, a lot of M&A is happening. You know, during COVID, this industry grew very rapidly. But after COVID, all of a sudden, you see that you know most operators, whether it’s media, services operators or telecom operators globally have not been able to add net-new subscribers. The subscriber numbers have actually coming down, the ARPUs are coming down.
So there’s a little bit of an issue structurally in this industry. A lot of the deals that we see at this point in time are lot about efficiency-driven deals, you know, how can we do more with less consolidation deals and of course, we are starting to see AI and Gen AI-led deals as well in this particular industry segment. And we see — as I said, we also see in the media space, if you look at it, we see M&As happening.
We see a — we see even large companies, whether it’s Warner Brother Disney or NBCU, you know, taking dissions of, you know, hiving out the digital pieces as a separate company and the legacy pieces as a different company. So there are a lot of things happening in this particular industry. From a telecom perspective, again, 5G investments have really not, you know, brought in new revenue streams for operators. We’re now getting into the 6G era.
So again, we see a lot of focus on, what do you say, using of open-source, bring down the cost, automation, you know, how to improve operational efficiencies. So these are all the themes that are playing out. And we are trying to capitalize on some of these, right? For example, we have built our own product you know called Neuron, right, which really helps in the automation piece, right, how can we help customers automate their deployments, their operations and using automation frameworks, using Gen AI and so on, so that without adding manpower, can they still continue to deliver better operational efficiencies for their customers.
So there are various things that are playing in this particular industry. And we have, of course, we operate from — you know from a services perspective. At the same time, we also have certain products that we license to customers that sort of acts like a differentiator as compared to a lot of our competition. So we are trying different things to really open up the market and also to grab wallet share and so on, right? Our efforts are on. But the market currently, I think is in a very, very difficult situation. We — having said that, I think we have reached the bottom from our — from perspective, and some of those has also been because of the large deals that we have won and the transition period and transition cost and all of that is now behind us.
So hopefully, from the coming quarter, we should be able to report better results in this particular in a vertical for us. Having said that, as I said, the market is still very, very — it’s not an easy market at all. And the deals are all most of deals, large deals, especially are around efficiency themes here.
Mohez Chandani
All right. Yes, yes. Thank you for that. My next question was on your system integration and support segment. That’s seen a very sharp decline on a quarter-on-quarter basis at nearly down 30%. So how should we think about that? Do we expect that this is going to continue to decline going-forward? No, so I think that is all because of one deal that we won in the last quarter, which was a one-time deal, a large deal, I think almost INR30 crore INR14 crores worth of deal that it’s a small-business for us, right?
Manoj Raghavan
So in percentage time, percentage terms, you might see, oh, there’s a big drop. But actually it’s not that big a drop, okay. So don’t go by the percentage. What has happened was last quarter, there was a large deal, that is the Bharat Pavilion in Japan in Osaka, another fantastic work that we delivered last quarter.
And we were — there were other deals, similar experienced design deals that we were bidding for in this quarter, however, closures did not happen one-time and that’s the reason why there is a sharp dip in that business if you look at it from a percentage terms perspective.
However, I mean that is the nature of the business. These are — you could get 10 crore, INR15 crore, INR20 crore deals with a turnaround time of three months or four months and then we really need to find replacement deals and so on. That’s the nature of the business there.
So if you look at it, SI business will usually be around INR25 crore INR30 crores a quarter for us.
Operator
All right, got it. Thank you. Thank you for answering my questions.
Manoj Raghavan
Thank you. Sure. Thank you.
Operator
Thank you. We have our next question from the line of Bhavik Mehta from. Please go-ahead.
Bhavik Mehta
Thank you for the follow-up. Just one question on the media and telecom segment. Can you explain how does the large deal transition cost impact the revenue? I understand there are upfront costs because of costs might impact the margins, but how does it impact the revenues? Just curious about that.
Manoj Raghavan
Yeah. So I think Bhavik, if you look at it, it’s a large deal that we have won, right? So what happens is that deal comes at certain commercial terms, which is lower than the rates at which we have been working in the previous quarters. Now if You look at it, when we get into that deal, so for example, this was the first-quarter of that deal. So our entire portfolio of business in that particular customer, the rates have been reset to a lower per unit rate because of the commercial construct of that deal. So if you look at it, volumes have not gone down, but because of the rate negotiation that has happened on the overall portfolio, the business has come down. However, there is a commitment, it’s a three-year commitment. So we will be able to make-up this over the next three years. So is this reset already happened in 1Q or should we see this being a headwind to some action going-forward? It has already happened in 1Q, the first-quarter
Bhavik Mehta
Okay, got it. Thank you.
Operator
Thank you. Our next question is from the line of Ashish Dhash from Mirae Asset Capital. Please go-ahead,
Ashish Dhash
Good evening. So my question is on healthcare and medical devices vertical. So this vertical option remain soft for last year.
Operator
Sorry to interrupt, Ashish, but your line is not very clear. May I request you to please check the mode that you’re using
Ashish Dhash
Is it better now?
Operator
This is much better, sir. Please proceed.
Ashish Dhash
Okay. So my question is on healthcare and medical devices on the call. What I feel that this versal has been weak for the last two quarters.
Operator
Sorry once again, Ashish, right now your line is breaking up
Ashish Dhash
Recover into. So I just want to understand what gives you confidence that it would recover in the second-half? And second, I just want to understand that what I believe that this vertical as good morning.
Operator
Ashish, sorry to interrupt, but your line is breaking up in-between right now. May I request you to please obtain better network and rejoin the queue.
Thank you. Our next question is from the line of Vimal Jamadas Gohil from Alchemy Capital Management. Please go-ahead.
Vimal Jamadas Gohil
Yeah. Thank you for the opportunity. Manoj, my question was on autos. Given the fact that the entire sector is in a bit of a flux because of tariffs and we’ve done a good job of keeping our heads above water. But I want to understand the ramp-up of the newer deals and as to why will they not get — why will the ramp-up not get impacted because of the situation we are in, what leads to your confidence on the ramp-up of the large deals that you’ve won?
And why will the existing deals not ramp-up? If the current ones that you’ve won in the previous few quarters, if they are doing well, why shouldn’t the existing ones also do — shouldn’t do — shouldn’t — they do well.
Manoj Raghavan
What is the confidence you asked, right? The confidence is because we had certain, you know between the customer and us, we had in order to achieve certain ramp-ups in Q1 and we have certain ramp-up to happen in Q2 and beyond, right? So I’m happy to tell you that the Q1 ramp-up has happened as per expectation, right? So we don’t see any pullback. We don’t see any slowdown that is happening from that ramp-up perspective, of course, given that the markets are not very — in a very favorable portion and so on, but still the ramp-ups have happened.
And the sort of engagement that we’re having with customers, right, the sort of reviews that we’re having on a regular basis gives us the confidence that look this ramp-up, whatever deal that we have planned is going as per original plan. We’re not changing any of those deal terms, right, so-far, right? And that is a commitment in Q2 as well that, look, this is a ramp-up that we will have and we are progressing as per that schedule.
There is no pullback, there is no budget cuts. The projects are coming in, engagements are happening with the customers. So all of that is happening as per plan. So that’s why we are pretty confident that you know those deals are going ahead as per plan. So Manoj, what again it’s encouraging to hear the new deals ramping-up well.
Vimal Jamadas Gohil
My follow-up then would be on — on the existing business, especially with Tier-1s and Tier-1s for us have done — have done very well over the past few quarters, therein we’ve faced some pain on the — sorry, on the OEM business, sorry, our OEM business has done very well versus the Tier-1 sort of are struggling.
So why isn’t that our existing Tier-1 contracts are showing the kind of growth that the newer deals are shown?
Manoj Raghavan
No, the Tier-1 business globally is very, very stressed. That is because the Tier-1s are also not winning large deals, right? Many of them are losing deals because OEMs are taking over that role. OEMs are becoming more like Tier-1s, right? OEMs are really wanting to own software. So we see that happening across the globe that more-and-more deals are — in the automotive industry, the OEMs are taking that ownership. And even if there are Tier-1 opportunities, most of the Tier-1s have their own GCCs here and the current — I mean, whatever we’ve seen of the Tier-1s is a lot of the work is being done out-of-the GCCs.
So to that extent, our business from Tier-1s, we see a continue to see that decline and whatever little business that we are seeing is from the GCCs and our engagement with GCCs.
Vimal Jamadas Gohil
And, what about OEMs? How will the existing business from OEMs pick-up from Q2, Q3, when do you expect that to pick-up? Ex of the newer deals. No, no, we are already seeing that, right?
Manoj Raghavan
We’re already seeing when I say more than 72% of our revenues today is coming from OEMs. I think maybe a couple of quarters ago, it was 60%. We are — so we are seeing a gradual move that more-and-more of our business is coming from OEMs. Of course, large deals we have won that is also helping.
But across the — across the globe, we continue to see deal momentum in OEMs. A lot of the deals, whether it is in Japan or in APAC region and India, we see a lot of OEM movement there. Europe also the new deals that we are seeing is from the OEM, so that is also improving. US is a little bit slow.
I mean, some of the OEM customers that we are engaged with, we have seen some amount of disruption and what do you say, project stoppages and so on. But we’ve — we’re not getting a clear idea as to when we will be able to restart some of those discussions with the US OEMs. But minus US OEMs, I think we are seeing a — we are seeing a good recovery happening across our market.
Vimal Jamadas Gohil
Fair enough. Wish you all the very best for the rest of the year.
Manoj Raghavan
Thank you.
Operator
Thank you. Our next question is from the line of Karan Upal from PhillipCapital India. Please go-ahead.
Karan Upal
Yes. Yeah. Thanks for the opportunity. Just continuing the discussion Vimal asked, so the ramp-ups which you are seeing in the auto business, could you clarify which areas you are seeing the demand? Is it EVs, is it hybrid, is it, body engineering what are the areas which in which you are seeing the demand?
Manoj Raghavan
We continue to see demand in in SDV as well as electrification and some of the older relationships we have, you know, we still continue to see work on-body chassis, infotainment cockpit area that will.
Karan Upal
Okay. Also, I just wanted to check on the Mercedes deal which you have announced, if you can provide the ballpark range, what was the deal size and what is the scope of work given to Tada Lexi? Is it around OS, middleware, cloud, verification, validation of all these areas, if you can clarify that? And how is the pipeline for SDB-related work?
Manoj Raghavan
Yeah. So I think we have whatever information on Mercedes, we have already issued a press release, right? So we are not going to provide any further color other than what is already provided. But a lot of the business actually comes from the SDV area, plus a little bit of powertrain area as well out there.
Karan Upal
Yeah. And how are you seeing the pipeline for SDV-related deals launch?
Manoj Raghavan
A lot of the OEM deals that we are signing-up and lot of the conversations are around SDV.
Karan Upal
Okay. Okay. And last question from my side is on FY ’26 growth. So in terms of vertical mix, how do you see each of these verticals performing? You Have mentioned some ramp-up visibility there in auto segment and in media also you are a bit positive. So from the full-year perspective, how do you look at the vertical growth?
Manoj Raghavan
I think you know, of course, you know, for the financial year, I think our growth will be led by the transportation business. That would continue because on the back of the deals that we have signed and also on the traction that we see in the market, the growth for the company will be led definitely by the transportation business.
Media and communication business will recover and that’s a plan that we are working on. So we hopefully will see the growth from Q2 itself. Healthcare, I would be a little careful there. It’s — I mean this tariff-related issues and so on. And the fact that it’s a smaller business for us.
And we do have — we don’t have a large list of customers. It’s a select set of good customers that we have. So that will be a little volatile for us and but however, we hope in H2, we will start seeing the growth in that particular business. We have done a lot of investments there, including from a leadership perspective, from a sales perspective, we have done a lot of investments and we are hoping that from H2 onwards, we will — we will see an uptick in business there.
And this business is also a little bit of a long-lead cycle business. So we are working on some good opportunities and so on, but closure times are closer takes time in the healthcare business. So yeah, so that’s how the three businesses would pan-out.
Karan Upal
Okay. Great. Thanks and all the best.
Operator
Thank you. Thank you. The next question comes from the line of Arvind, an Individual investor. Please go-ahead.
Unidentified Participant
Hello. Thank you for the opportunity. And looking at the headcount reduction in the quarter-on-quarter and year-on-year, also the attration rate is also increasing like in quarter-on-quarter and year-on-year. Looking on all these, it looks like the business environment is quite challenging right now. So is there any strategy to bring back the past glory and the performance going-forward?
Manoj Raghavan
No, of course, that’s what we have been discussing all along. I mean, the business environment is definitely tough. We discussed about how the three verticals. So we also talked about how the growth will be led by the transportation vertical that we have and that’s what we have been working. The media and communication also will come back to growth. Healthcare will take some more time. So we are hopeful that what are steps that we are taking, we will be able to grow our business, right? Yes, the headcount has come down because we have not been aggressively hiring. We still have a decent bench that is available.
And as the business grows, we’ll be able to utilize the bench at the same time improving our margin as well. So we’re very conscious about this situation, Arvind and hopefully you’ll see the performance come back-in the coming quarters.
Unidentified Participant
Okay. And any new strategy entering in new geography or any new vertical or any inorganic growth opportunity there?
Manoj Raghavan
We still would focus on the main geographies, right, which is US, Europe, Japan and India. Of course, you know, we have entered into Middle-East, Africa and Latin-America and Southeast Asia. So these are new geographies that we have some business today, not major business, I would say, but hopefully, we’ll be able to ramp-up our business there.
So on M&A, yes, we are looking at we have certain — at any point of time, we have certain pursuits. But again, it will only be you know, whatever we look would be a tuck-in sort of an acquisition right and regarding new verticals you know, we are looking at the adjacencies for each of our three main verticals.
We are currently focused on the aerospace and defense as a new vertical and we are investing. I think I talked about it in one of the previous questions. So that is what we will be focusing on in this financial year.
Unidentified Participant
Are you optimistic in the margin in the aerospace and defense sector? Sorry, what is the question? Regarding margin in the aerospace and the defense business, are you — are you optimistic on that?
Manoj Raghavan
Yeah. I think we’ll answer that question once we see the — I mean, we are taking a very differentiated position and a very different approach as compared to some of our traditional partners, traditional — sorry, as compared to some of the traditional companies that operate in aerospace and defense, right? So we believe we have an opportunity to win deals at decent margins there.
Operator
Yeah Aruvand, you are audible. Please go-ahead. Arvind, you may proceed. You are audible.
Unidentified Participant
Sir. Sir, any guidance regarding FY ’26 revenue and net profit, any some idea — any some idea?
Manoj Raghavan
No, we don’t give guidance you know as a revenue or profitability?
Unidentified Participant
Okay. And the last question from my side, sir. Is there any applying for the stock split or bonus issue for rewarding the shareholders?
Manoj Raghavan
I think that was — question was addressed in our AGM by our Chairman and a lot of our shareholders have asked about it and we will be answering that in the Board and we’ll get back at appropriate time to the shareholders.
Unidentified Participant
Okay. Thank you, sir. That’s it from my side.
Operator
Thank you. Thank you. Our next question is from the line of Govila from Morgan Stanley. Please go-ahead.
Unidentified Participant
Yeah, hi. Thanks for taking my question. My first question is with respect to the media vertical. So just wanted to understand this large deal that we had won last quarter. So by when do we expect this to fully ramp-up? Can you provide any color around that? Full ramp-up should happen by H2 of this year financial year? Okay. So you mean by the 4th-quarter?.
Manoj Raghavan
Yeah, most probably third — between 3rd-quarter and 4th-quarter, yeah.
Unidentified Participant
Okay. Okay. Okay. Understood. And with respect to the mobility vertical, while you highlighted that there are certain deals which continue to ramp-up and there are more ramp-ups which are coming from 2Q onwards. Are there any — are there any potential areas of leakages that you still expect in the coming quarter? Given that we mentioned that Tier-1s, they continue to be weak. And in JLR, we expect momentum to be maintained in the sense we don’t expect an aggressive growth out there. And US OEMs may also be weak. So if I add all of that, so it’s probably three-fourths of the portfolio. So just trying to understand if there is any area of potential leakage or weakness which is there in the quarter.
Manoj Raghavan
So I think the Tier-1 portfolio would continue to be under stress, right? And it is purely because of the business issues that the Tier-1s are having. Already our — I would say our revenues from Tier-1s have come down. I think we have reached a stage where I don’t really foresee too much of a drop-in that portfolio. But again, the fact is that their businesses are challenged. So that could be maybe a little bit more of de-growth in the Tier-1, but it should not impact us so much because the growth that we are seeing from the OEM side will be much larger and faster as compared to the de-growth.
So we should be able to show positive growth is our expectation.
Unidentified Participant
Understood. Understood. And then just a last question on margins. If you could provide the margin walk for the quarter, given that the cost — the cost increase this quarter is quite sharp. So just trying to understand what’s the sort of investment that has gone in this particular deal on the media side?
Manoj Raghavan
I will ask Gaurav to take you through that.
Unidentified Speaker
Hi, Silab., if you see our overall total cost, that has not gone up significantly. I think it is almost flattish or slightly up from the last quarter just by INR4 crore odd crores. But that cost increase is mainly on account of currency impact on the on-site people, salary costs
Unidentified Participant
And some of the visas that has been applied during the quarter. However, the margin was the major flow-through and dip in the margin is because of the revenue sequential decline. Otherwise, on the operating side, the cost doesn’t have any signature change. Okay. Understood. Thank you.
Operator
Thank you. The next question is from the line of Rohan Nagpal from Helios Capital India. Please go-ahead.
Rohan Nagpal
Hi, thanks for the opportunity. Am I audible?
Operator
You are audible, sir. Yes.
Rohan Nagpal
You’re okay. Yeah. So just continuing on the ramp-up or within the OEM business. So if I look at the — if I look at the impulse to spend and invest more in R&D and the electrification and SUV programs, et-cetera, that has been constant for the last two or 3/4 or maybe longer actually. And if I look at the macroeconomic environment, it seems to be stable, if not deteriorated. I mean, TCS called out continued uncertainty and they actually called out a demand contraction. So that is in contrast with what you’re saying in that you’re fairly confident of the — of growth from the OEM side of the business for you.
So I’m just trying to understand qualitatively, what is driving the growth? Like what — what has happened now that the OEMs are finally ramping-up their spending and there is increased momentum in deal closure.
Manoj Raghavan
So I think you know, I’m not talking of all the OEMs suddenly deciding to spend and so on. I’m talking of the OEMs where we have engaged and the OEMs where we have signed some of the large deals over the last couple of quarters, they have shown inclination to spend, right?
So I’m confident of the set of portfolio of accounts that is handling at this point in time. Given that we had met our objectives in Q1 and we don’t see any of the customers going back on the deals that they have signed, we are confident that will continue. I’m not talking about the larger overall macro and what is happening to the larger overall spend in the market? I’m not of that. Fair enough. I was just asking because you said that there is slow — there is there is a slowdown, so to speak in North-America, you’re not quite sure when that will come up, but you said Europe and Asia, you see that ramp.
Rohan Nagpal
So okay, I guess within that subset for you. Yeah. But even on the pipeline, if you’re looking at the pipeline, are you seeing — if pipeline is increasing, is it the pipeline for follow-on work with your existing portfolio? Or are you seeing a slightly broader uptick in pipeline even for logos that you don’t engage? Because I think you called out a new logo addition, right?
Manoj Raghavan
Yeah, yeah. So it is both, right? The customers, existing customers of us, also we see an uptick in business in the subsequent quarters. And the new logos that we’ve signed on, we are seeing that whatever large deals that we signed on, that is continuing to — our execution — from an execution perspective, we continue to execute as per plan.
Rohan Nagpal
Okay. But all of this momentum is solely within your existing customer-base. You see though it’s going to be difficult to expand to other logos within this year is what you’re implying. Is that correct?
Manoj Raghavan
Yes. No, I’m not saying that we do have pursuits for from a new logo perspective and new customers, right? So that continues. I’m not saying that we are not going to get business. In fact, as we speak, there are other opportunities and deals that we are chasing, proposals being made. So the good part is we are seeing all those discussions happening, conversations with new customers happening. So that is positive. That gives me hope that, look you know we can do — I mean, moving forward in the next 3/4, we will be able to grow our business in the transportation industry.
Rohan Nagpal
Okay. So if I just wanted to clarify that I’m understanding, I just want to confirm that I’m informing this correctly. So it’s not just — it’s not just an increase in the momentum of, say, deal ramps within your customer-base, but there is an increase in deal momentum or at least velocity of conversations with the broader automotive ecosystem with OEMs in Europe and Asia. Is that correct?
Manoj Raghavan
Yes, Europe and Asia. US continues to be slow for us.
Rohan Nagpal
That’s fair enough. Thank you. That’s it from my end.
Operator
Thank you. The next question is from the line of Raja Kumar from RK Investments. Please go-ahead.
Unidentified Participant
Yeah, good evening. Am I audible?
Operator
Sir, you are audible.
Unidentified Participant
Yeah. Sir, just a question on the margin front. So the question is, given the work you for high. I just wonder once the revenue has been could be fair to assume that you will be able to the margins that you have earned in the —
Manoj Raghavan
Sorry, we are not able to hear your question. You’re not very audible at all.
Operator
Rajakumer, you were coming through very muffled. Maybe you could use check the mode that you’re using on your phone?
Unidentified Participant
Hello, can you hear you not really, sir. You were breaking up in-between as well.
Yeah, hello, is it better now?
Operator
Yes. Please go-ahead.
Unidentified Participant
Yeah. Sir, the discussion front, so that your revenue engines are not firing now. So I just want to know if once your revenue engine fires, mean that you have extensively invested in and Gen AI. So I had to assume that you will be able to surpass what was in the past years the benefit of AI engineering.
Unidentified Speaker
I think your voice was still not very clear, but I guess your question was that once the revenue and all the new verticals started to fire, whether we would be able to get back or surplus our historical margin using G&I AI engine. I think we answered that question previously that I think the focus is to steadily grow from here. And once the revenue gets back, I think we are very confident that we will get back to our historical levels of the margin, but that would be our mid-term aspirations to get those to those levels of margin. But I think from here onwards, you will see there will be a gradual uptick in the margins as we progress on the steady-state, I mean, steady revenue starts to build-up on a quarter-to-quarter basis.
Unidentified Participant
Okay. Sir, just to labor on the same question. So actually what I want to know is what is the impact of this AI on your headcount? In other words, if you were using one headcount earlier, has it brought down the number to 0.9 or 0.8, whatever — whatever is the number that you want to see?
Manoj Raghavan
No, of course, we are using AI and Gen AI. We are increasingly talking to customers and so on. But unlike IT or a BPO or some other industries, the impact of AI is still — is not going to be very dramatic as we speak, right? There are a lot of legal issues. Customers are talking of open-ended liabilities, you know, there are a number of legal issues to be sorted off before you can see uptick of usage of AI engine AI in the engineering space.
So you cannot assume that because AI and Gen AI is now available, you — the — you will be able to deploy lesser manpower and so on and so forth. Yes, for certain task, it is possible. A certain type of projects, it is possible, but it is not a generic for all projects, we will be able to do it. So I’ll be very guarded and not to mislead you in saying that, look, Gen AI is a — is a penatia for all issues that we’re going to have. That’s not going to happen.
Unidentified Participant
Okay. Got it. And sir, the next question is, I just wonder how big is the gaming segment for you folks and any output we don’t operate in the gaming segment.
Manoj Raghavan
We used to maybe 10 years ago, but we have sort of got out of that segment.
Unidentified Participant
Okay, sir. And lastly one housekeeping question. So I see the tax-rate has moved to almost 27% in this quarter. So is that the guidance for the whole year? Or because last year was 23%. 26% odd.
Unidentified Speaker
I think we have been mentioning during the last few quarters that some of the benefit under the SEZ is coming to closure and we have been moving from 100% tax holiday bracket to 50% and hence the tax bracket will move towards high north of 25%. That’s what we are seeing now. Last quarter was lower because there were certain tax order credit refund, income tax reference order were there. Otherwise, if you see our normalized tax-rate for the last few quarter, it is now about 26 odd percentage.
Unidentified Participant
Okay. Got it, sir. Thank you so much.
Operator
Thank you. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the call over to the management at Tata LXE for closing comments.
Manoj Raghavan
Thank you once again for all the investors for all the questions that you have. We look-forward to seeing you again end of next Quarter and hopefully, we will come up with a much better performance that we anticipate in the coming quarter. Thank you so much and look-forward to talking to you again soon. Bye-bye.
Operator
Thank you. Thank you. On behalf of Tata LXE Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines