Q1 21/22

Jul 27, 2021

Ladies and gentlemen, good day, and welcome to the KPID Technologies Q1 FY 2022 Earnings Conference Call, hosted by Dollop Capital. As a reminder, all participants in line will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain. Thank you, and over to you, sir. Yes. Thank you, Bilal. Good evening, everyone. On behalf of Dollop Capital, rest all of you are keeping safe. I would like to thank KPIT Technologies for giving us opportunity to hold this earnings call. And now I would like to hand the conference over to Mr. Sunil Fansalkar, who is the VP and Head, IR at KTIT to do the management introductions. Over to you, Sumit. Thank you, Rahul. Good afternoon and a warm welcome to the FY 2022 earnings call of KPIT Technologies Limited. I sincerely hope all of you have completed your new vaccinations. If not, we would urge you to get it done as soon as possible. On the call today, we have Mr. Kishore Patil, CEO and MD Mr. Sachin Tikekar, President and Executive Director Priya Hardikar, CFO and Jorg Stoolly from Investor Relations. As we always do, we will have the call with initial comments about the quarter performance and the way we look the year ahead by Mr. Kishore Katin and then we will have it open for your questions. Once again, a very warm welcome to all of you. And I will hand this over to Mr. Kishore Patel. Good afternoon. I'm very happy to welcome you to the results of the Q1 for this current financial year. We achieved after the demerger and having $130,000,000 around revenue, we achieved a special milestone during this quarter of achieving a $1,000,000,000 market cap in 2.5 years. So it's a special milestone we achieved during this year during this quarter. It is also a very good start for the New Year and I'm sure we will build the business momentum based on this good quarter. During the quarter, we our revenues year on year increased from euros 60,250,000 to €77,200,000 It is a yearly growth of 18.3 percent. And on a quarter on quarter basis, the growth is 4.3%. Generally, the growth has come across geographies. Generally, more specifically the wins I'm talking about, the new wins during this period have been more in the area of autonomous and diagnostics. There are 2 edge new OEMs we added in China, which is also important and interesting as we had mentioned in the past that while focus on T25 strategies. We look at disruptors who are coming in the market. In terms of EBITDA, we have increased the EBITDA a bit shed more than the last quarter to 17.3%. Year on year, as you know, a year back, our EBITDA was 13.5%. So I think we have achieved good number in EBITDA. Profit from the INR 60 crores this quarter, we are at INR 60 crores from INR 47 crores from the last year from the last quarter, which is a 30% quarter on quarter growth. I don't want to I mean, year on year that looks very significant number, but last year we were very soft in that quarter. So I think, but 30% over quarter on quarter is a good growth for all the operational profits, which we have achieved. Mainly the difference why the profit has gone up, while the EBITDA is relatively constant has been mainly because of 2, 3 reasons. 1 is, of course, the growth. The second is the depreciation has reduced. 3rd is due to good cash accruals, overall the higher interest income. And we were also supported by the currency other income during this quarter. Overall, if you look at last 10 quarters, we have shown consistently a very high cash generation and cash conversion from profit. During this quarter also we have a 98% conversion. Our DSO is probably the best in the industry at 50 days. So I think in line with the profit growth and the of course, revenue growth, the cash generation has been very good. In terms of people, if you look at the attrition as we have mentioned, the attrition will be higher in H1. It is about 20%, but we are pretty confident that in the H2, it will come to normalized level. And there are few things which we are doing. Of course, there is a consistent focus on the growth of people, both in terms of their technical skills as well as leadership skills, our motto is best plus to grow. And last few years, we have really intensified this effort. As we know that we are probably the largest employer in the new age skills. We have a tremendous focus on building these skills. So we continue to invest in that and looking at growth of people internally to manage the growth. We our increments are due in this quarter. So in Q2, basically and the increments, I think our team has done very well in the last year in spite of our difficulties. They really worked hard. So we are giving one of the leading most increment in the industry. And apart from that, we are also giving medium term incentives for the KT members, more KT members, we already have that skin. This will have certain impact on the EBITDA about 3.75 percent that is the overall impact on the EBITDA, but we will make it up by other factors, both quality of revenues, growth and the other parts I talked about. So overall, we believe that the impact even after such a high increments will be less than 1%. So that will be the impact in the Q2 part. We continue to focus on the 0 Defect delivery, which is very important in line with our strategy of T25 and focusing few plants also in, if I would say, in I would say critical projects. And during this quarter, we won the NASSCOM award for Service Delivery Excellence. I may say that we only nominated 2 projects, both projects won the award. In terms of future outlook, I would like to talk about first is the plan discussions. The overall growth environment is pretty strong. As we have been maintaining, the planned discussions are about long term investments increasing investments into electrification followed by autonomous and we know that it will get another connected part and technologies will also get more impetus in the next year or so. [SPEAKER MOHAMMAD ABU GHAZALEH:] And the key for enabling all this, the key discussion is about new architecture, changes in the new designs. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And those are basically the critical program for 2024 2025. And this is where we have been focusing on, and this is where we have been talking about large deals being staged. And we are in active discussions with most of our clients on this kind of opportunities. And in some of them we have started with, I would say, initial engagement. But this is where we believe the growth part we'll fortify in quarters to come. We believe in 6 to 9 months some of this will fortify some of these large deals. We have based on these parameters, we have increased our profitability guidance lower one. First, we talked about 16 to 17. Now we are talking about 16.5 to 17 and mid teen growth. And as you can appreciate as some of these deals come through, we will have a better visibility beyond that. We have a good cash on balance sheet. And we intend to utilize it specifically for two reasons. 1 is accelerate our growth and also key resources which are required for some of these large complex deals, which needs experts. So during that for that purpose, as it is required, we will do that. Also, we want to expand some part of our offerings, which we believe will have higher potential going forward. So we do look forward to inorganic growth. We will be very, very, I would say conscious about the size of the deal, the type of companies and how quickly they can scale those acquisitions. As you know that we had a good track record of doing that. Needless to add, none of this will be any dilutive on the margins or on return on capital employed. Thank you. We can now have it open for questions. Sure. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question We have the first question from the line of Vimal from Union AMC. Please go ahead. Yes, sir. Thank you for the opportunity and congratulations on a very strong quarter. Sir, my first question was on the revenue growth And the guidance. Talking about 2.3% revenue growth and let's assume that you're talking about 15% sort of growth in FY 2022. That implies a CTCR of about 1.5% over the next three quarters. Are we which seems to be slightly conservative given the demand environment that we are talking about. Should we is there any are we building in some delays in execution of deal wins that we've had in the or is there any conservatism that has been built into our guidance is my question. And just wanted to clarify this when you say mid teens, this is pure organic growth, right? It does not include Park Partners, which we have acquired. That is question number 1. So the second question is the growth in this particular quarter, if you see geography growth, this has been driven largely by the APAC segment. And if you see even in this particular quarter, the Powertrain segment declined on a quarter on quarter basis. I do understand that the deal wins that we have had over the last your quarters have been pretty broad based. So in line with that, should we expect our revenue growth to be much more broad based going forward, so that we can assume that it will be more sustainable in nature. And lastly, your growth outside, it is very heartening to see your growth outside strategic clients coming in. Should we expect this trend to accentuate going forward because you're talking of adding new clients as well over there. So if you could just comment on that as well. So these are my 3 questions. Thank you. So thank you for the question. See the first thing is what we have done is in terms of now our whole focus is on some of these large opportunities, because most of these decisions will happen in next 12 months to 18 months. So the whole focus, the whole articulation and it is on these areas. Now so initial engagements can be small, can be big depending upon how it happens in some of these areas. So right now, we have gone based on our visibility now. So naturally, as I said, if the deal wins as actually the conversion happens. We have a very strong pipeline that will naturally give a better outlook. So I may just leave it here for this time. The second thing I would say that the growth is across the geographies and powertrain, even though during this period has been, if I had to say, for one of the exceptional quarter when it has gone down, our pipeline is one of the strongest on the electrification. Not only that, some of these our large programs we are talking about, they are also on electrification. So we are not worried about it. And as if you remember, some quarter back, people had some concern whether autonomous growth is going down and we had mentioned that it is not so. And now you see it coming back. So we are not worried and it will be more broad based. The third thing you talked about, I think I have to remember all the questions. Yes. So it was growth in outside your With the 25 clients. Yes. Over there, the growth has been very strong. So it's very heartening to see that. So should we I mean, your focus obviously remains on the 20 But should we really expect this trend of growth outside these 25 clients will also sort of increase because you think good opportunities there as so the point we have is, as we have said that in order to have T25 accounts, we work with some clients, which we call which are potential T25 going forward. And also some new generation companies who could be disruptors. So we continue to work with them. And these are in commercial vehicles in new some of these disruptors and this. So they are a part of our overall clients and it is a part of our strategy, but our focus, the basic strategy of having more than 85% revenue from T25 events. I will just this is Sachin Dikekar. I'll just add to what Mr. Patil just said. We have to look at both. Our we believe that by having a sharp focus on T25, we are able create tremendous value for them and we are able to build a long term relationship. So that part remains important to us as well as to our clients. And as Mr. Patil said, more than 85% of the business comes from there. Having said that, there are disruptors and we always have to keep given the changes that happen in the environment that are mergers, acquisitions And so forth. We have to keep our ears to the ground. There are disruptors that are coming into play. We really need to understand their strategy and how we can create value for them. So at any point in time, there are always 3 or 4 that we are looking at to add to our list of clients. But it's a balance that we want to maintain going forward. Sir, would it be fair to say that this 25 strategic clients that you're talking about, over the period of last maybe 2, 3 years, you have gained significant amount of wallet share of their spending and that you are looking to increase that wallet share significantly going forward. What would be the potential? Have you already reached that potential? Or is there some more scope of increasing your wallet share in the strategic 25 accounts? No, I think you make a good point. If you take a last 3 or 4 year view, most of our growth has come from these P25, bulk of the growth. And over a period of time across different practices, our wallet share has actually increased. As Mr. Patil said, in some of the areas, there are new programs that keep coming up, whether it's autonomous driving or electrification or electric e cockpit. As the programs come, we have an opportunity to increase our business and also the wallet share. So we don't see the ceiling in most of these T25 clients in the foreseeable future. And that's why we are saying that more than 85% of the business will continue to come from T25. Great, sir. Thank you so much and all the very best for the rest of the year. Thank you. Thank you very much. Thank you very much. The next question is from the line of Karan Upal from Flip Capital. Please go ahead. Yes. Thanks for the opportunity and congratulations Good set of numbers. Thank you. The first question is on Ophthalmos, Ophthalmos Diving. So it had a good quarter in Q1, but it has been volatile in the past. And if I compare it with other practices, all the other at or above the pre COVID levels, so when can we expect stock numbers to be exact level? Second question is on the large deals. So one of our competitors recently announced 2 large deals in the TV space amounting to around $25,000,000 from OEMs and Tier 1. So you spoke about the pipeline being very good in the TV space. So are you seeing similar size of these or [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Or maybe higher than that. Any qualitative color would be very helpful. Thanks a lot. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes. So the first thing is on autonomous. And if you remember, we had I had explained this in a quarter before that the first couple of assignments which large deals we got in autonomous were on-site basically because of the way they were getting delivered, the software methodology it had, also the client was very keen to do that being very critical part. So that's why it was like that. But over the period, we have moved most of the work to offshore and that's why it in terms of volume, it is much higher than the pre COVID level. And that's why you see some of the areas like profitability going up, etcetera. So from that perspective and I mean naturally now you know that overall as a company we are higher than the pre COVID level. So I think but in terms of volume, we are much higher than the pre COVID level. And that is what gets reflected into the financial performance. The second question, I believe, was about some long term engagements. From KPIT perspective, again, our effort is to work on long term programs and that's what we've been working on. As our clients were getting a grip on their business post COVID, we are in constant discussions with them about their future programs in couple of areas. 1, Mr. Patil talked about basic changes in the software architecture itself that the conventional players have to change over a period of time in order to remain relevant. And secondly, specific domains, domains like autonomous, electrification or e cockpit and diagnostics and vehicle engineering and so forth. So if you look at given all of these the conversations are ongoing And most of these engagements are long term. The architecture related investments engagements would be that of 4 years or so. And most of the other production programs are at least 2 to 4 years. Given all of that, we believe that the size of such engagements is increasing for KPIT at a level that we have not seen before, but they will also be stretched over a period of time. And from our company perspective as well as from our client perspective, that's a good thing. I think we have a longer term visibility, there is consistency and so forth. I think we feel more comfortable with that model. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] And just to size, I think you have seen that last year we announced $50,000,000 plus 3 deals. So I think you can say for the new architecture program, depending upon the number of years that Mr. Tikekar mentioned, I think the size will be much higher. Okay. Thanks a lot, sir. I really appreciate the color. Just lastly on one clarification on the guidance. So the mid teens growth guidance, it's the organic part, right? You are not including the past personal tech Into this. Yes, mid-ten does not include acquisition. Okay. Thanks a lot, sir, and all the best for FY23. Thank you very much. Thank you. Thank you very much. The next question is from the line of Shyam Sundar Shiram from Sundar Mutual Fund. Please go ahead. Yes. Hi, sir. Good evening. This is Shams and Sundaram, thanks for this opportunity, sir. And many congratulations on the good operational performance. Thank you. Thank you, sir. So my question is probably related to the prior question. If I see the commercial vehicle segment vis a vis the car segment, Commercial vehicle seems to be much better sequentially than the car segment. Does it tie up, is there any cost Means with that, with the slowdown in the powertrain division, that is the first question. Any customer specific issues on the car side that is filling down some amount of the growth there. That is the point number 1. Secondly, for Asia, the geography has been much better Okay. That is your U. S. And Europe have grown slightly below the company average. You also spoke about even in the last quarter also you highlighted some of the deal wins in Asia geography. So what is happening in that [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] In Asia, India, if you can give some perspective on what's happening there, that is the other question first. Yes. So let me take one question at a time. The first question was the commercial vehicles and passenger cars. As you know, more than 70% of our business is from passenger cars and comparatively commercial vehicle business is smaller. We don't see any issues with passenger cars, especially in electrification. What happens with electrification is many programs got over for the launch of FY 2022 models. Multiple models got launched And the programs got over. Now we are actually engaging with our T25 client to talk about programs that are meant for 2025 and So growth will come back in e powertrain and we don't see any slowdown in the passenger car business. Having said that, given the base, which is smaller for commercial vehicles, we are seeing very good traction coming. Number 1, all of our existing clients, they are few years behind in terms of technology of as compared to the passenger cars. They are also embracing autonomous driving and alternate powertrains. So I think their spend is going up as far as our existing clients are concerned. And we have also started working with 3 or 4 new clients. So the growth is higher on that side based on these two factors. 1 is the growth that we are seeing in our existing clients, which is higher than normal due to new technologies that they're trying to embrace. And secondly, our client base was smaller in commercial vehicles. And now the world is going around and more and more clients want to work with us. So I hope that answers first part of your question. 2nd part was about growth. Yes. I hope it answers the question. Yes, sir. Yes, sir. Okay. Thank you. The second was about the distribution of revenues in Asia and how it compares. I think it's very tricky to look at growth in any particular quarter. What we think is going to happen this year is we're going to have a very balanced growth Across the 3 geographies. Asia may have slightly higher growth because again, it's the smallest in terms of base. But we'll see robust growth coming from Europe as well as from the Americas. As we sort of get into the year, you'll see growth coming from U. S. In coming quarters. And we believe that in H2, Europe will contribute To a higher degree. So if you take a yearly view, I think it's going to be fairly balanced, which is a good thing for the company as well as for our clients. Speaking of some of the clients that we signed up in Asia, the growth has come from Japan. We also Mr. Barthel talked about signing up a couple of new clients, especially from the New Edge clients in China, so there is some growth that is coming from China. As far as India is Concern, we work with some of the tech centers for their global programs. And so I think it's spread across. And then there was one as we get into this year, you'll see a growth that is fairly balanced across the 3 geographies. Understood, sir. Understood. So just one other question. So if you look at the green pipeline now, Nishu also Talk about very strong pipeline. So compared to 3 months ago, we do see the pipeline is much better now. And therefore, the Q2 also the translation from the prior wins maybe referred in the Q4 last year should give you a much stronger growth in the second quarter onwards. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And was there any supply challenges during that quarter, sir? So any constraints because of the COVID related supply challenges? [SPEAKER MOHAMMAD ABU GHAZALEH:] Yes. So I spoke about the pipeline and I can only say that our pipeline has increased. As I mentioned, our focus is on large deals, so pipeline [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] As I said in the past that the large deals also take a little bit of a time to 55 and that's why we have given guidance based on how it is hit today. The pipeline is very strong and it has increased from last time, last quarter when we spoke. So that is the first point, the second point. 2nd point was about the Obviously, it's not just the automotive and mobility industry that is impacted in the supply chain. I think the whole world is are struggling with getting their supply chain right. In automotive and commercial vehicles area, it's the chipset that has caused some havoc. Most of our clients are making adjustments and reprioritizing where the chips go. They are obviously putting the chips more and more profitable vehicles and so forth. So they're learning to Sort of roll with the punches and make sure that they're able to meet their revenue and profitability targets. As far as the impact of all of that, obviously, it's impacting our clients, but that impact is not getting passed on to KPIT. Our programs are long term programs in software. And this is something that it's essential for them to stay abreast of the competition in technology. So we ourselves have not seen Any negative sort of impact on us and we are not likely to see that. On the other hand, we believe that there could be specific opportunities where as our clients learn to roll with the punches and make some changes in the production program, maybe we'll participate in some of the programs that we have not participated in before. So that's what we have to say when it comes to the disruption in the supply chain. Sure. Sir, I was more asking from a COVID related are employee related any constraints that put on the was were there any constraints from KPIT employee sorry, which sort of constrained our growth in this quarter, because some other peers did call out some challenges due to the COVID impact of some of their employees, I was just trying to get that flavor from you, sir. It was obviously one of the most challenging quarters ever from people perspective, right? No two is about it. All of us spend many sleepless nights making sure that all our employees and their families are healthy. We did all of that. Somehow, I think and there were a lot of illnesses in the families, And we were very concerned. I have to give it to our employees for going way beyond their Call of duty, a, to help out their colleagues and b, to sort of uphold the commitments to our clients. So I would say the impact, if any, was bare minimal in spite of the onslaught of the 2nd wave of COVID. And now that many of us are vaccinated and we know the disease slightly better, hopefully the worst is behind us. We are not done with the pandemic, but I think our ability to deal with it is slightly better. It's much better. So globally now we have globally we have around 75%, 80% people vaccinated. And by September end to October, we will get most of the people vaccinated. And probably we'll start having a more presence in the office post that. And by the end of the year, calendar year, we will work out our strategy for the long term. Understood, sir. Thank you very much and best wishes. Thank you. Thank you very much. The next question is from the line of Nitin Agnavan from Investec. Please go ahead. Yes. Hi, good evening, everyone, and congratulations on the quarter. Thank you, Ratin. I have a couple of questions. The first is, I think you said 2 things. 1 is the new architecture based deals are typically larger in size than the $50,000,000 plus kind of deals that we saw in the past year. Did I get that correct? That's correct. However, the tenures could be slightly longer, but that said, the overall size will be larger for us. Yes. Right. Now just wanted your thoughts on we have a very strong pipeline at this point. And going forward, maybe in 6 to 9 months, these sort of deals start getting converted. So just wanted your thoughts on in the interim, do you think the existing sort of flow of business from existing clients itself is Likely to be strong and whatever happens with those large deals should actually accelerate growth from thereon as we move further. Is that the sort of longer term trend that one should sort of expect? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Yes, I mean, the current growth will be in the normal course of business that will continue. That is not going to get impacted. But these large deals will help us to accelerate our growth further. Sure. And obviously, in terms of our headcount additions, that also one should sort of expect that sort of increase as we move through the year? Absolutely. I think we what we have done is dual strategy. 1 is, of course, we go to campus. But we have created a much better pipeline for hiring every quarter different ways of doing it. And already all of our campus recruits I've been absorbed by for this year. And we will continue to hire as it goes. So I think we are getting ready for any such deals. And we had to work it out on 2 ways. One is the overall number, which is hands and legs you can take. And the second is the experts unit for some of these bids. So these are the 2 different ways in which we are building the pipeline. Sure. Sir, lastly, on the if I look at our space, in terms of our ability to get potential price increases over time, considering the supply constrained environment, would you characterize it in a way that our ability to garner pricing increases should be better than a typical IT services firm? Certainly, I think, see, the when we work with our critical programs, I think That shouldn't that won't be the issue. So when we get in some of these deals we are talking about, which are more into new architecture and complex program. I think we will be in a position to get higher rates. Sure. Sir, last one last question from my end. The two clients that you said you have added in China, I wanted to add up now because our cost will be also little higher than what we said. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] They are going to be complex [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Projects, so the cost will also be our investments and cost will also be higher. Yes. So one should expect an initial Sort of drop in margins as we expect to. No, no drop in margin. No, we don't expect drop in margin. Okay. And the last one was on the 2 China based clients that you said you have sort of been able to capture. Are those do you think that the part of the T25 that you had aspired for or No, as I mentioned, there are T25 And then we always keep our ears to the ground to see who are the potential disruptors. In China, it's very clear that there are 4 players who are likely to Disrupt the Nios and potentially the usage and the Teslas of the world. So we wanted to engage with at least 2 of them in a meaningful manner and that's something that we have done. It will be a while before they actually become T25, we are just testing the water with them at this point in time. Sure, sir. That's helpful. Thank you so much and I'll get back in the queue. Thank you. Thank you very much. The next question is from the line of Mohit Jain from Anandraty. Please go ahead. Hello, sir. Good evening. First is on this on-site offshore. You spoke about shift of work to offshore during your opening remarks. So where are we in that journey? And can that be liver for FY 'twenty three, so to say. Mohit, I think we mentioned that we don't like to report like that because of multiple reasons, because the stages that it goes through, any new programs I spoke about, you will require first experts that will be you know, there then they will move again at the integration systems level, they will be on-site. So we don't report that from that perspective. But I just mentioned that specifically for autonomous, specifically the whole projects were on-site, 100% of the people were committed to be on-site for the initial few years and that's more offshore and that's why there was a significant change in the revenue for that practice. That's why only I mentioned. Otherwise, as you know, we don't report on that. All right. But in terms of runway, like do you think there is still scope? Or do you think some of this will reverse as the year progresses from a company level or set of your perspective? I think we are at a good level. I think we can maintain here and maybe improve a little bit. Okay. The second was on the U. S. Outlook and large deals. Like if I understand it correctly, What you're saying is that in the next I mean, the new large deals, the new set of light deals that KPI would sign would probably happen in 6 to 9 months from now. And then in the interim, we will focus on mining the existing customers. Is that what you're telling us? Is my interpretation correct then? One slight correction. We didn't talk just about The software architecture deals that we are talking about are not just limited to the U. S. There are conversations with the OEMs in Europe and some conversations in Asia as well. But rest of the thing, I think you got to tell. No. And all these bills are for T25. Yes. They're all for T25. Okay. So third one was on this carve out of hydrogen fuel related product. So if you could help us understand what kind of investment or what kind of priority will Capiti get And how much involvement will it have from your side? It will have 0 involvement. Actually, we have stopped being involved a few years back actually. There is no investment from KPIT side. We just made it in the interest of just making giving the clarity. But there is no involvement of any employee or executive directors in any of the activity. And the reason we did it because our investors also wanted us to do it. If you remember that every no hardware activities, no product activities, we wanted to focus on software integration partner. We want to be the best and the largest software integration partner. That's why the hardware business and the product business we had divested, closed and taken on. So from a promoter bandwidth perspective, you are saying it will not it involves or it will not involve you guys. Now 0, 0. I won't even say partial or 1%, 0. Okay. And the last one is on inorganic. So, Parq Partners, of course, is 1 which will get integrated during the year. But what all like should we expect more M and A on similar lines? Or are you looking for slightly bigger? Any timeline or guideline in terms of size that you can offer? No, I think we will look for good acquisitions. And see we believe that the market size is high. But I have always said that we want to really focus on a good quality business with good quality clients. So but the scale for engagement could be very high. So from that perspective, both from regional presence, the number of experts it can bring and of course some of the access they can give to the new offerings, we will look for acquisitions. But we will be very careful. I mean, we are not going to do anything what we cannot digest or which is not in line with our strategy. And we will give you the full disclosure whenever it is. Maybe at some point of time, we may also share acquisition strategy when we are ready for it. So, sir, is it fair to assume given that we already have strategic 25 clients and then you have other clients also which are sort of growing. That the acquisition will not be from a client access perspective given that industry is also fairly concentrated and so it will be more tech driven? Yes, I mean largely, largely, KPIT, we believe we are confident that any new plant we want to acquire if we focus 6 months for 9 months we will be in a position to get access to the plant. But at the same time, if you find any new Technology area or that and that gives you a better access to clients where we are not at that level. That helps. But to your point, it will not be client taxes for client taxes. It will be for certain expertise and offering. Understood. And sir, any hiring target for FY 2022? Any quantification to that, which you can share? Hiring. Hiring target for FY 2022? There's no target because I think we have a very strong and robust system for 2 quarters ongoing planning and visibility. So basically, but right now, we will be around 1,000 plus minus. That is how we have done right now, but we will keep on adding every quarter. So right now, the offers and the current visibility is 1,000 plus, we will keep on adding. So then this is 1,000 is the addition that you're broadly looking at for the year? Yes. Yes. Okay. That is all from my side, sir. Thank you and all the Thank you. Thank you. Thank you very much. The next question is from the line of Arvind Kothari from Nivesh I. Please go ahead. Yes, sir. Congratulations on the set of numbers. If you could please help me understand, is there a part of our software business which is dependent on volumes of what the end client makes? No, I think that is not related with any sale of software of sale of cars. It is not dependent on that. Not only that, while there is a possibility we keep away from that to a large extent, if at all we keep a very small portion, which is dependent on that. So our business model is not to link with that for sure. Okay. And I mean, is adding more clients in a way on our platform, does it make it for the clients cheaper in the sense to get connected with our services. I mean, from the scale perspective, if we get more scale, is it making us more competitive and hence, going forward, the number of client wins we can make increases with the number of ways increasing? Yes, our philosophy is basically with T25, they have a huge spend. So as long as we even get to that spend, I think we could easily double or triple the size of the company. So I think that is how we are looking at it. So that's why we are more focused. Okay. And last one was on 2 wheeler side. Is there anything on the connected vehicle or maybe an offering like Ola is increasing its, you can say, capacity substantially in India also. So is there an offering over there which you find is getting more traction and that is growing at a very high rate or something, which might be a small portion of our revenue right now? We looked into connected 2 wheelers connected vehicles. We had a product we decided to Let go of that product because we want it to be out of the product business. However, there is a platform That we have available with us. And it's in a production program with 1 large OEM. And we believe that there could be some other takers for that. However, our primary focus given what's happening in the market, The disruption that is happening in passenger cars and commercial vehicles, our focus primary focus remains on passenger cars and commercial vehicles. Got it. Thank you so much. Thank you. Thank you very much. The next question is from the line of Nilesh Jathani one was on the employee expenses. So we are assuming 3.4% decline in the EBITDA margin owing to the hike in the employee expenses. Are we also incorporating this 1,000 incremental employees you're planning to add for FY 2022? I think if we look at what we said is the wage hikes will be effective in the next quarter. The gross impact of the wage hikes would be about 3.75 bps, but the net impact would be around under just under about 100 bps. So that is what we said. And this impact is for Q2 that will happen because the wage hikes will be effective in the Q2. If we look at the additions that we talked about and the Wazix overall, I think for the whole year, we have said that our EBITDA margins would be between 16.5% to 17%. So that is the range that we are currently looking at Understood. So second, clarification, I wanted on the other segment. What we have seen other So there are we also do good amount of work in vehicle engineering and design and also on the body side. And given the changes that are happening in the vehicles due to electrification and autonomous vehicles, we are seeing growth coming from Vehicle engineering design and body, both these practices. But they are largely impacted because of in a positive way because of the Changes in the vehicle due to electrification and autonomous side. Understood. And then my last question was on the little bit on your thoughts on the Powertrain Segment. So the PIP IT as a firm works with most of the top 10, top 15 OEMs across the world. Largely these OEMs would be having at least 1 or 2 launches in the electric vehicle segment. So when we think about powertrain as a segment, So lastly, the R and D spends would be behind us as far as the powertrain is concerned. It will be more to do with autonomous or connectivity going forward. So how should we look at the Powertrain segment? So revenues, of course, are T21 clients for us. Will there be some muted growth as far as powertrain segment is concerned from the T21 clients or how to look at the segment going forward? No, actually, on the other hand, we see the largest growth area potential in powertrain. It is not a one time Kind of a thing. Actually, it is all evolving. Everything is changing. People are coming with new designs, both for the actual e powertrain also outside infrastructure or structures like charging, Etcetera. So many things are changing. Also it is becoming more intelligent, more connected, even the powertrain I'm seeing. So I think there are a lot of things which are happening there. And the new architecture which will happen will also drive many changes in that. So Actually, I feel that in next 3 years, the largest spend on our engineering will go into this segment. Understood. And sir, the 3 deals which we have won USD 60,000,000 in the last year, are we seeing the revenue recognition from those in the current quarter? Yes, yes. I mean it's a part of a normal business, so it is happening. Okay, sir. Yes, those are my questions. Thank you so much. Thank you. Thank you very much. The next question is from the line of Alok, an individual investor. Please go ahead. Hi. Thanks for taking my questions. So I had 3 and of course before that good quarter, but I had 3 questions, if I may. So I was thinking a little bit more outer to 3 to 4 years. So from a 3 to 4 year perspective, I just want to what is the pool of opportunities that exist from within the R and D budget of the OEMs? Clearly, the OEMs spend well above $100,000,000,000 put together, I guess, and not all of that is available okay, PIP or that kind of a business. So I just wanted to understand what is the pool that we have and how the conversion rates from the pipeline or the pool have actually been, let's say, over the past couple of years. So that was question 1 and then I'll follow-up with the other 2, if that's okay. At a high level, the software spend in R and D in the areas in between is going to grow by 10% is the prediction on the high basis for next many years. So that is basically overall industry Consensus on so that is the one. And in the areas in which we work, right, our pool, if you look at C25 or that, I think our win ratio is very good. I think it is more than 50% when winning ratio is more than 50 And it's not just the R and D. So we have some of our business comes from R and D. There is a lot of spend that goes in engineering. And that is also our bread and butter, which is ongoing. Okay. Okay. I mean, so would something like a RMB5 1,000,000,000 or RMB10 1,000,000,000 sort of opportunity pool be a sensible number or is that quite large? Just trying to get some broad sense. I think at this point of time, we'll not, but we have said that I mean people have asked us in the past how big this business can happen. It can happen as big as it can be. I mean, I can only say that and I said it Sometime back that we can become 3 times of the size by just doing what we do. Okay, okay, okay. Fair enough. And second question is from a business model perspective. Once we get in on a particular platform on the R and D side, so the engineering and the R and D does our role stop once the product is commercialized and it's in serial production? Or is there some sort of recurring Content. So I was just thinking from that perspective that if the software content is rising, then somebody has to pick up the upgrades and maintenance and mid cycle stuff that goes on, on cars. So just wondered a little bit about that. There are two aspects to it. Once the production program gets over, the program gets over, but there is an ongoing maintenance and support that continues. Secondly, once a production program gets over within the following 2 or 3 years, most of the OEMs start to work on the next generation of production program. Usually, the involvement starts 4 years prior to the launch, 4 to 5 years prior to the launch. [SPEAKER MOHAMMAD ABU GHAZALEH:] So it's an ongoing thing for most of the car and commercial vehicle OEMs. If that answers your question. And then typically in the IP Services business traditionally, what was what's typically regarded is once you hit a $1,000,000,000 sort of a revenue mark, it's almost like you get a seat at the table in a manner of speaking. So I just wanted to understand what is the is there anything of that sort that happens in our specific domain that we are in? And where if that is the case, then where do we stand versus the inflection point? I mean, I'm just trying to understand, are there any contracts or programs which perhaps would go to, let's say, something like an Accenture or some of the larger companies just because they are large? That's the only thing I'm trying to understand. The first thing I would say that we are larger than some of the companies we are talking in the areas in which we operate. So we are not talking about the general business. I think here the people are more interested in who understand the architecture of the client vehicles who has worked on their production programs, who understand domain better and who understand the integration better And who is connected in the overall ecosystem? I think that is the basically fundamental way. And as you understand, as Mr. Tikekar mentioned, if you understand architecture, you understand the domain, your ability to win the next program is higher as it is. And as he mentioned that typically now when it become more a software driven vehicle, it is more about bringing new features, bringing new versions of the same platform. So it is not maintenance, it's pure maintenance. It is adding to the features, etcetera. So it continues over the life of the vehicle. Typically, in some of the programs we have announced earlier 7 to 8 years, we get some of those funds. You spoke about getting a seat at the table. Looking at software being the center for most of the OEMs and this is something that is new for them and KPIT brings in expertise. So we actually given our size, we punch way above our weight because what we do for them is very critical. In terms of volumes, it may not be 1,000,000,000 of dollars, but what we do is important for their future. So from that perspective, we do get A seat at the table at the highest level with all the OEMs that we deal with, if that's what you meant by seat at the table. That pretty much answers my questions. Thanks a lot. Thanks a lot and all the best for 2022. Thank you. Thank you. Thank you very much. Thank you very much. The next question is from the line of Vimal from Union AMC. Please go ahead. Thank you for your opportunity again, sir. Sir, my question was on your employee pyramid. I do understand you might if you look at the wage hike impact that you're talking of in the next quarter and if you talk about the net impact is quite low. So how much of it would be coming in from, let's say, pyramid normalization or pyramid broadening at the bottom? How How much of it would be coming from utilization? And I'm assuming the growth would also be very good because operating leverage would also play its part. If you could just correct me in my analysis here, if I'm going wrong somewhere. Thank you. I think it's a mix of everything. It is not only on account of Pyramid. There's a small upside, but we will not be in a position to give specific numbers. But it is a mixture of everything. Everything brings something to the table. So there is growth, there is operational efficiency, all of that, Plus the use of our platforms, tools and accelerators that also increases profitability and so forth. So it's a bunch of things. Do you see more upside on 2 of our what metrics which is utilization and I'm talking of utilization offshore, including trainees and your pyramid, do you see some more upside of improvement in this case We look at it only as operational efficiency. We don't look at a specific area. I think that we'll look at it more from the revenue per person, contribution per person because it's a mix of multiple things and we'll leave it to the business leaders to manage it. All right, sir. Thank you so much once again. All the best. Thank you. Thank you. The next question is from the line of Ankit Agarwal from Yellowstone Equity. Please go ahead. Hello, sir. First of all, congrats on a strong quarter. Thank you, Ankit. My first question is around the Fast Partner acquisition. Just wanted to get some insights into what drove this acquisition? It seems it's more technology focused, but are we getting access to new clients as well? And then the second question is, it seems like the proportion of fixed price projects have increased. Is there any noteworthy trend here? Is there anything qualitative that is driving this? So two things. 1 is the acquisition. Acquisition is mainly for as we have said that to strengthen our positioning as software integrator at a lower level, which is basically semiconductor level. We believe semiconductor companies will play a higher role and are critical in this new program. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So in order to get some access to some of this technology as an expertise, that is the main reason for that acquisition. I think that will help us to scale and also improve our expertise in that area. So client access is, as I mentioned, I think it is not a key point. But of course, they have better relationship with semiconductor companies, which we will be in a position leverage for our clients. Okay. And will this be integrated or will this be operated independently? No, I think we all work as one business. It is everything is integrated as soon as possible. Okay. Got it. Got it. And so this is more around embedded engineering, right? Yes. All right. Okay. And then on the fixed projects? So if you look at fixed price projects, I mean for the last 3, 4 quarters, you'll see that that percentage is going up. We believe that it will marginally move up, but more or less in the same range that we have currently. Okay. But is there anything qualitatively that is driving it like that? Yes. Qualitatively, the point is we prefer going for a fixed price project. It gives us flexibility. It gives us ability to use the assets which we have. We are much more competitive than the if I had to say, handstand leg companies. So that allows us to really be more competitive, but more importantly, add value to the client in terms of delivering ahead of time, etcetera. So we prefer that. And I think now the clients also want to they are also getting more comfortable with that model. Right, right. And is it fair to say that the more complex the project, it tends to be fixed price? Yes and no. I mean, it really depends upon the maturity of the plant and how you want to do it. But largely, it is true if it can be carved out some parts of it. But there has to be a maturity of the OEM as well as the clarity in his mind, then only we will go for it. Otherwise, before going for the while we take the ownership, the financial model may be time and material. To answer your question in otherwise more and more projects basically in almost every project we take the full apart from few, most of the ownership and for it is in our favor and even for clients' favor to move towards fixed price. And in general, do fixed price projects tend to be more margin accretive in your case? Yes. Okay. That's it from my side. Thank you for answering my question. Thank you. Thank you. Thank you very much. The next question is from the line of Nitin Badinaban from Investec. Please go ahead. Yes. Hi. Thanks for the follow-up. Just two quick ones. One is last year, all the large deals that we have done was in Europe. Is there anything are there opportunities that we are we think we'll be able to close in the U. S. Geography that will stand out this year? That was the first question. And the second one, Mizan, during COVID last year, Correct me if I'm wrong. If there were any pricing discounts given to the clients during that period, are those sort of coming back at this point in time or they've already come back? Those are my two questions. Thank you. As far as long term engagements, large engagements are concerned, yes, there were a couple from Europe, in U. S, we have seen growth actually across all of our clients. Yes. So yes, we are actually working on long term engagements with some of our clients in the U. S. And we are also seeing good amount of growth. That's the same case with Asia, as far as the COVID discounts were concerned, there were since our clients were in a difficult position, we extended certain discounts or we extended the credit period. All of that has come back to normal. And we have given it a fixed price. We have given it for a fixed period of time, and I think the time is all over. I think things are back to normal from that perspective. Sure. Fair enough. So it's not that it's coming back next quarter or anything, it's all done? Yes. I think it's all done. It's all done. Fair enough. Thank you so much. All the very best. Thank you. Thank you. Thank you very much. As there are no further questions from the participants, I would now like to hand the conference over to the management for closing comments. Thank you very much for your participation. And if you have any further questions, I'm always available. So stay healthy and bye bye. Thank you. Thank you very much. Basman on behalf of Dollus Capital, that concludes this conference call. Thank you for joining