Ladies and gentlemen, good day and welcome to the Tata Elxsi Ltd. FY 2025-2026 earnings conference call. 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shashank Ganesh from EY. Thank you. And over to you, sir.
Thank you. 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 the business risk that could result.
Further result, performance, or achievements that differ significantly from what is expressed or implied by such forward-looking statements.
To take us through the results.
Answer your questions today we have the senior management of Tata Elxsi 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., Company Secretary.
We will start the call with a.
Brief overview of the quarter by Mr. Raghavan 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 further questions, you may join the queue later, 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 Raghavan.
Over to you, Manoj.
Thank you, Shashank. A very good evening to everybody who's joined us today for the Q2 FY 2026 investor call. I hope all of you are doing fine. Before we begin today's investor call, I would like to take a moment to reflect on a profound loss that continues to be deeply felt across the Tata Elxsi family. The passing of Mr. Ratan Tata today marks one year since we lost a visionary leader whose legacy is woven into the very fabric of our company. His values, vision, and quiet strength continue to inspire us every day as we move forward. We remain committed to honoring his legacy not just in words, but through our work, our culture, and our pursuit of excellence.
Coming to the Q2 performance, we reported an operating revenue of INR 918.1 crore with a growth of 2.9% in natural currencies and 1% in constant currencies quarter on quarter. During the quarter, we reported an EBITDA of INR 193.3 crore corresponding to a margin of 21.1%. Our PBT stood at INR 214.7 crore at a margin of 22.2%. Our key markets continue to be volatile, but we delivered strong quarter on quarter growth across key overseas markets led by the U.S. market, which grew 7.9% quarter -on -quarter. Our media and communication business reported a smart 6.8% sequential growth, strengthened by ramp-ups of large deals which we announced in the previous quarters and new deal wins.
I am pleased to share that the launch of MBC Now, a Saudi Arabia headquartered content super aggregator catering to audiences across the Middle East and Africa, is powered by our in-house developed OTT platform Teplay. However, the industry environment continues to be volatile with business restructuring and M&A across leading operators and broadcasters. Our transportation business that accounts for over 50% of our revenues registered a growth of 0.7% in the quarter gone by. We are happy to report a robust pipeline momentum that is driven by global OEM, SDV programs, and other large deal wins. This quarter, we opened the second engineering center in a partnership with Suzuki that focuses on cloud hardware and loop simulation setup, enabling faster SDV transition. Adjacency strategy is also showing good progress with customer additions and deal wins.
In the aerospace and defense segment, we are happy to report a turnkey airport guidance systems development program from a U.S. headquartered aerospace supplier. Our healthcare and life sciences business reported a decline of 2.3% primarily due to the conclusion of some large regulatory and MDR programs. We are building a strong pipeline of new customers and large deals across key regions in the healthcare and life sciences business, and I'm confident of sustained growth in the coming quarters. I'm pleased with the launch of the dedicated technology center for Bayer Devices in Radiology. The center is designed to co-develop advanced radiology devices and technology that enable early and accurate diagnosis and treatment of critical illness. Our system integration business recorded a growth of 20.5% over the previous quarter. We're also pleased to announce the award we won from Dell Technologies for the Best Infrastructure Solution Group Supplier category.
Enterprises are investing in on-prem infrastructure as they pivot to AI data centers and edge computing for their AI-powered enterprise applications and workloads. This award recognizes our differentiated next-gen capabilities for infrastructure design, integration, and run management as enterprises mainstream AI-led applications. We have delivered strong operational excellence and growth across customers, regions, and industry verticals in this quarter, and we have created a strong foundation for sustainable growth. We look forward to carrying this momentum into the second half of the current financial year. With this, we would like to open the session for Q&A. Shashank Ganesh, please go ahead.
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 their touchstone phone. If you wish to remove yourself from the question queue, you may press star and then 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 again. To register for a question, please press star and then one. Our first question comes from the line of avik Mehta from JP Morgan. Please go ahead.
Thank you. Three questions. Firstly, on the auto or the transportation side, how's the demand trending over the past couple of months given that trade days have been finalized? The uncertainty has gone away. How are you thinking about R&D spends coming back from the OEM side given the alternative going away now? Also, you think about the demand or the growth trajectory from here on for the auto vertical. Second question is on the cybersecurity incident that has happened with one of your top clients in the auto segment. If you can quantify what kind of headwinds on revenues and margins you saw in 2Q and what should we expect in 3Q as well, given that they're going to gradually start the operations. Lastly, just on margins, we have seen margins come off a lot over the past two quarters.
Going ahead with the confidence and growth coming back, how should we think about the trajectory of margins over the next few quarters? Thank you.
Sure. Thanks, Avik. I'll try to answer these questions. I think from an automotive customer landscape perspective as compared to maybe last couple of quarters, as we sit today, I feel a lot more confident about the spend coming back. If you look at the deals that we're chasing, if you look at the funnel, if you look at the pipeline, and also if you look at some of the deals that we have closed and the ramp ups that are happening, I feel that H2 will be definitely much better than H1. I'm very positive on that. From a trajectory perspective, if you divide it a little bit between the various regions, I say we definitely, if you look at Europe, I think we'll definitely grow. We see good traction happening there. Japan is very positive for us.
We continue to grow, we continue to win new deals, we continue to expand our existing relationships, both OEMs and suppliers. India is also a pretty good market for us. We continue to do pretty well across all the customers that we have in India. U.S. is still a little muted for us. That is something we hope that in the next half year we will have a lot more clarity. For us at least the coming quarter will be a muted quarter. We are hoping that changes. From an automotive perspective, from an adjacency perspective, from aero and rail and off road and so on, we do see a good traction building in the U.S. market. Overall, I would say if you look at our transportation business across geographies, we believe that H2 will be better than H1.
From the cybersecurity issue that you talked about, yes, of course we had some impact. Some of the projects that we were supposed to start in September had to be pushed out. Rather than giving you a number and quantifying it, I would say that if that incident had not happened, we would have definitely shown a CC positive growth. That would give you an idea that incident did affect a little bit for us. From a margin perspective, we are definitely seeing a recovery. It is a slow recovery. As the top line grows, as the utilization picks up, as the revenue grows, we would see that margins gradually coming back. Our target definitely would be from a H2 perspective. We definitely want to do much better than H1 and I'm pretty confident that we will be able to achieve much better margins as compared to H1.
We wouldn't want to quantify it at this point in time, but we could from a management perspective, we're pretty confident to get back over a period of time. Right. I think if you had seen from a utilization perspective, we have improved our utilization from about 66% to 70% and above in the last quarter, and we see an increasing trend of that. The first focus for us is to get to a 75% utilization by end of this financial year, and next financial year to see how we can touch 80%. That is definitely the focus for us. Once we achieve those numbers, I'm pretty confident that our margins will get back to our earlier trajectory that we have been meeting. That's my answers to the three questions.
Thanks a lot.
Thank you. Our next question comes from the line of Karan Uppal from Philip Capital India. Please go ahead.
Yeah, thanks for the opportunity. Just one clarification on the auto commentary which you mentioned. You said that H2 will be better than H1 in the overall transportation business, but it will be driven by the adjacencies, not the core auto business. Is that what you said?
No, I said only about the U.S. market. All other markets we see good traction in the automotive sector as well.
Okay, okay, got it, thanks. The second question is within the auto business, which are the areas where OEMs are keen to spend on, and where are they holding back right now? Also, are you benefiting from the offshoring trend increasingly? Offshoring trend which we are witnessing across players for the automotive business.
I'll answer the second question first. Tata Elxsi is known for offshoring. We are one of the, if you look at from a percentage of revenues that comes from offshoring and so on as compared to all the other competitors, our ratios are far, far higher than anybody else. It goes without doubt that any trend in offshoring, looking at best cost countries and so on, Tata Elxsi is a preferred vendor because of the capability, the experience, the process, know-how, and 30+ years of experience of doing this. Without doubt, I think we would definitely benefit from the offshoring trend. From an area of offshoring, areas of sort of demand that we see, the good part is if you look at a lot of the large deals, new deals that we're talking of, it's all around software defined vehicles, the electrification side and so on, EVs and so on.
We do see a lot of interest in ADAS and as well as the infotainment and cockpit and all of those areas. Interestingly, we also see a revival in the traditional powertrain ICE related areas as well. I think we are well placed to really capture all those new, all the areas that we are seeing traction in.
Okay, thanks. Very clear. Another question is again on automotive. Beyond U.S. and Europe, I know that you have a good footprint in Japan, but are you looking at other markets like India, Korea, China as the growth market? One more clarification, how big is the U.S. and Europe within automotive for you?
Yeah, of course we are. I mean, I talked about it. Our major markets are definitely Europe, U.S., Japan, and India. China is also an important market for us, and we are really evaluating what we need to do there. Our business is relatively small there at this point in time, but definitely we are looking at that market to see what we need to do from a percentage or from market share perspective. I would say Europe is number one, and U.S. is number two. Japan and India also, we get a significant business from these markets. That's the pecking order.
Okay, thanks. Just last question.
Karan sir, may we request you return to the question queue for any follow-up questions?
Sure.
Thanks.
Thank you. A reminder to all the participants, please limit your questions to two each per participant, and you may rejoin the queue for any follow up questions. Our next question comes from the line of Manik Taneja from Access Capital. Please go ahead.
Thank you for the opportunity. Manoj, the first question was once again on the automotive side. Given what you are seeing on the ground in terms of pipeline and your customer discussions, do you think we probably see a significant pickup in growth over the course of the next four to six quarters? If you could probably give us some sense, given the kind of growth that the industry including you enjoyed between FY 2022 and 2024 in this industry segment, that's question number one. The second question is related to our margins. If you could help us understand the different moving parts on margins, given currency and given the point that you highlighted about our high offshore revenue mix, as to what were the moving parts on margins and how should we be thinking about wage hikes for the year, those would be my questions. Thank you,
Manik I will answer on the margin work first. We got a 90 basis point gain from the favorable currency movement, which is net of the cross currency impact on the cost side. Also, due to the higher salary cost converted into the actual INR reported, the 90 basis point of exchange gain got compensated, offset by the 40 basis point of the higher people cost, which is due to the campus onboarding that we have done. The last batch that was remaining has been onboarded during the quarter, and also some of the strengthening has happened onto the sales side. Another 30 basis point came on, compensated with the other expenses, which is typically towards the partnerships and AI-led infrastructure that we are building. That gives you a 20 basis point uptick from the last quarter on operating margin.
If you see at the PBT.
Net income before tax, we have higher other income, which was on account of hedging gains and also the R&D credit that we get in the U.K. That added another 90 bases points. Hence, at the PBT level, you have 110 bases points sequential increase from the.
Last quarter
from an automotive industry, from auto sector growth perspective, was next four to six quarters. Right. What I would say is, look.
What.
We are looking at, based on the discussions with customers and some of the ramp-ups that we are seeing in deals that we have closed and some of the large deals that we achieved, we believe that, look, next year we will be able to look at double-digit growth from an automotive view, transportation business perspective. That is one from a wage hike perspective. Yeah. I mean, we have already indicated that there will be a part of the team will be given hikes in Q3. That is something that we will consider. We definitely need to look at the impact that we talked about, the cybersecurity incident, and we hear from our customer that, you know, the systems are up and everything is back to normal. We will wait till end of the month to take that decision.
If things go well, yes, that will be part of the teams will have a wage hike in October.
Sure.
With regards to the stock customer, when you saw some delays in terms of projects during Q2, are you beginning to see some normalcy emerge over there, or probably this may remain some sort of a near term headwind?
We are definitely seeing a lot more positive conversations and at least people are coming back for discussions and so on. We were prepared for the worst. I think things are definitely looking much better now.
Sure.
Thank you.
All the best in the future.
Thank you. Our next question comes from the line of Moesh Chandani from Ambit Capital. Please go ahead. Yeah.
Hi, good evening and thank you for taking my question. The first question was on the media and communications side. You've seen that quarter. I've seen that segment being challenged for quite a few quarters now. There's a strong growth pickup this time around. Do you think that we're sort of bottomed out in this segment or was this just a large deal ramping up and you think growth will moderate for the next few quarters in that segment?
I think it's true that we have, you know, the last deal that we've won, you know, that ramp ups have happened. I believe that the growth will moderate in H2. This industry segment is still under a lot of stress with a lot of M&As and a lot of corporate action happening at our customers' sites. I believe we have to wait and watch and we are not projecting pretty large growth in the H2 for this business segment.
Got it?
Understood. The second question was on your attrition levels. That's gone up for the third.
Quarter in a row.
Now, given that your demand environment is weak across the sector, where exactly is the challenge in terms of attrition? Do you think that that will also impact your wage hike if this continues going up?
I think attrition has gone up marginally. It's not very significant. We are aware of that. We're keeping a watch on that. I think it's also the fact that if you look at, if you don't add, the numbers in the denominator go down, so automatically the calculation goes up. I think it's a factor of that. It's not a very significant thing for us. We will definitely be able to show much better numbers once the revenues pick up. I believe H2 will be better from an attrition point of view.
Okay, perfect. Thank you for taking my questions.
Thank you. Our next question comes from the line of Amit Chandra from HDFC Securities. Please go ahead.
Thanks for the opportunity. My first question is on the transportation vertical. If you can elaborate more on the deal that we had with Suzuki, the SDV deal, what is the kind of revenue potential or what kind of efforts has been deployed on that deal? In terms of the revenue potential, when we can see the ramp up happening there and are there other OEMs who are planning to set up similar HDB centers in India?
And.
An extension to that is how do we see the OEMs, the vendor consolidation deals? A lot of OEMs, large deals, are coming up for renewals. How are we placed in terms of winning some of the vendor consolidation and the large deals which are coming up for renewals in the OEM space? That is on the transportation vertical. If you can answer that.
Sure. I think we've announced a deal with Suzuki last year based out of our center in Pune and that has ramped up pretty well for us. The deal that we announced recently was a cloud-based hardware and simulation deal which will be executed out of a center in Trivandrum. That is also, we expect, and both these deals are long term, you know, five to 10 years sort of deals. These will definitely, you know, peak. The peak headcount will happen after six or eight quarters. Still, I would say early days and we would really definitely see ramp ups happening. As with many Japanese companies, they would really want to first try and they want to ensure that we deliver. They want to see success, they want to see actual outputs coming in.
I think we have crossed all that stage with Suzuki now and we have had fantastic relationships with the customer. We're pretty confident that this ramp up will happen, will continue. It's a multi-year, multi-million dollar deal for us. We are very gung ho and we are very committed to this customer. We are also committed because a lot of the work that we do will eventually hit Indian roads and it is Indian consumers that will benefit a lot from the activities that we do. To that extent, we would be proud that some of the technology that we built are actually getting into cars that we launched in India. In fact, the new car that was launched, Victorious, had a lot of components that Tata Elxsi was involved in. Very proud of the fact that there has been some part that we were involved in that launch.
Coming to vendor consolidation, it's not so much of, you know, we don't see in the automotive industry, we don't see so much of really vendor consolidation deals. A lot of the OEMs are really looking for technology. Right. It's not as if that they have some legacy stuff that they want to give it to the cheapest vendor and do a vendor consolidation. Traditionally, we, Tata Elxsi, we have not been very strong in those vendor consolidation deals and so on.
Right.
We do see a number of deals with OEMs. Today we also announced another deal with another Japanese OEM that's also ramping up pretty well. We have deals that we have announced with the European OEM that's also ramping up. We have announced deals with Mercedes-Benz that has been also ramping up pretty well. I think there are a number of deals that we have announced and those are all working pretty good for us. I think we continue to have these deal pursuits. Even as we speak, there are a few deals that we are bidding for. I think we are in a good position with respect to capability, with respect to business model, with respect to address the needs of the customer and meet, I mean, deliver that incremental value that they need at the price points that the customer needs. I think we are good.
Okay. Also, within the transportation vertical, obviously OEM is the part where we are seeing a lot of traction. Within transportation, there are some issues or some drags that we're seeing from the tier one supplier ecosystem. If you can give some color, whether it has stabilized or are we seeing some more issues there, or most of the incremental growth is coming from the OEM side, will this continue or the tier one has stabilized and it will start to grow again?
I think we've had a lot of, you know, in the last, I would say, four quarters, we have moved a lot of our business focus from the Tier 1s to not just four quarters, right, almost eight quarters. We moved that focus to the OEMs. To that extent, definitely, the Tier 1 businesses have gone down. That's the nature of the business. That's the industry. Tier 1s are definitely losing business with respect to OEMs. For us, I think we still engage with some critical Tier 1s and we believe that those Tier 1s will continue to exist. I think this quarter we sort of stabilized that, maybe even slight growth in the Tier 1 business for us. I think it's positive for us.
Okay.
The last question is on the communications vertical. Obviously, we have seen strong growth ramp up in terms of deliverance.
Ramp up the large deal win.
Last quarter we had a pricing reset with some volume commitments in terms of incremental volumes. Has the overall volume commitment in terms of what has been committed been achieved, or can we see some more volume growth there?
Yeah.
I think the commitment is, you know, it's not that everything is fulfilled in one quarter. We have achieved whatever objectives we have said we had achieved. Of course, the next half year also we have to achieve certain, you know, volume commitments from our side so that we will work on that.
Okay.
Thank you and all the best.
Thank you.
Thank you. Our next question comes from the line of Ankur Pant from IIFL. Please go ahead, Ankur. Your line is unmuted. Please proceed with your question. Sir, if you have self-muted your line, please unmute your line and proceed with your question.
Hi, am I audible?
Yes, sir, you're audible now. Please go ahead.
Sorry for the delay there. My first question is on the automotive vertical. You've mentioned that Europe is holding up better. Europe, Asia is holding up better versus the U.S. What is the apprehension in terms of U.S. clients, which is holding them back, whereas the European clients are able to spend more? What are you hearing in terms of client conversations?
Yeah, so this is the lesson here. Maybe I'll take that. First of all, I want to clarify that U.S. is doing very well and we believe will continue to do very well on the adjacency side, where you're talking of off road, commercial vehicles, aerospace and defense, where we are making some strategic forays. On the OEM side, you remember there are two sets there. One is a set of new age OEMs where there are a different set of challenges, and the traditional OEMs or the legacy OEMs where the challenges are a little different. To that extent, I think the withdrawal of EV incentives, the fact that the whole emission norms have been completely relaxed, are kind of providing reprieve as well as a window of opportunity to continue to stay with ICE vehicles, to stay with limited EV conversion and so on.
That's causing a bit of a portfolio reset, both in terms of what you will engineer, what you will R&D, and what you will manufacture and deliver. To that extent, that is a prime consideration with the legacy OEMs in terms of portfolio reset and product portfolio considerations. With the new age OEMs, you have to remember that there are just one or two who are winners, well funded and continuing to maybe grow. The other OEMs are still on the horizon. Some of them are just getting into production, some of them are still in development stage. Again, the fact that many of them targeted the U.S. as a key market, mid to luxury kind of segments, the withdrawal of incentives, the little bit of color that's hanging and cloud that is hanging over EVs as viable vehicles for the U.S. market, I think is what is causing issues.
To that extent, I think it's a little bit of a mixed bag, like I said.
Sure.
In Europe, have they moved past the impact of tariffs that they're going to have and the profitability and competition from China? Have they moved past that and are ready to open their purchases a lot more, or is that still lingering?
I think that issue is actually causing them to look at best cost locations and open up a lot more outsourcing because they have to do more with less.
Finally, a bookkeeping question. Your depreciation has been coming down over the last three, four quarters, and the tax rate this quarter was significantly higher than what we generally see. Just wanted some clarity on the run rate for depreciation and the overall tax rate for the year. What should we assume?
Hi, Ankur, this is Gaurav. Let me answer that question first on your depreciation. One, I think there's a declining book of depreciation in our books due to no new CapEx that has been added or significant CapEx that has been added. I think we are managed capacity that we can live with for at least some period or maybe a few more quarters before we have to do another layer of infrastructure development or capability capacity addition to the required structure today.
You will continue to see.
A depreciation to keep coming down slightly on a quarter to quarter basis for at least two more quarters on your effective tax rate. I think in the current quarter it slightly went up just because there was a higher other income which is not tax exempted and little bit lower revenue. Otherwise, what we believe that for the full year our effective tax rate would be anything would hover around 26% to 26% and up.
Sure. Thank you and all the best.
Thank you. Thank you. Our next question comes from Manita from Axis Capital. Please go ahead.
I thank you for the follow up opportunity. Just wanted to get your sense with regards to why you spoke about achieving or hoping for double digit growth in the automotive segment in FY 2027. If you could also give us some sense on the other two industry segments because over the course of the last two or three years we've had some challenges in those verticals.
Yeah, Manik, let me answer that. Right. As I said, I'm pretty confident both healthcare and automotive we will be aiming for double digit growth in FY 2027. Media and communication is still, as I said, is still a little bit wait and watch. We would ideally also want media and communication to really, you know, we aspire to grow double digits next financial year but at this point in time it's difficult to, given the visibility and so on, it's difficult to commit that that is something that we can achieve. We will relook at it, you know, in maybe Q3 and Q4 time frame.
Sure.
Could you spend some thoughts around how are we thinking about the customer concentration across our industry segments? Because that's also one of the challenges that we faced historically.
Yeah. I think both in automotive and healthcare, I think we have gone a long way. We have multiple now customers that are really touching that multimillion dollar sort of mark. Right. I think next financial year, both in automotive and healthcare, we'll have a very, very good spread of revenues, especially with some of the new deals that we have won and ramp ups happening and so on in the media and communication industry. I think we will be still not seeing that. We have definitely, we have number of accounts, but we're not seeing that sort of, you know, growth happening. That's why a little bit of, you know, we are waiting and watching. Right. Before we commit that look that is, again, we will be able to deliver.
Sure. Thank you, and appreciate those inputs.
Thank you. Our next question comes from Mehir Manohar from Trust Mutual Fund. Please go ahead.
Yeah, hi. Thanks for giving the opportunity.
Yes, sir. Please go ahead.
Yeah, sure. Sir, you mentioned on the revival, specifically European auto side. I just wanted to understand when we see the Germany car production data or exports data or the registration data, that number is not looking that encouraging. What is driving the revival in auto spend, specifically Europe? Is it revival of the older programs which are already there or what is the status and development of the newer programs? Some color out that will be helpful.
Yeah, we're not looking at current vehicle data or sales data and so on. I understand that is important, but these are all programs that will come out in the next two years, next three years time frame. All the German OEMs realize that to compete with competition from China and elsewhere, they definitely need to up their game, build more features, and compete aggressively with what the Chinese OEMs are able to bring in, but at the same time with a much, much lower total cost of ownership. If they don't invest now, I think their future will be bleak. That is why most of these companies have restarted those investments.
Okay, understood. This is largely revival of the older programs which are there, right?
Not just old program, even new programs.
Okay, understood, sure. Also, you can provide color on the industry side. I mean there were talks about the emission norms, especially in Europe getting loosened, and consequently the new models getting pushed out. Some color around that will be helpful.
There has been talk, right? Of course, we know in the U.S. that it has been relaxed and so on. I think Europe is still focused on the emission norms, right? I think 55% reduction in carbon emission as compared to 1990 levels and so on. I think that is the norm that they have put in place by 2030 or so. I think that continues. I don't think they have relaxed that.
Sure.
Understood.
That's it from my side.
Thank you. Our next question comes from Karan Upal from Philip Capital India. Please go ahead.
Yeah, thanks for the follow up. Just one question on this Bayer deal which we have announced. If you can give some sense on the size of the deal and would this provide some catalyst in the medical devices segment in coming quarters, and also which players did we compete with to win this business?
No, absolutely. I think this is a market deal for us. It is again a start of a multi-year relationship, at least a five-year relationship. We competed with the best of the companies in India, and they did evaluate seriously a number of our competition, and they selected us. This is definitely a multi-year deal and, you know, a multi-million dollar deal. This will give stability to our business definitely, at least for the next three years, if not more.
Okay, thanks. Thank you.
Thank you. Our next question comes from Hitesh Sharma from Golden Science. Please go ahead.
Can you hear me?
Yes, we can.
I observed like your main clients are Europe and U.S. where the competition is coming from China in the EVs and all over markets. How you are giving up to meet the demands because in next 10 years China will be controlling around 30% market share.
I don't know if I understood your question. Your voice is not very clear. If you could repeat it.
See, I see your main clients are from Europe and America and Japan and India. Whereas the competition is coming up from China. Maximum EVs are being built, like big, big giga factories are coming up in China. How are you going to compete with the Chinese?
We are not competing with Chinese. Our customers are competing with Chinese. Number one, in most countries like Germany, for example, the auto industry is the backbone of the economy there. I don't think the German government or anybody there will allow that industry to go down without aggressively pushing and giving enough incentives and benefits and really ensuring that the German companies are able to compete. I think it's out of our remit to comment on who would win or would Chinese companies win or would European or U.S. companies, how they compete and so on. As long as those companies exist and they need to compete with China, we would benefit.
That will hold true for the similar companies in China supporting Chinese manufacturers. What is your percentage of market share per business from China?
We don't do much. We have very minuscule presence in China. The China market is very, very different, and they definitely do a lot of collaboration internally. I've really not seen anybody from outside coming in and winning a large market share in China.
Thank you very much.
Thank you. Our next question comes from Tanmay Chaudhary from Ventura Securities. Please go ahead.
Yeah, thank you for the opportunity.
Sir.
My question was on the healthcare part only. In the last financial year, the most confidence that we have was in this particular sector. Going forward, in the last two quarters are not performing well. What is the exact uncertainty playing out there, and are we still aspiring for those high double-digit revenue mix on this particular sector?
Yes, as I said, right. I think definitely next financial year we would see those double-digit growth. In fact, we will. We have won some new deals, new customers, and that gives us a lot of confidence that H2 will definitely be much better than H1. I think, yes, we had a number of, we have a few projects from customers that we're rolling off and there was not continuity in some of those projects. There was some amount of uncertainty there. I think we are over all of that now and we are really looking at new customers, new businesses, and that gives us the confidence that H2 will be better and next financial year definitely will be better. We've also strengthened the team both from a delivery standpoint as well as from a sales standpoint.
A lot of things that we have worked behind the scenes over the last couple of quarters and that also gives us a lot of confidence that we are attacking the right problem, we are addressing the right challenges that the customer has. We are really looking at holistic, what do you say, value proposition to the customer rather than point engagement. A number of things that are different in the way we are addressing the market and that gives us the confidence that, you know, next financial year will be different for us in the healthcare space.
Okay, are we also looking for other geographies like from the U.S. or in this particular sector?
This job, this business is primarily U.S. driven, right, and a little bit Europe. U.S. is the main geography for the healthcare business.
Thank you, sir.
Thank you. Our next question comes from the line of Shivlala Khandelwal from an individual investor. Please go ahead.
Can you hear me?
Yes, sir. You're audible. Please go ahead.
Are we now exploring anything regarding this Semiconductor industry?
Yeah. Hi Shivlal, this is Nitin here. Not directly because we of course work with a whole set of semiconductor platforms and partners. We are largely focused on the software that needs to go on top of semiconductor in order to power applications. You will find key announcements that we made whether it's with Infineon, whether it's with Qualcomm and so on, forth and across segments. On chip design itself, we do not have any significant presence and not an intent either.
Is it going to contribute significantly in future to our top line or something like that?
The software part, yes, it continues to.
We believe that much more than.
Contributing directly to Drop Line, it's a very, very important enabler because the work that you do, the partnerships that you carry with the folks like Qualcomm, I think start to power some of the key engagements that you have with OEMs who are adopting these platforms. I think it's as much a joint go to market and enabler as much as it is a direct revenue.
Okay, thanks a lot.
Thank you so much.
Thank you. Our next question comes from Pritesh from PL Capital. Please go ahead.
Yeah, thanks for the opportunity. Just on this quarter automotive side of the growth, if wanted to quantify the impact coming from the Jaguar top account, if you want to eliminate the cyber impact coming through that account, what has been the growth of our automotive in Q2 if I were to.
Yeah, we already discussed about it. Right. Instead of negative or a flat or a 0.5% constant currency negative, you would have definitely gone into a positive zone.
Okay. You expect the growth to accelerate from here in quarter three, quarter four, given the kind of commentary that you made on automotive side ramping up on majority of the deals and again positive commentary.
Yeah, absolutely.
We saw significant jump on the fixed price contract by 400 basis points. Anything to read there? Is it more to deal with the ramp ups that we see on.
Yeah, there's nothing. I don't think we need to read too much into it. We've had a few deals that had come our way which were fixed bid engagements, including in our system integration business, which showed a good increase in revenue uptake. I think a few of those deals came through and I think that helped us in the quarter. If you look at it from a next H2 perspective, we don't see a big change in the ratios.
Thank you so much. Thank you.
Thank you. Our next question comes from Rohit Jain from Tara Capital Partners. Please go ahead.
Hi, can you hear me?
Yes.
Thanks for the opportunity. I just wanted to get some sense for the coming quarters. Obviously, on the positive side, you said that automotive and healthcare are going to see continued traction. On the other hand, the media vertical is going to see a slowdown given that this quarter had higher growth because of one deal ramp up, and it is also a furlough quarter. Net net, how should we think about the growth in the coming quarters at a company consolidated level?
I've talked about it earlier as well. We are definitely confident that H2, from a growth perspective, will be definitely far better than H1.
How should we think about margins given that there is tailwind from better growth, but there are headwinds from maybe the effects not being as supportive or not contributing as much as it did this quarter? There is also a wage hike.
I think incrementally as the revenues pick up, automatically the margin profile will also pick up. Our utilization, as you said, we have touched 70%. The focus is to see how to get to 75% by end of the financial year. If we achieve those objectives, we will be able to manage the headwinds like wage hike and all of that and still show margin recovery.
When you say still show margin recovery, that is versus H1 or that is versus the average of last year, the full last year margin
versus H1.
Okay, thank you. Thank you.
Thanks a lot.
Thank you. Our next question comes from Karthik Vaijanathan, an investor. Please go ahead.
Thanks for the opportunity. I have a couple of questions. I think first is I wanted to know if you are involved with any hyperscaler data centers. Do you work with companies like NVIDIA to integrate some of the AI-based solutions? Any light you can throw on would be nice.
Yeah, maybe I can take that. Yes, we do. In fact, we have our own. I will not boast about it, but we do have our own mini NVIDIA data -center that we set up ourselves for our own AI experimentation and workloads.
If you look at the work that.
We're doing and the award that we announced with Dell , will automatically. That is also to do with infrastructure that will go into on-prem data -centers, and a large part of them are targeting AI workloads. The short answer, yes.
Okay, and what are those use cases? Is it on the ADAS side or the healthcare side? You know, how are you basically, you know, there's this whole thing about efficiency. I mean, one is of course reducing the headcount because you're able to take up the task. I mean, of course, if you can throw light on that, that is fine. Is there some new use cases that these AI services are giving you, that you're getting much more efficient? Any light on that? Those use cases would be useful just to understand the long term vision here. Right? That's the question I'm asked.
Sure. Karthik, maybe I'll try and keep it simple. I think we're looking at it in two parts. One is how can we operate and deliver better, which is essentially to do with what gains does AI and GenAI provide for productivity, for quality, and therefore resultant cost benefit. The other part is what does it do to innovation and features. If you look at ADAS, if you look at the predictive capabilities or analytical capabilities of Radiology or MRIs and so on, for all this innovation of features, because it is not doing what is already being done, it is actually driving something that has not existed before. Not all of that is GenAI. Please note, a lot of that is AI. AI and not GenAI.
That continues the journey that we strongly drive because we are ultimately a product engineering company and this is intimately connected to how products can function better, can deliver more features or value. We operate better, I think, is a journey that we are taking very carefully, in consultation and in conjunction with customers in terms of where is it that you really get benefits of GenAI and productivity and how much of that is clear of any infringement liability. There I think the journey is definite but careful and calibrated. The first one, innovation features, is all out. That's a journey that we've been on for actually about 14, 15 years now.
Because we look at our.
We announced our own autonomous journey starting 2014.
Okay.
Okay.
Yeah, that adds. Thanks for adding more. Just one additional question related to what I just asked. Right. Because you mentioned radiology. There's also these use cases where breast cancers, whether you want to do benign or malignant, those are healthcare related stuff. Are you also working in those places? Because that is also AI, not GenAI, just regular AI, just looking at patterns and trying to identify on the healthcare side.
Absolutely.
Because that's a very strong use case. I just wanted to know you have excellent products, you can scan images just like that, and at least if you can identify these patterns, that can go a long way in terms of serving them.
I think that's the direction healthcare is taking, which is how do you detect earlier and how do you detect better? I think we are on both parts.
Okay, yeah. Very good to know and good luck and wishing you all. Thank you.
Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Thank you, Sushant, and thank you all for the patience and all the questions. We look forward to a much better H2 and look forward to talking to you again for the Q3 conference. Thank you very much. Take care. Bye bye.
Thank you. On behalf of Tata Elxsi Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.