Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Tata Elxsi Ltd (NSE: TATAELXSI) Q4 2026 Earnings Call dated Apr. 21, 2026
Corporate Participants:
Shashank Ganesh — Senior Associate
Manoj Raghavan — Managing Director and CEO
Gaurav Bajaj — Chief Financial Officer
Nitin Pai — Chief Marketing and Chief Strategy Officer
Analysts:
Sajal Kapoor — Analyst
Rishi Mody — Analyst
Mohez Chandani — Analyst
Bhavik Mehta — Analyst
Abhishek Chandrakar — Analyst
Ankur Pant — Analyst
Amit Chandra — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4FY25 26 earnings conference call of Tata Alexei Limited. As a reminder, all participant lines will be in the listen 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 star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shashank Ganesh from ENY.
Thank you. And over to you sir.
Shashank Ganesh — Senior Associate
Thank you very much. Good evening to all the participants on the call. Good morning. If you’re logging in from the western side. 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 business risk that could cause further result, performance or achievements that differ from what is expressed or implied by such statements.
To take us through the results and answer your questions today, we have the senior management of Tata at XC represented by Mr. Manoj Raghavan, Managing Director and CEO Mr. Nitin Pai, Chief Marketing and Chief Strategy Officer. Mr. Gaurav Bajaj, Chief Financial Officer and Ms. Neha V. Co. Secretary. We will start the call with a brief overview of the past quarter by Mr. Agavan followed by a Q and a session. We would appreciate your cooperation in restricting us as 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 Raghavi. Over to you, Manoj.
Manoj Raghavan — Managing Director and CEO
Thank you, Shashank. Very good evening to everybody who’s joined us today. Welcome to the Q4.26 investor call. I hope that you and everybody in your family is safe and healthy. I’m pleased to announce that we have delivered a healthy revenue of 9, 993.8 crores for the quarter. Growing 0.9% quarter on quarter in constant currency terms. In our transportation business, Our revenues in Q4.26 grew by 0.2% quarter on quarter in constant currency terms. We are delighted with two strategic wins. One an APAC region from a new age OEM and another from a next generation mobility services company in the US Paving the path for business growth in coming quarters.
Our investment in efforts to pivot towards OEM business is delivering continued success. Underscoring our strength in focused execution of chosen strategies, OEM customers now represent 77% of the revenue in this vertical. Our healthcare and life sciences vertical degrew by 13.1% quarter on quarter in constant currency terms impacted by delays in deal awards that we were expecting and prepared for in the quarter. However, during the quarter we opened an offshore development center for the Japanese medtech leader Terumo Corporation.
This center brings together the power of design, engineering and digital to innovate their cardiac and vascular solutions. I’m happy to report that our media and communication business posted a 5.6% quarter on quarter revenue growth in constant currency terms. This growth was led by continued deal ramp ups, a strategic deal for adtech and Tier one US Telco. In the quarter. We also won a multi year large deal from a world leading device, OEM for its portfolio of video and broadband products. For the quarter our EBITDA margin stood at 24.6% improving by 130 basis points sequentially.
This reflects a continued focus on operational excellence and margin improvement. In FY26 we significantly advanced our adoption of Genai. This was supported by partnerships with AI companies launch of our own automotive SDLC platform DevStudio AI earlier in this quarter, curated tool stacks and agent inventory investments in infrastructure sandbox environments with IP protection and data privacy and rigorous upscaling. With these coordinated efforts we are progressing steadily towards being an AI native engineering organization, strengthening our differentiation and innovation quotient.
I am pleased with our sustained and strong operational performance through segment leading offshore delivery, continued transition to fixed bid, project ownerships and the systematic and enterprise adoption enterprise wide adoption of AI enabled efficiencies. These levers strengthened execution discipline and productivity driving consistent margin improvements throughout the year. As we enter the next financial year, we remain focused on scaling our differentiated design, LED and AI enabled offerings, strengthening operational leverage and driving sustainable growth and healthy margins.
Thank you and over to Shashank for the Q and A session.
Questions and Answers:
Operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press STAR and then one on the Touchstone phone. If you wish to remove yourself from the question queue, you may press Star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To register for a question, please press Star and then one. Our first question comes from the line of Sargent Kapoor from antifragilethinking.
Please go ahead.
Sajal Kapoor
Yeah, hi. Thanks for taking my questions. And sir, of the deals you have won recently how much of the value is coming from existing customers expanding their engagements of wallet share versus entirely new logos? And how has this mix evolved over the last two or three years? That’s my first question. Thank you.
Manoj Raghavan
Yeah, I think if you look at it in any quarter the new customers would contribute maybe 2, 2.5% of the revenue. So a large portion of the revenues come from existing customers and the deals that we win with them. But however, we also see good new set of customers that are coming in. For example this quarter we have announced a deal with Terumo for example, that’s a new customer that set up an ODC with us in the healthcare and life sciences space. Similarly the deal that we announced in the automotive segment with the APAC customer, that is also a new customer for us and that’s a deal that we have announced.
The deal that we announced in the media and communications phase with the multi year deal, that’s an existing customer of ours. So. So it’s always a mix of existing as well as new customers.
Sajal Kapoor
Sure. And just a follow up. I mean is there a pattern where the new logos typically take X number of years to scale up or is there no such pattern? I mean it depends on customer to customer.
Manoj Raghavan
It depends on business to business. I would say usually even if you win a deal for it to make a significant impact it it takes anywhere between nine months, 12 months for ramp ups actually ramp ups to happen and start delivering.
Sajal Kapoor
Sure, that’s helpful. And my second and last question is, you have highlighted AI led productivity and a shift towards fixed bid and platform based delivery. Are these changes starting to alter pricing power and contract structures or are they mainly improving internal efficiency? So far
Manoj Raghavan
It’s both. Right. Definitely we are using a lot of that for internal efficiencies. However, there are customers that are demanding, you know, better, you know, efficiencies, productivity and so on, which automatically leads to, you know, if you’re able to deliver that performance and productivity then a better pricing power. Right. So it’s a combination of both.
Sajal Kapoor
Okay, thank you. I’ll rejoin the queue. Thank you.
Operator
Thank you. Before we take the next question, a reminder to everyone, you may press star and then one to ask a question. Our next question comes from the line of Rishi Modi from RDM Advisory llp. Please go ahead.
Rishi Mody
Yeah. Hi. So my first question is pertaining to the quarterly result. So healthcare, we’ve declined 13% QoQ on constant currency in our revenue. Last quarter you called out that probably Q3 was the bottom. Just wanted to get your view that do we see Q4 as now the bottom or is there something which has changed over the past three months for us there?
Manoj Raghavan
Yes, I think we were very optimistic that the health care business has reached the bottom and we will turn around. And we were pretty confident because there were a few deals that we were bidding for and we are pretty confident that we will be able to close those deals. Unfortunately for us, those deals have not closed and that resulted in this situation that we’ve had. But however, we still continue to carry, you know, those items in our high probability funnel. And in fact a few of them actually, you know, we have closed in the, in a couple of weeks, you know, in the new quarter.
Right. So I think I’m pretty hopeful that last quarter, you know, Q4 was the bottom and you know, we will be able to recover this. And you know, if we had closed these deals earlier in the quarter, then we would have had a fantastic exit to Q4. All the three businesses really firing and so on and that is what we were all aiming for. But hopefully it is just shifted by a quarter and we should be able to recover that position in Q1.
Rishi Mody
Got it. So say Q1 plus Q4 combined should have positive growth over Q2,
Manoj Raghavan
Q
Rishi Mody
Q3, if that’s how I have to look at it. Second, on the USA business, the media and communications industry, the consolidation seems to have happened. Are we now going to go back on the higher growth trajectory or is there something which needs to be recalibrated in usa?
Manoj Raghavan
I’m
Rishi Mody
The media and communication both. Sorry.
Manoj Raghavan
So the media and communication business has smartly grown for U.S. In the U.S. Right. But overall the U.S. Business has declined a little bit. That is primarily because of the healthcare piece, because healthcare for us is largely US focused.
Rishi Mody
Okay, got it. Finally, more on a structural question. Right. You’d mentioned in the past that now incrementally we’re doing fixed contracts which might may or may not be a trend that we are following. But also we are doing longer tenure contracts which are not as profitable in year one as say the earlier shorter term contracts that we were doing. But if you were to take say a two year, three year profitability combined, do we even out on our margins or we take the hit on the margins but we’ll get higher absolute amounts.
Is that the approach? Or we have levers to get margins ramped up in year two, year three.
Manoj Raghavan
Yeah. So obviously when we, when we look at a three year or a five year deal, right. The initial, you know, one year would, would have a lot of you know, costs involved. Right. You know, that could be sometimes rebadging costs, that could be acquisition costs and you know, and all of that. Right. So, so, but however, you know, when you look at a three year or five year, we definitely would be looking at seeing how we can improve our margins, you know, sequentially quarter on quarter and year on year.
Right. So that is the focus for us. So definitely we would want to bring back and especially now with, you know, using AI Gen AI and so on, we have many, many ways of really, you know, bringing out the margins in a positive way. So. So I think that’s what we’re focusing on.
Rishi Mody
All right. Finally just a bookkeeping one. If I could get the utilization rate for the quarter,
Gaurav Bajaj
It is about 73%.
Rishi Mody
73%, got it. Thank you. That’s it from my end.
Mohez Chandani
Thank you.
Operator
Thank you. The next question comes from the line of Moesh Chandani from Ambit Capital. Please go ahead.
Mohez Chandani
Hi, good evening and thank you for taking my question. My first question was on the broader transportation segment. So you know, the last year has been turbulent for the entire segment, but looking at Q4, I think things were flattish. What’s your outlook for the transportation segment going into FY27 and for the overall business, is the application still double digit growth for the financial year?
Manoj Raghavan
Yeah, I think, you know, the good part for us is while as you rightly said, the overall market outlook was sort of mixed right. Throughout the last financial year, but we were still able to win some large deals and so on. In fact, even in Q4, we won some fantastic good opportunities for those multimillion dollar deals. So what we are confident is that look, some of the new deals that we have won we will be able to scale in the next 6 to 12 months time period. So that is what will help us really deliver growth in the automotive space.
Of course, on top of it, as we have been updating all the investors that we have been gradually moving to more and more of our business from the OEM side. Right. I think today we are looking at about 77% of our revenues, 77% of the automotive revenues coming from OEM. So I think that is also, you know, that pitch is also shift to OEM business is also helping us. So I would say, you know, I’m still pretty optimistic about the overall automotive market. But however, given the current geopolitical and all the war and all that.
Right. So while we have the deals in hand and we will definitely look at ramping up and so on, there could be some amount of uncertainty. We are still talking to customers on that. Having said that, I think maybe we would look at a high single digit exit. Right. May not get into a double digit for automotive.
Mohez Chandani
Understood. And the second question is on margin. You know, again, margins saw a very sharp improvement this quarter. What seems to be driving that? Especially I think since utilization is still at about 70%, 73% like you said. And then in terms of sustainability for the for this margin improvement going forward, what would your comments be?
Gaurav Bajaj
This is Gaurav, let me answer that question. I think we have been talking about the margin for the past few quarters and I think we have been mentioning that. I think we are making constant effort to go back to our original margin band which is about 27 to 28%. So I think the work has been happening towards that. In terms of the operating model, operating efficiencies and delivery. It’s not only about the utilization. Of course utilization was below 70% at one point of time. Now we are almost inching towards mid 70.
So every, you know, one person increase in utilization also helps, you know, at least 25 to 30 basis point on the margins. So that is helping one second, I think that some of the fixed price contract that increase that has happened that is also, you know, come sometimes with a better margins because you are able to, you know, have a better optimized and rationalized pyramid on those, you know, deals if you able to deliver and execute on those contract, you know, the way you have contracted for. I think third is that pyramid in terms of, you know, managing the pyramid and the further hiring.
So that is well calibrated in terms of the future requirement, supply, demand, state. So that is giving me almost 65 basis point kind of improvement on a quarter to quarter basis. And yes, I think there has been some currency tailwind which is also helping margins for the current quarter. So if I have to put in terms of the margin work, probably 150, 155 basis point is coming from the currency movements against most of the cross currencies has improved compared to the INR 65 paisa. You know, 65 basis point would have come from the operating efficiencies, you know, across different levels.
That is in the into play. And also we have done the, you know, the salary increase for the rest of the staff for the, you know, in the organization, you know, effective first Jan. So that would be 90 basis point kind of, you know, impact on the quarter. So that, you know, sums up to almost 130 basis point improvement in the operating margin on a Quarter to quarter basis.
Mohez Chandani
Understood. And just one last question, if I can squeeze in. So you know, media, one of the concerns that were there last year in terms of consolidation and again, you know that a lot of deals were getting cut. So do you think that phase is behind us now or do you think, you know, looking at the very strong growth we’ve had in media or do you think that the segment is still challenged from a growth perspective for the next few quarters?
Manoj Raghavan
I think that, you know, in general, I would say the, you know, we are still challenged. The entire media and telecom industry is challenged. But how are, you know, what has happened for us over the, over the last quarter and the financial year is we had won some large deals that especially from some of the large customers, those ramp ups have really started happening and we have seen those ramp ups happening in Q3 and Q4 as well. On top of it, we won a large deal in Q4 which we would be literally taking over the engineering for one of our customers, all their legacy products and so on.
And that’s a pretty significant deal for us. And that single deal actually also bumped up our overall growth in this segment. Having said that, deals are still consolidation deals and cost takeout deals that are there on the table and we are still participating in those deals selectively. So overall, yes, I think we are still not out of the woods in this particular industry segment. However, because we have won a few good deals for us, we are able to show this growth.
Mohez Chandani
Understood. Okay, thank you so much for taking my question.
Operator
Thank you. Your next question comes from the line of Bhavik Mehta from JP Morgan. Please go ahead.
Bhavik Mehta
Hi. Thank you. So understand, on generative AI, how are the client conversations evolving? Are you seeing clients asking for productivity pass throughs or pricing discounts because they want you to implement more of gen AI into the projects or is it still at a very nascent. That’s not in a big way so far and different, you know, for the three different industries you cater to.
Manoj Raghavan
Yeah. So I think from a generative AI perspective, I think we are seeing a lot of, a lot of conversations happening in the media and telecom space. Not so much in automotive and healthcare. Yes, there are conversations happening and so on. Those are more in terms of, you know, for example, in automotive space there’s a lot of interest from, from OEMs and customers in terms of how do you manage, for example cyber security and confidentiality requirements and so on and so forth. So that’s why we have built our own DevStudio AI tool chain to Address some of the concerns that customers keep asking us.
Right. So I think in both automotive and healthcare there are those initial conversations happening. There is an interest to see how we can use some of these technologies for better efficiencies and you know, and so on. Not so much conversations around cost and you know, cost takeout and so on at this point in time. But media and telecom, we see a lot more, you know, customers, you know, asking if, you know, can we use Genai to overall, you know, what do you say, help in efficiencies at the same time also manage with their budget situation.
Bhavik Mehta
Okay, got it. And any sense on what could drive this different customer behavior between. Let’s go to media. Is it because media is under more pressure right now and hence the clients are more desperate for cost efficiency versus the other two sectors?
Manoj Raghavan
I think automotive is still, you know, very, in some sense, it’s still very regulated and you know, automotive software development follows certain processes and you know, using a generic, you know, AI tool will not, you know, it’ll be very difficult for automotive companies to pass various, you know, regulatory requirements and so on. Right. And that is why, you know, you need to build custom tools for automotive. Healthcare is also same. Right. It’s more, you know, a very regulated industry as media and telecom.
You know, it’s that, that sort of very, very strong, you know, regulatory requirement is not there. And in terms of, you know, that if you, if you do something is not going to, you know, cause an accident or you know, kill somebody and so on.
Nitin Pai
And maybe I can just add to that. I think in general the telecom industry, especially telcos, are actually at the forefront of deploying data centers, building the infrastructure and the connectivity that you need to deliver AI engine, AI. So to that extent in many ways I would say they are ahead of the curve, at least between industries in terms of being ready and being comfortable and already having sorted out some of the key questions around how do you deliver?
Bhavik Mehta
Got it. And just lastly, Gauravar, how should we think about the trajectory of margin from the project been increasing since the last three quarters, which is good to see. Should we continue to expect similar kind of expansion even next year or do you think it could slow down a bit given that most of the utilized in F26
Gaurav Bajaj
So Bhavik, I think we will have a sustained effort in terms of improvising our margins from here. Probably it will not have a huge uptick on a quarter to quarter basis. Probably it would be more gradual increase or the improvement that will happen on a quarter to quarter basis and also it needs to be tightly aligned with the top line growth. So focus would be on the top line as well as the bottom line. But some of the margin will come back as we see some of the growth coming back and most of our verticals start to deliver on the top line.
Having said that, of course there could be quarter where the margin can have a left or right shift depending upon some of the one timers and other events. For example, if whenever in the quarter we have to do a salary hikes, there could be an impact in those quarters for the margins. But overall if we have to see in a mid to long term probably. I think the idea is that if we can exit the next financial year, you know, somewhere near to 27% kind of a margin not for the full year but maybe to. For the exit of the, you know, this financial year quarter four
Bhavik Mehta
Is that clarification is 27% is at the EBITDA level or the PVD level.
Gaurav Bajaj
I mean at the PBD level.
Bhavik Mehta
Okay, thank you.
Operator
Thank you. The next question comes from the line of Abhishek Shindadkar from Ingrid Equities. Please go ahead.
Abhishek Chandrakar
Hi sir. Thanks for the opportunity and congrats on a good quarter. Sorry this could be a repeat. I joined a little late but just wanted to understand, you know, the healthcare life sciences traction. The anticipation was that the, you know, the deals won earlier could help, you know, traction in the, in terms of growth for the current quarter. Was the, you know, the, the, you know, did healthcare perform as anticipated at the start of the quarter or was there any mid quarter or late quarter challenges in terms of daily decision makings, so on and so forth?
Manoj Raghavan
Yeah, I think I discussed that earlier in the, in the question that came up earlier. Yeah, we were, we were hoping on a couple of deals because we are very close to signing those deals and those are large deals that could have really helped us with improving the numbers. Unfortunately, both those deals did not come through in the quarter and they have been pushed to Q1. So I think it is more a shift of some deals. At the same time there have been, you know, a few, a few, few projects that have also, you know, closed.
Right. So a combination of that has created this, this situation for us. But I think I’m very confident or hopeful that we will be able to recover in Q1.
Abhishek Chandrakar
Understood. So just a clarification. So this planned out, you know, or this happened more in March or was it a phenomenon starting January itself? Just trying to understand, you know, the, the behavior of the clients in this context,
Manoj Raghavan
In fact, these deals started in October itself. It was more. We were hoping that it will definitely close, but it took six months and that was a delay that we’re not expecting that it would take so much of time to close these deals.
Abhishek Chandrakar
Understood, sir, that’s very helpful. And the second question, again, maybe a repetition. I just wanted to get clarify. So when there was a question about margins, our answer suggested that we are okay to let go margins in the interim to win larger deals. Is the understanding. Right. Because what I’m trying to understand is we are also Talking of a 27% PBT number for next year. And at the same time we also made a comment about, you know, leaving margins at the table for growth. So I’m just trying to, you know, put a context to both these commentaries.
Manoj Raghavan
So the 27% we talked about was the exit margin at in Q4 this financial year. It is not the margin for the year. Okay. So that is very clearly. And that is where we were aiming for. Right. I think today, I mean upwards of 25.6.
Gaurav Bajaj
25.6
Manoj Raghavan
In Q4, you know, last financial year we want to take it to in Q4,
Gaurav Bajaj
FY27.
Manoj Raghavan
So that’s the indication that Gaurav talked about. I don’t think we made a statement that we are leaving money on the table or we want to. It’s not a generic strategy that look, from now on we will drop rates and go out. Yeah. There could be certain specific deals which are from existing customers, which are large deals. And we feel that we would not want to let competition in or we want to vacate that space. Sure. For those cases, we’ll definitely look at seeing how we can be competitive. But as a generic strategy, we still definitely want to improve our margins and we have not given any guideline to our sales team or to our finance team that we can drop our margins.
Nitin Pai
Also note that even in those deals, there is a path to improving margins. It’s not that you’ll win it and it would stay where it is. Understanding is there are some deals, they constitute a small percentage of your incremental revenues every quarter. Some of those deals may need that investment period ranging from a quarter to more. But the expectation is over the longer term, especially because you’re going for longer term foundational revenue baselines, you would start to recover some of that margin back and hopefully you would improve well beyond 2.
Abhishek Chandrakar
Perfectly understood. Nitin. Sir, thank you for taking my question and best wishes for the next year.
Nitin Pai
Thank you so much.
Operator
Thank you. Your next question Comes from the line of Pratik and individual investor. Please go ahead.
Abhishek Chandrakar
I am audible.
Operator
Yes. Are you audible?
Abhishek Chandrakar
Yeah. Can you please share the margin breakdown for this quarter once again in terms of what led to the 130bps QoQ increase?
Gaurav Bajaj
Sure. Pratik, I think I mentioned earlier also, but quickly just to summarize what we are saying that 155 basis point from the currency, 65 basis point from the operating leverage and then we have a 90 basis point impact due to the salary hikes that has been done during the quarter. So that adds up to 130 basis point.
Ankur Pant
Understood. That’s it from my side. Thank you.
Nitin Pai
Thank you.
Operator
Thank you. Your next follow up question comes from the line of Rashim Odi from REM Advisory llc. Please go ahead. Rishi. Sir, your line is unmuted. Please proceed with your question.
Rishi Mody
Hi, can you hear me?
Operator
Yes sir, we can hear you now.
Rishi Mody
Yeah, hi. So Manoj, one fundamental question on how the market is behaving. How is competition behaving in terms of pricing aggressiveness, especially with AI benefits being priced into say contracts. Are you seeing rationality or irrationality in the market currently and how are we tackling this?
Manoj Raghavan
No, I don’t think we have seen irrationality in general. Right. Because see ER&D is still a very, very specialized. It is not that, you know, we can use AI or Genai across the board. Right. So having said that, yes, we have seen a few contracts where there have been competition that has priced very, very aggressively. And we are also a little bit surprised. We don’t know whether it is because that they have used Genai or they have assumed that Genai will lead to certain productivity. See Genai. I don’t think we can see Genai as you can cut and paste in all situations.
Right. That is a very wrong way of looking at Genai. And there are. I know that there are a few competition who are pretty aggressive in using some of this. But even customers are very, very careful before they accept a complete Genai based solution and so on. So largely I would say we’re not seeing irrationality that you indicated. There are a few cases here and there, but we’re not sure whether it is Genai or some other factor that are playing.
Rishi Mody
Got it. And are we being conservative, moderate or aggressive in pricing and efficiencies from AI in our bids?
Manoj Raghavan
No. So we are definitely looking at AI and we have, in all the projects that we are bidding for there is a component of it which we attribute to AI and we track it and we want to see how we can use that to really improve our, you know, efficiency, you know, productivity and ultimately, you know, margins. Right. So those are things that we are definitely tracking internally. So I wouldn’t say that we are aggressively going overboard at the same time. We are not, we’re not conservative at all.
Nitin Pai
Yeah, sorry,
Rishi Mody
Go ahead.
Nitin Pai
Yeah, no, so I think much more than cost. I think we are double clicking on value. I think what Genai does coupled with domain expertise is that I think it allows you to move up the time to market and quality factors as much as cost. And I think in the R and D space that is invaluable at times it’s much more valuable than simply cost because engineering cost is a fraction of your overall cost, product and product development cost. So I think the opportunity is actually in announcing value rather than reducing cost.
Rishi Mody
Understood. So bigger contracts should, or at least execution speed for existing contracts is more likely to be the outcome for us rather than say cost efficiencies which might be for other it, traditional IT services. Is that understanding correct?
Nitin Pai
Yes, though I don’t want to generalize that again. But all I’m saying is that the simple factor of only cost is not the only consideration.
Rishi Mody
Okay, got it. Thank you. Thank you. This is helpful. That’s it from my end. We can move on to the next one.
Operator
Thank you. Participants, you may press Star and then one to ask a question. Our next question comes from the line of Amit Chandra from HDFC Securities. Please go ahead.
Amit Chandra
Thanks for the opportunity. My question is on the transportation vertical. Obviously we have seen a good recovery there and now it’s stabilized also. And you mentioned in the PPD that 77% is from the OEMs. So if you can share some more light in terms of how the tier one portfolio has been doing and most of the recovery is from the OEM portfolio and how and the Tier 1 portfolio has stabilized and also in terms of the overall spending or the recovery that we have seen from transportation, it is only from the top client recovery and the ramp up of deals that we have won or is it higher spending across the OEMs both in the US and the European geography?
So how is the mix and what is the confidence that we move to a double digit growth there in the transportation vertical?
Manoj Raghavan
Yes. So definitely recovery is broad based. I would say it’s not just. And as you said, OEMs contribute more than 77% today. And these OEMs are primarily of course spread across. Right. It’s not just US and Europe that you are Talking of, we are also talking about India, we are talking about Japan and we’ve also, you know, we are also talking to some Chinese OEMs and so on. Still early days, but I think those are the. So essentially for us, it’s a global market and we are not really constrained to only one geography.
Tier one portfolio, I would say continues to shrink. Tier 1s, I mean, if you look at it, are having a tough time given that OEMs are taking more and more responsibilities and so on. So yeah. However, we are deeply entrenched with a few tier ones and that business definitely continues. Yeah. So deal sizes also with tier ones are smaller and so on. Right. So for us, growth will continue to come from the OEMs.
Amit Chandra
Okay. And so you mentioned from the AI side that the adoption of AI in terms of, especially in transportation OEMs is less versus the other verticals. But are we also in terms of the impact of renewals when the contracts come for renewals, are we also seeing deflationary impact or higher discounts that the clients, OEM clients are asking in terms of the AI benefits or obviously in terms of the higher spend related to AI? It’s not seen. But are we seeing the impact on the cost side or in terms of higher discounts in terms of renewal?
Manoj Raghavan
I think it’s very early days. Right. So it’s not as if that we have contract renewals coming every now and then and so on. So we’ve at least what those contracts that have come up for renewal, we have not seen impact of AI. But having said that, it’s very difficult to predict 6 months to 12 months down the line. What will be the change in the buying behavior of OEMs today? I think AI or Genai is not the most important thing that OEMs focus on. It’s more on value and how are we able to support them with the various projects that they have.
And it’s about the people that you have and how you’re able to deliver value to them. Right. So that’s the more focus, not so much on AI engine AI at this point in time, but as I said, six months, nine months, 12 months later. It’s very difficult to predict what sort of demands will come in.
Amit Chandra
Okay. And so on the margins part, obviously we have not been adding headcount and we have enough capacity. So till what growth rate or till what kind of growth you think that the existing capacity is sufficient or we need to add capacity maybe in the next one or two quarters?
Manoj Raghavan
Yeah, we are at 73% utilization so I think we can go all the way up to 80 or slightly more than 80%. Right. It’s not that we’re not adding people, we’re adding people wherever we need them, but we’re not aggressively adding headcount. Right. We are really meeting the headcount additions and so on. Only when there is a real requirement do we go out and hire. Right. So. So yeah, I think we can, we can. Once the utilization touches 80 or 82%, that is, then I think we will be, we will be looking at adding more, you know, in larger numbers.
Right.
Amit Chandra
Okay. So thank you.
Manoj Raghavan
Thank you.
Operator
Thank you. The next question comes from the line of Angkor Pant from iifl. Please go ahead.
Ankur Pant
Hi. Thank you for taking my questions. My question is around the fact that Last quarter for FY27 we were aspiring for a double digit growth for the business overall for FY27 and led by transportation healthcare verticals. Now this quarter healthcare has been a bit of a disappointment. And last quarter, if I remember correctly, we were expecting growth in transportation in 4Q we expect come out that flattish. So just comparing your expectations for FY27, how was it last quarter and how. What would be the aspiration as we go as we start FY27?
Manoj Raghavan
Yeah, I think, you know, I mean a lot of things have happened in the quarter, right. Geopolitical situation has changed. You know, customer spend. You know, we have, when we started last quarter when we talked about it, we had high hopes that of course transportation would continue the growth momentum as well as healthcare and licenses, we’ll be able to get back to growth. And I’ve explained the reasons why healthcare life senses, I think automotive we have governed the circumstances, governed the challenges and so on.
I think we have done reasonably well to exit flat or small growth. Right. So today, I mean sitting today looking at what is happening around the world and the conversations we are having with customers and so on, I think for us overall we might be looking at a single digit higher single digit growth for the financial year. We may not look at a double digit growth
Ankur Pant
And that and the verticals that would need it would again be transportation now.
Manoj Raghavan
Transportation, Yes. I mean we ideally would want all the three businesses to grow, right. We’ve had a very difficult, I would say 12 months where multiple businesses went into a, you know, downswing at different quarters and so on. But from now on we are really hoping that all the three businesses will start showing.
Ankur Pant
And the other question is now given the tough geopolitical issues that we have had in this Quarter. Did we see clients now pushing back on the signing of deals or decision making cycles getting slightly elongated, which may again mean that the recovery that we were expecting may also get pushed back by a quarter or two. Are you seeing signs of that as well? Quarter,
Manoj Raghavan
We are seeing both sides. Right. We have also, you know, announced deals that we have won in the quarter. We also know that there are cases where the deals have been pushed off. So there is no one answer to your question, right? It is, both are happening.
Ankur Pant
Sure. But, but, but the expectation of recovery that you had, is that still, I mean, are you still hopeful of the same trajectory or that does that, that get pushed off in a few bits? Seeing what is happening around,
Manoj Raghavan
Which is where we, when we look, when we, when we started, when we came in the last quarter, we were hoping for a double digit, you know, sort of, you know, growth aspirations for the quarter. But looking at the situation today, maybe, you know, I would be a little more conservative and say maybe a higher single digit is what we should look at. This could change in the next three to six months. Right. When we look at the deal momentum and sitting today, the visibility that we have, conversations that we’re having and the deals we have closed and the deals that we are pursuing, this is what we feel.
Ankur Pant
Sure. Perfect. Thank you so much and all the best for the next day.
Operator
Thank you. Participants, you may press star and then one to ask a question. Our next question comes from the line of Mayur Matani from Mahesh Kumar and company. Please go ahead.
Unidentified Participant
Good evening sir. Congratulations on a good set of numbers. My question is regarding, pertaining to the fixed price contracts that we have. So over a period of time, we have seen that our fixed price contracts have now increased quite a lot. And I believe that fixed price contracts have a better margin trajectory. So with regards to signing more OEMDs, how do you see that trajectory going forward on a sustainable basis? Is there a further scope to increase the fixed price contracts?
Manoj Raghavan
No. So, you know, yes, some of the deals, large deals that we have closed are on fixed price, you know, contracts. The challenge is that, you know, if you don’t execute on those fixed price contacts correctly and then it could also lead to revenue leakages and, you know, profitability dip. Right. So it is, it’s not that it’s not advisable that we continue to shift more and more of our business to fixed price. So I think that is a careful, you know, decision that we need to take because the entire processes in the organization, the SMEs that we have, the Architects that we have, you know, any deal that we pick, we also need to be able to execute it, deliver on time with the margins.
Right. Only then we can show the margins. So it’s in some sense a double edged sword. So we’ll be a little careful in terms of how this goes. Right. It’s not our objective suddenly to move to a 70 or an 80% fixed price. That will be putting too much of risk on us.
Unidentified Participant
Right. Thank you. And with regards to your transportation verticals, we have been talking that whenever there is a slowdown that structurally you see that some of the orders or some of the projects, new projects might get offshore. So are you seeing that traction or there is indecisiveness from the customers side? Currently,
Manoj Raghavan
No, we are seeing a lot of that. Especially when there is a need in the customer space that they have to continue their engineering activities. And as a slowdown, the only option for such customers is to see, hey, can they do more with less? Right? With less of a budget, can they do more? Right. And that is where best cost countries like us and companies like us come into play. So yes, I think we continue to see such customers who are looking at which is the right organization that can deliver outcomes without too much of oversight.
Because if you’re doing offshore, it means a lot of the work the OEM has to hand over. Right. And they should have the confidence that tatalux is a company that can take up this complex work and deliver outcome remotely. And that that is the track record that we have and that is why customers trust us with lot more offshore delivery.
Unidentified Participant
Right. We have been speaking about it quite a lot, but over the past one or two years, I think that is not reflected in the overall revenue. So when do you think that change might happen? Or is it due to that the profitability of the legacy players are impacted? That is why we are not getting that kind of business.
Manoj Raghavan
No, if you look at it, the industry went through massive, you know, what do you say situation over the last, I would say 12 to 18 months. Right. So it is not as if that such deals have not happened. Such deals are happening. Some of them are ramping up, you know, as per plan. Some of those ramp ups are still slow. So it’s a work in progress. So we are seeing that shift happening.
Unidentified Participant
Okay. And last question with regards to the. Yeah, sorry, please continue.
Nitin Pai
If I may just add. I’m just adding a little perspective.
Unidentified Participant
Yeah. I
Nitin Pai
Think you remember all our revenues and growth, or lack of it is organic. That we have seen across many of the peers that we see in the industry has been actually coming from inorganic. Organic growth has been lacking. If you ask me, not very different. I think what’s different for us is the fact that you will see that consistent offshore track delivery. Nobody else carries that kind of an offshoring capability. Two is you’re seeing that gradual but consistent shift to fixed price. Rightly, like Manoj said, the intent is not to simply improve margins, it is to make sure that we can continue to deliver greater and greater value.
But the most important point I think everybody has to remember is ernd is not very large deals locked in for five years and so on. It is a set of projects that continue to run off. So every quarter you will lose 10, 15% revenues. You have to make it up and new contracts. So that is the challenge. It is not the proposition or the value that we carry. It is the ability for you to continuously refill that funnel.
Unidentified Participant
Thanks a lot. Thanks a lot. And last question is with regards to the media vertical, so we have been telling that media is still not out of the booth. So do you think that in the media vertical, if we are able to manage the revenues over a three to five year horizon, do you see that trajectory changing or what circumstances may bring the revenue in the media and telecom vertical back?
Nitin Pai
Yeah. So if I may again, I think two, three things, right? One is that we have seen a plus, minus, plus, minus. So there are some quarters of growth, there are some quarters of degrowth. So the media and telecom vertical for us has been very volatile
Bhavik Mehta
And
Nitin Pai
Overall it is not delivered growth. And that’s fundamentally reflecting the state of industry, which is whether it’s the telecom operators or whether it’s the large media streaming companies and content studios, they’ve all been under tremendous pressure for top line growth and therefore a lot of the focus has been bottom line. And bottom line means then it’s more of an efficiency and cost takeout game rather than an innovation game. So to that extent, I think what we have really done very, very well, if you ask me over the last six quarters, is the building of confidence, both in ourselves as in customers, that we can execute, we can win execute and execute very, very well on large consolidation deals.
Remember that we have typically not played that game too much. We’ve always been about do the new and less about consolidate. We will take over what you’re doing, we’ll make sure that efficiencies are delivered. So it’s been always less of that, more of do the new. I think that muscle that we have built, whether it’s an automotive, whether it’s in medium communications, I think is the biggest single factor that you are able to go there and win $100 million deal, that you’re able to go there and win $50 million deals.
I think that creates that muscle and discipline to say, look, can we build a foundation of revenues that even if there is some volatility, you can stay protected? And hopefully there is growth in certain quarters, there is growth in certain areas. But the real big answer will be that innovation has to come back to the industry for true big upticks. Yeah,
Manoj Raghavan
Yeah. And also the industry is also going through a lot of mergers and acquisitions. M and A is happening. So that is also, you know, sort of what happens when two media companies come together is, you know, there is duplication of engineering. And so there is a lot of resources available and there’s no need to really depend on, you know, an external. External supplier to come in and support them and so on. Right. So those things are also happening. Right,
Unidentified Participant
Right. Thanks. Thanks a lot. And one last question, if I may. We were looking at some new verticals, so if you can share something on it. Thank you.
Manoj Raghavan
So I think we were focusing on, for example, the aerospace and defense is one vertical that we’re looking at. And we have some very exciting things happening there. But it’s very difficult to, I mean, unless these result in some large revenues and so on, it’s very difficult to proactively tell you what is happening. They’re doing some very, very good work with the defense organizations in India, with hal, with, you know, the Aeronautical Development Agency, some large deals that we are bidding for working.
We’re also working with some, you know, global players there. Right. So I think till we reach a size, I think we will. We are continue to invest there, we continue to build capabilities and also, you know, when those, you know, initial projects and trial projects and so on. We’ll keep you updated there. We have also started, you know, focusing on the. The battery energy storage. Right. That is a big opportunity because of all the data centers that are being, you know, especially because of AI and Gen AI, a lot of, you know, power is needed.
Right. And for that, you know, battery energy storage is. There’s a huge demand in the market. And that is something that we have picked up and that’s something that we would. And of course, even for ev, you know, powering up EV in remote locations and so on, you need that battery energy storage. So that is something we have incubated. And I think the coming financial year, we hope that that will be a reasonably sized vertical for us. So we will make those announcements at the appropriate time. We’ve also started a little bit on the manufacturing side.
We have built certain capabilities. We have won some initial customers. That is another area we continue to invest. So all those three areas, we continue to build that muscle, build that strength. Do those initial projects build those capabilities. And we are hoping that next four to six quarters, at least one or two of this, will start showing results.
Unidentified Participant
Sure. Thanks. Thanks a lot.
Manoj Raghavan
Thank you.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Manoj Raghavan
Thank you. Thank you to all the investors for the call today. I think we are still optimistic that FY27 will be a growth year for us. And as I said, the growth has to be led uniformly across the three verticals. And that would be the focus for us as we enter into the new financial year. Thank you so much for your time today.
Operator
Thank you. On behalf of Tata Alexa limited that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.