Q4 20/21

Apr 29, 2021

Ladies and gentlemen, good day and welcome to the Q4 FY 2021 Earnings Conference Call of KPIG Technology hosted by Dollar Capital. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dollard Capital. Thank you, and over to you, sir. Thank you, Rituja. Good evening, everyone, on behalf of Dorit Capital. Thus, all of you are keeping safe. I would like to thank KTIT Technology Limited for giving us the opportunity to hold this call. And now I would like to hand the conference over to Mr. Sameer Kanshalter, EVP and Head IR of KTIT, to do the management introductions. Over to you, Suneet. Thank you, Ravi. Good afternoon and a very warm welcome to everybody on the On the call today, we have Mr. Ravi Pandit, Co Founder and Chairman we have Tishore Patil, Co Founder, CEO and MD We have Priya Ijikar, Senior Vice President and Head of Finance and myself. So as we do always, we will have the opening remarks By Mr. Pandit on the performance of the company and as well as how we see it in the near future. And then we can have the floor open for your questions. So thank you for attending this call and once again a very warm welcome to you. And I will hand this over to Mr. Punditna. Good evening, all of you, and welcome to the KPID Technologies Investor Fund. As Suneet mentioned in his opening remarks, what I would like to do is to offer some opening comments Before we throw the session open for questions, I would like to divide my comments into the audio 3 parts. A, how has this last quarter been and this last year been? B, We will talk about the industry because there are a lot of questions about how do we look into the future. And see, I would like to talk about the next year or Maybe a few thoughts about how things are. So I trust you have got our investor update. And what we have been trying to do every quarter is to increase the depth and coverage of the information that we provide. And so I may not need to go much detail into the last quarter or the last year, but let me just share some highlights with you. So on the back of a very good Q3, we also had a good Q4. In our dollar terms, the revenues went up by 6.8% quarter on quarter. The net profit went up by almost 12%. EBITDA percentage jumped from 15.7% to 17.2%, a very healthy jump indeed. The DSOs came down to 54 years. And as a result of the profitability and good collection, The cash balance that we had on our books went up from INR 630 crores to INR 222 crores. And remember, we don't have any debt And the balance sheet is very healthy, almost 70% of our assets are in cash. So that is how the last quarter was and Very grateful, I think indeed. If you were to look at the year, as you would remember, The first two quarters were back for the industry and back for us. And on an overall year basis, Our revenues came down by about 5%, our EBITDA backlog of 5% and PIMAS of 4%. But if one were to compare last year's Q4 and this year's Q4, which I would say are both kind of normal quarters, we can see a very good change. Our revenues, although in financial terms, there was a small drop of 2%, the volume was the same, which clearly show that now the customers are certainly preferring on-site offshore work to on-site work. And so our revenues also they have dropped the volume as remained the same. Our EBITDA has gone up by 24% and backed by 26%. Our margin, EBITDA margin has gone up from 13.5% to 17.2%. Cash, you would recollect a couple of years ago, we hardly had any cash with us. And our cash has been going up. In these last four quarters, the cash balance has gone from 3.27 crores to 8.22 crores, almost 500 crores of accretion driven by the profits as well as yield collections. So this has been the year as a whole, and I hope we will be happy to be here. Our own team is also quite happy to be here. The question, however, I'm sure it's in your mind, whether this is indicating of the years to come, Better outperformance will continue in the years to come and how do we look at our company in the context of the industry that we are serving. Ajay, it's all recollect. Some few years ago, we announced that we will not be a general purpose anti company that we will be a company focused only on the mobility industry, which means we will focus essentially on the automotive, both pass cards and CDs. And so in a sense, our future is now tied to the future of the Automotive Industries. And there are other questions because earlier in the last 12 months, the industry took some hits because of COVID globally. And there are also been some questions Although as you know, the auto industry could some hit 4 quarters ago, In the last quarter or so in the recent months, things are coming back. The pent up demand has started slowing back. And so it seems that it will gain its normalcy in a second. What is important is not just the number of Cars that are being sold, but also the nature of the cars. And that is something that I want to spend a little bit time on. Over the period, the role of electronics and the role of software inside a car is becoming increasingly critical and very crucial. Some people have called a car as a producer for me. High end cars have anywhere between 110 to 113 ECUs or computers on them. And in all of them, there are literally millions of lines of code, More lines of code in a car now than in an airplane. And this is the current status, but going forward, It is very clear that the role of electronics and of software is increasing even more. And this is driven by 4 factors which we call SKUs, connected, autonomous, shared and electrical. And let me spend a few seconds on each one of them. Connectivity is becoming increasingly important. A car is not an island by itself. It is connected with other cars, it is connected with the ground And it is connected with the ownership of the driver who is driving it. And that connectivity is extremely critical going forward, especially as the people are now looking at self driving or autonomous cars. So there is a lot of work happening in the ADR connectivity And our company is called BP Investing that. The second major trend is the area of autonomous. And as more and more vehicles are becoming shared, the desire to cut the driver costs, in the Western world, this desire is very fine, which means that more and more companies are going in for self driving vehicles. I wouldn't say it is really like immediately around the corner, but the dates and towards that is unmistakable. Automotive driving, of course, involves a huge amount of software because typically what you have is the multiple sensors and cameras which collects the pictures around the car, then there has to be a software which interprets those pictures and converts them into recognizable objects. There is a lot of AI involved in this and then you use that to connect with the behavior of the fact. So again, a huge potential where millions of lines of data has been connected so that the AI models become more and more dependent. The third one is shared mobility, and I spoke about it through to you earlier. Even shared mobility is all driven by software. And whereas people are now saying that in the Western world, The personal ownership of the car is going down and shared ownership is going up. What it really means that an earlier car, which was being driven by maybe 15,000, 20000 kilometers a year, will now be replaced by shared cards, which will be driven by a few 100000 kilometers, We have a few 100,000 kilometers every year because they will run continuously and we will have more and more cars, models coming in in a shorter and shorter timeframe, which means that every car, new car model which will replace the old car will have to be richer in its features, which again I mean, higher electronics in there. And the last one is, of course, the electric. And you would have probably read, GM has made a commitment to fulfill the electric by the end of the year. Most of the other car companies have made such similar commitments. So, by Edmund, Daimler, BMW, most of them, new increase in the market will be electrical. And this means again a lot of use of electronics and software because the batteries had to be managed properly, The engine issue has to be managed properly. The DC DC converters had to be managed properly. And all of that is driven, as I said, by software. So the way we see it that there will be growing use of software inside a car. A company like McKinsey, for example, has said that over the next But the growth of software inside the card is going to be almost like 10%, 12% every year. This is the sphere in which we are playing. And so we work, as I said earlier, not as a general IT company, we are a pure Technology company focused on the mobile industry in the midst and our engineering almost 90% is focused towards electronics. So we are in the peak of these major changes that are happening. Our own vision of ourselves is that we want to be Reimagining mobility along with our customers, we want to be at the guiding or the leading area of this and we want to operate as software integrators of choice for our partners. And we believe in the light of this, there should be enough work for us to do in a very, very exciting area. Keeping this in mind, we have actually taken 4 missions or you could call them as 4 initiatives. I want to spend a minute each to tell you what we are doing so that you can appreciate the nature of the work that we are doing. So we are we believe that The work that we do is extremely critical from our customers' perspective because the software we write goes inside the car, This is sold by our customer to his end customers, with which he is giving warranties and guarantees and he is expecting his customer satisfaction to be very high. So, he is looking at high quality software, sturdy, dependable, highly efficient software. And what we want to do is to make our customers successful. With that in mind, we are looking at actually 4 major missions for us to carry out. Firstly, to come up with leading edge platforms and practices. We want to become the best in the area in which we are. And with this in mind, we have now focused on a few practices such as connected vehicles, autonomous vehicles, powertrain, AutoStar, which is like connectivity software, autonomous driving, connectivity and such other areas we are working on. And in each of these areas, what we are trying to do is to build a lot of platform, accelerators, which can help us deliver better software, faster, cheaper to our customers so that they can succeed in their marketplace. In this area, we make Significant Investments. And so these are the areas where we believe we should get some edge over our competition. The second initiative that we have or mission that we have is 0 effect delivery. As I mentioned, the software that we deliver is mission critical And we want to ensure that our customers should be able to sleep easy at night once they use our software. So a lot of efforts have been going on inside the company on 0 to 6 delivery. And on that, we have done, I would think, fairly well. There is still a way to go, but I think we have progressed quite well in this area. The 3rd vision we have is the best place to grow. And see, This is the work in which we are engaged is something that is driven by passion. It's driven by passion for cleaner, smarter, And we want to attract people who are passionate about this area. We want to attract people who are technology savvy And we want to make mobility much better. So our focus has been to attract the best, to retain them, to train them and to grow them professionally and personally along with the company that we expect to see growing. We do many initiatives in this area. Some of you would be probably aware of the work that we do in the security cycle, which is where we attract innovative minds across the country. Last year, we had over 21,000 students from like 600 colleges across country from almost like 24 states who participated in this and they were the candidates who are looking forward to working in an exciting environment and We propose and we work towards providing that environment. And that's a very major initiative, which is personally guided by our CEO. We hope that we will attract and retain the best of the talent so that our customers gain and regain. The last of the 4 missions is of course what we call C25, the top 25 customers that clients that we are looking at. We don't want to be providing services to each and every client that can be around. We want to stay focused on a few clients and we want to deliver them the highest value. We believe that there are a lot of benefits of long term association. We believe that, Sravi, we would end up not being vendors to our clients, but being long term partners. So and we can discuss with our clients their long term plans and their growth plans. And we have seen a lot of depth emerging out of our strategy of T25. We are also beginning to find that the top customer that we are working with are truly global in nature. So you can typically the same companies operate across Asia, Americas and Europe. And our work with them in one area, in one region helps us in another area and another region. So these are the 4 missions that we are following very closely and we trust that all of them together will result in profitable growth for us. And we believe that at least in the last couple of years, We are beginning to see sprouts of this initiative. Now looking at what we are planning to do As a strategy which you can call as inch wide and mile deep, we believe that we will become an integral part of the automotive ecosystem. We believe that we will enjoy the fruits of the growth of this industry in their engineering area, which as I mentioned is really expected to be very good. And therefore, we believe that it is possible to have some kind of a secular growth in time to time. We are banking on this and I should say we are preparing for this. Now we want to continue to focus on the mobility industry, But what it means is that we will work also in the cognator related industry, which constitutes, so to say, the entire ecosystem of the automotive industry. So we are seeing ourselves now engaged with the semicon companies. So far as they are working with the auto company, We also see with the onslaught of 6 gs and 5 gs, there will be a lot of connect between telecoms and Automotive Industry and we see that we will probably play a role in both these areas. Currently, we are focused largely on the pass car business, but We are also seeing a significant growth potential in the commercial vehicle business. Because some of the technologies that I mentioned to you about from this perspective, They are extremely relevant from the CV business perspective. Typically, a CV owner is focused on his profitability. So, he appreciates everything that can add value to his bottom line and we are striving to become that partner going to that. So these are like my broad comments about the growth in the years to come. And I would like to say that we are very timely, we are very hopeful how things can pan out over the years. I would like to take a moment to talk about a very momentous decision that we took 3 years ago. You would recollect at that time we were a software company. We were about $500,000,000 And then we decided that we want to let go of our general software business and really focus on a single vertical. At that point in time, some of us thought whether this would be to see whether reaching our stars, whether reaching our wagon To a single industry could be bigger, but I believe that Fingerhut will. Looking at it from our investors' perspective, and this is something that has been directed at length in our investor update. Our shareholders, now that they own a share, each of KPID as well as DigraSoft, They have gained about 54% CAGR since the day on which we announced the merger and demerger scheme And since the day in which it was implemented, that is 3 years ago, the CAGR of total value has been about 40%. So I believe that From the perspective of our investors, it has been a good decision. From our own perspective, we believe that our focus is more clear, Our best is greater and the value to our customers is also high. So we believe that this has come out quite well. Now the last issue that I want to talk about is next year. As our investor update says that we expect The same growth in the next year. I would put it in mid teens barring unforeseen or exceptional circumstances. We expect the EBITDA also to be in the same range where we are. It's currently 16%, 17%. We believe that our cash attrition will continue and our focus will be to maintain a strong balance sheet. So I think these are my opening remarks. We shall be happy to take any questions that you may have for all of us. And thank you again for attending this call. Thank you very much. We will now begin the question and answer The first question is from the line of Karan Oppal from Philip Capital. Please go ahead. Yes. Thanks for the opportunity. Congratulations sir on a very good set of numbers. First question is on the deal wins. So can you please talk about how the deal wins were in Q4? And how is the pipeline looking overall for next couple of quarters? And I appreciate if you will talk about in terms of your practices whether You are seeing demand in autonomous connected electric. So that would be my first question. And secondly, on the powertrain business, This corporate was flat, so any specific reason for that? Thanks. So Two things I would like to say. On the pipeline, we do not give a specific number, but let me tell you, the Pipeline increase during this year has been one of the highest in the last few quarters. And the Pipeline gives us confidence about what we have given what we talk about the next year. So I think there is enough pipeline Sufficiency to move on to the next year. So that is the point number 1. And it is across the region and it is across the practices. So We see actually some of the practices in the past where couple of them where I would say we're not growing. And we had mentioned to you at that point of time that this will come back. And we are very I feel that this growth is across the region and across the practices. On the strategic point of view, I think there is no point in looking at every quarter. I mean, if you look at I think has driven our growth last Two quarters, the large deals were there. I mean, it happens every quarter here and there. I think nothing specific Actually, as we have always said that, that will be a major area of growth for us. Basically, I mean, apart from Europe, which was always which has a tremendous focus on electrification, now U. S. Has also U. S. Companies and overall U. S. As a region had also got a very high focus on electrification. So actually that's a high growth area for us over the meantime. Okay. Answer on powertrain, please? That's what the electric powertrain is what I It's explained to you. So naturally, the conventional powertrain business will get More and more, I mean it is not something which will grow to the extent like the electric powertrain and our Practice also in electric powertrain is the highest. Actually, all the growth is coming largely into electric powertrain, We have been in a position to sustain and grow marginally also in the quarter. Okay. Thanks a lot. Thank you. Thank you. The next question is from the line of Bhiman Ghoyan from Union Motion Fund. Please go ahead. Yes, sir. Thank you for the opportunity. I think my question on revenue growth has been answered regarding the guidance. And my question now is on margin and offshoring. What I believe is that there There has been some increase in offshoring, which has led to some increase in the gross margins. Just wanted to understand What has been the extent of increase in offshoring? And is it sustainable going forward? I mean, will we see an increasing trend of offshoring going forward? If yes, then is there an upside risk to your 17% EBITDA margin rate? So let me say 2 things specifically. I think we had given a guidance between 16% 17%, while our Q4 is 17.2% for a couple of reasons. One is naturally this year we see increments Which will come up and we had to really spend that. The second part is also We are looking at and secondly, we're looking at the market and that which is we have to provide for some of these on a higher side. The 3rd part specifically is in terms of never for the which may get into effect sometime during the year. We also see that at least in the H2, we actually hope That there will be partial operations which will be start, which will also increase the expenses, operating expenses. And last But not the least, Mr. Pankaj talked about T25 and our deferred engagement. We would like to invest in that area. And we are taking some more concrete strategic steps in order to improve our engagement. So these are the areas of At the same time, we are going to increase offshoring during this year. Certainly, that is Area is there, and we are looking at improving margin across the practices and the region. The second area which we see is on the productivity side. As you see that trend for the last three quarters and going forward, our fixed price engagements have gone up. And with the productivity improvement, significant productivity improvement initiatives we have, we hope That is going to help us to improve the contribution. And because of these two reasons, I think We have guided between 16% 17% for the next year. So I would leave it at this point. Right, right. The second question was with reference to your Media, a comment that you made in the morning saying that the automotive spend on TR and D is Expect it to grow in between 10% to 12%. Safe to say, sir, that KPIT with its engagement with the Top 5 clients will probably regain more share within their spend and will grow at a higher pace than that. Yes. I mean, Certainly, we will be beneficiary of that. And as we have said that we are looking at barring any unforeseen circumstances We are making kind of our growth for the next year. If you look at our current Ranvej, we are around 10%. And we believe that, as I said, looking at the external We should be in a position to really get to this kind of a growth rate of And we will be and to your point, we will be the beneficiary of BA spend into our PA strategy client. Absolutely, sir. Point taken. Thank you so much, sir, and all the very best. Thank you. Thank you. The next question is from the line of Rajesh Pothari from Alpha Aptitive Advisors. Please go ahead. Good afternoon, sir. I have 2 questions. 1 is industry specific. Is it possible for you to give a bit more insights in terms of the Competitiveness of KPIT kind of players with whom we compete, is it more like the captive houses of this auto companies for our global companies including maybe some Southeast indications? That is first question and then I will take the second question. So actually, if you look at the competitive landscape, it really varies for Every area, I mean, every practice, every area, it changes. And I think we always have said that I would not look at it as a competition with the captives, but let me put it like this, we share the engineering strength with Capgemont. And we collaborate with the clients. And we look at their strategy, what they want to do on their own and what They are where we are in a position to add value. So from that perspective, we see that there are clear areas where KTIT plays a very significant role, Specifically into productionization of the software. When the software goes into production, it's a Sreeti, I would say it's a complex process and also something you have to do for a longer time point of time. So I think that is one area. The second area, I would say, if you look at the external competition, naturally there are multifaceted And again, across the practices. In some cases, there are specialist Companies in few specific domains like IC, I'm just Meaning few like Luxoft kind of a company, which is more into Which company? Luxoft kind of a company, which is more into domain of infotainment or e cockpit area So there are companies like that. If you really look at some companies which And what the OEMs are trying to do is when they are moving going into the next level of architecture and production, They are also trying to own more software. So sometimes they are trying to own the software, which still now was being supplied by Tier 1. So I think that is where we have won couple of visits in the past. So that's one area where we are trying to own the software and work with OEMs and take the responsibility of software on Tier 1. And the third is we are working with the Tier 1s to really transform them as OEMs are changing and they are expecting more from the Tier 1s, including the software. So we are working with the advance for, again, from integration perspective and bringing up their software capabilities. Okay. My second question is, if I look at your numbers, well, of course, the Q on Q numbers are definitely good, but I'm looking on the Full year basis and as well as on 4th quarter on YOY basis, where the most segments basically we have seen Very big growth. So just trying to understand how much will it be because of course you are the one segment which is growing and one segment which is degrowing. But net net, if I look at the thing that FY 'twenty one over FY 'twenty two, that is U. S, Europe or Asia Across verticals, across geographies, there is a degrowth. So including new mobility as well, of course, it is a very small base. So just trying to understand that how one should look at this? So I think we have mentioned that if you really look at the Q4 part, Mr. Pandit also mentioned about it. I think the EBITDA, if you have seen, it has moved from INR 75 crores to INR 93 crores. And I think there has been a big shift into on-site to offshore in many areas. Specifically, I will take one example and which we have mentioned in the past, Like one significant assignment in Autonomous last year we had taken, which was like 100% we were doing for 18 months from on-site has moved significantly like 70% offshore. So some of these situations things have happened and many of these programs which were one of its kind, we had to be very, if I were to say, cautious about it in the beginning. And that transformation has happened during the year. And I think So that is the reason it gets reflected into also EBITDA increase. And as I mentioned to you, going forward And as Mr. Pandit mentioned, over next 4, 5 years, we see a significant opportunity across the practices For our key T25 clients. So basically you are saying if just for such on-site to offshore either way, then it would have been a much bigger number in terms of the top line? Yes, I mean, it would have been a higher number for sure. We will not it won't be a For taking this kind of a company where you have multiple clients, multiple segments, and I don't think you disclosed TCV. How basically from the visibility perspective, how well should attract the company? I think the way we look at it is I think it is about our focus, right? I think we are looking at if you look at it over the Our model is very close to our T25 plan. So our 85% of the business is repeat business with our clients. And as I mentioned, the spend is increasing. We are getting a higher share of that business. If you have seen over the period, our deal sizes have increased. And we can announce you, we cannot announce you. In some cases, we are lucky when the client allows us to announced some of these deals. But based on the repeat case of customer, their increase in the share and our solution, On that basis, we are giving our estimate for the next year. As I mentioned, even if you look at the last this quarter's run rate, it about comes to about 10%, So basically you are seeing that the T25 clients which are most important clients for you, their spend is going to be So, say, 8%, 10% higher on annualized basis. That's what 10% to 12% higher. Okay. And your share, whatever your share might be, That also you would likely to increase further? Yes. Okay, great. Thank you, sir. I'll come back in queue. Thanks. Thank you. Thank you. The next question is from the line of Mohit Jain from Anand Razi. Please go ahead. So one is on your geographical split. So this time, I think U. S. Shot up quite sharply. Europe had just become our largest region, I think, last quarter or last to last quarter. So is there a change in the spend that you're looking at between these two regions? I think we actually think that I mean, if you really look at our Asia has shown higher growth in terms of percentage. So I I think we would be one of the very few companies which has such a balanced portfolio. U. S. And Europe, both are big markets, right, can change quarter to quarter. But overall, As I said, our estimate for the next year, our profitability for the next year and growth across the packages and all the three parameters, we are seeing the growth. So there is nothing which probably is specific to a particular region. So no specific wind ramp up or anything that you would have seen in the U. S? I mean, it will vary to some extent, right, here and there. But we don't there is no Trend, there is no particular trend. The other comment that I made, Pajit, most earlier was that I think it's not Proper to call a win in a particular geography because an Asian client may be operating in Europe and U. S. And we get some business from Asia, the executive team in Europe. So the whole job of the dividend is so fungible. I wouldn't draw a lot from that. Absolutely. That's the right one. Okay. And the second was on the M and A, Like you mentioned in the presentation, you guys are now looking for tech in. So any size that you can specify on areas where you see gaps, could it be regional or more tech driven or Yes. What kind of areas? So absolutely, we are not losing anything large, very large, I guess more around $20,000,000 plusminus, right? So More driven by technology or some of the gaps in the strategy to accelerate that largely instead of building what we can accelerate. So some of the areas which we have said in the past like semiconductor as Mr. Pandit mentioned or some of those areas And there are a few other areas which we are looking at. So Semicon, meaning Semicon A different kind of area or no? Software, software, software, which basically what The big changes which is happening is software I mean, we are already engaged with the semiconductor company. Semiconductor companies are playing a very significant part Of the new architecture program, which Mr. Pandit mentioned about ACUs and controllers and etcetera. So they are also taking a higher responsibility. As we see our role as a software integration partner, the understanding of chip design and integration First, help them with certain kind of a software, which we call middleware as well as integration. For both these cases, the relationship with semiconductor will be very useful. So we are not looking at semiconductor companies more as a client, but more as a go to market partner to the OEM and basically Understand their use of the expertise of semiconductor and the solution to service our OEMs. So the 20,000,000 is the revenue size or is it Enterprise value that you're looking at? Particularly, I mean, 20,000,000 is the revenue size what I mentioned. Okay. Thank you, sir. That's all for me. Thank you. Thank you. The next question is from the line of Andrey Solshottam from Cogito Advisors. Please go ahead. Thank you. Thank you for taking my question. I have two questions. One is that From a medium term perspective, could you give some color to the amount of opportunity that you see in CV and the 2 wheeler space? That was my first question. And the second question is that you have 2 large deals in the recent past on the €50,000,000 €68,000,000 Kind of variety, which is a departure from the past from where the deal size has been fairly smaller. How do you see this trend Calling out, you see that you see the continuance of this trend. And I know that you cannot predict this on a quarter by quarter basis. But from the sense that you get on the ground, You see the possibility of such multimillion dollar or euro deals increase in the future. Yes. So I will take the second question first. I think we see this trend for Certainly, a larger engagement because as their challenges are Significant in front of them. I think it is important they are looking more as a partner rather than vendor. So in that case, they want Higher ownership of their partners in a specific area. And it is across the domains. And As the architecture will become more significant and more complex, it will be across the domain and over many years. So from that perspective, these build sizes are going up. And sometimes people don't sign specifically the POs, but It is very hard once you are in a production program, which runs over 3 years to 4 years. So that is how we see. So that rate is Absolutely, yes. Did I answer your question and the second question? Yes. And is this also related to the fact that You mentioned earlier that the OEMs are going towards the tendency of wanting to own their software and therefore that also increases the size of the team? Yes, absolutely. Because as I mentioned, for example, one of the deals which we won in the one of the 2 deals which 3 deals which we announced, which we won, was basically taking the ownership of the software on behalf of Tier 1 completely by KPIT for OEM, so that OEM has a better control over that. So I think those kind of deals which were of course the ownership And overall responsibility is high and that's the reason that you signed this product. Okay? And on the second, To be fair and clear, we do have some solutions, but our basic focus on those is on T25 is our strategy for growth. We see the spend from T25 is pretty significant. The opportunity is very high. So we would like to focus on these clients. And wherever there are certain platforms or products where we find maybe Applicable for this and we do have 1 or 2. There we will find partners who can take this to either or 3 d. 3 d also. CV is absolutely the focus for us. T25 basically talks about passenger car and commercial car. In last 2 years, we have brought in more focus on the I mean, we have increased our focus on commercial data, which was earlier There, but we did not have a specific organization to really bring revenues from that. So I think over the last Year on, sir, you will see that our commercial division I mean, business from our commercial vehicle manufacturers is going up. And can you give some color as to what are the areas in which your business is going in commercial verticals? You also talked about the fact that The commercial vehicle is concerned about the total cost of operations. So perhaps your software may address those issues or some other issues. Can you give us what are the needs of commercial vehicles that you are trying to serve? And which are new needs that are emerging Yes. I'll go to KTIG. So it is exactly the same areas, but there is a May I say that the technology option may be little differently then. But it is the same electrification, people are going for electrification. Now in some cases, it may be hybrid, in some cases, it may be 12 cell, it may be so there are multiple options. And the commercial vehicles manufacturers may choose different options or PASCAL, but is the overall at the area level, it is the same as electrification. On autonomous, that is where If you really look at any shared services or if you really look at many of these areas where transportation of goods, If you can look at it, that's where also those specifically in the cities, last mile and etcetera, So where there are applications for autonomous more significant. In other areas also, if you look at e cockpit, which also includes some areas of Autonomous, there are certain regulations also which are coming where you need Better connectivity as well as better features in the driver's schedule. So I think those are the areas which are driving this. Thank you. Thank you very much. That completely answered my question. Thank you. Thank you. The next question is from the line of Mizrahi from Investec. Please go ahead. Yes, Anurag, good evening, everyone. Just a couple of questions. The first is over the last, I think, 3 to 6 months, A lot of OEMs have sort of put sort of deadlines in terms of by when they want to complete EV portfolio. Is there any change in the urgency to close deals or anything that you see from these customers? And how do you see the sort of intensity of deal making over the next maybe 12 odd months With reference to these clients versus the others who still haven't sort of put in deadlines. Yes. So Certainly, there is an urgency as we talked about the adoption of electrification happening across the region. Earlier it was more in Europe, now moving to U. S. Autonomous also for some time it has been slowed down, but now it is ADAS, if you look at and until level 3 automation, it is again there. So I think in all these areas, actually there is a urgency because people have lost almost a year before. And if you look at what they are competing with, They're competing with Tesla and they're competing with new generation tech companies which have come with a full force. So there is, of course, an urgency. And I think most of The key decisions of many of these programs along with the new architecture will happen in these 24 months. Sure. And on the T25 clients, we currently have 21. And Mubay, just your thoughts on by when you think those strategic lines that you have always looked to sort of Sure, should be within our base. And the second question was interestingly and it's nice to see that The revenue from strategic clients are now at pre COVID levels. But what we're also seeing is that a lot of Mobile phone OEMs have started launching electric vehicles. So in that context, is there Any change in how would you think about this T25 clients that you have earlier looked at? And is there Would these clients be potential areas where you look at the market share? Certainly. So we have the way I would answer is we have Currently 21 designated as a client. And when we say designated as a strategic client, it means there is a certain set of organization and investments we make to engage The level at which we do, etcetera. But of course, we have a list of potential clients who will move into the strategic client. And there are another set of clients, which at the right time when we think our relationship at the right level And we get a visibility, we move into the private line. Now in these areas, there are what we call it as a new Technology companies, disruptors, as you may say also. As you said, there are few companies coming. But we are very Conscious about working with some of these and making sure that they are in the right position to really, if I had to say, we are successful both in terms of the strategy and overall thing. So we track them, we engage with them and some of them we have seen reasonable success both from Chinese and other clients as well, Asian plants as well, also some from the California and Silicon Valley plants also. And what we expect is some of this will move into T25. And we look at the T25 client list every 6 months and we Basically, look at it and if there are any changes, we are incorporating. I just have 2 more quick questions from my side. One is A lot of there seems to be a lot of electric vehicle sort of launches out of China. So Is it easy to sort of work with these customers? And do you see these any of these customers sort of even coming within our Strategic 25 are being meaningful for you. How easy is it to sort of penetrate those accounts? And the second one was like a bookkeeping question. I think when we relisted as KPIT Tech, we had spoken about how 60% Of the powertrain revenue was EV. How has that number changed when you look at it now? Thank you. So I will answer the first question. As I mentioned to you, we are engaged with these clients and we have seen good engagement with some of them. So it is possible that some of them will and I mean, as they become more successful and as our there is a clear The reason why we bring a person into C25, one is we are well engaged. And I think in China, our presence has been there for quite some time. I think almost 10 years kind of our inside team. And we did not go anywhere here and there, but we were focused on going to OEMs and our specific plants. And see, as you know, there are more than 100 OEMs in China. And we probably would have visited 60%, 70% of them at some point of time. But after that, We have shortlisted clients with whom we can work with and we have been focused on it over the period, consistently without any, if I have to say, losing that focus. So we believe at some point of time when the time is right and we see some early signs in engagement. So we are engaging with them And we have reasonable presence for us to leverage that. So I think from that perspective, I feel comfortable with that. The second thing you may know that when the China sales went up significantly of the automotive, most of that was European companies who have a In China, their brand sales or foreign brands, even some of, of course, U. S. Also some, but lastly, Their sales went up. So naturally, we are engaged with them in China also. But to your question, we are working with the new generation companies in China, Asia and otherwise. And some of them may enter in 2025. On the second side, I think that ratio, I won't have it exactly quickly, but I can tell you that it would have increased significantly Because our EPT growth has been higher and conventional powertrain growth would be marginally higher. So I think the ratio would have changed. I don't have exact number, but it would be more like 70, 30, right? Correct. Great. That's very helpful. Thank you so much and all the Thank you. Thank you. The next question is from the line of Dipesh Mehta from N. T. Global. You may turn it. Thanks for the opportunity. I have a couple of questions. First is about, can you say now what would be our on-site offshore mix? I think earlier, Maybe year, year and a half that we used to have 55, 45 kind of mix. So now how it has evolved? Second thing is on supply side related challenges. So can you help us understand what is our hiring plan, fresher versus lateral? And how we intend to manage our Telenpul, considering we are looking somewhere around mid teen kind of growth rate. And third thing is about autonomous program. I think partly you alluded in earlier question, But if you can briefly touch upon autonomous program, any acceleration or deceleration because earlier we have seen some softness in L4, L5, Whether that L4, L5 related spend also returning or it is L2, L3 which is giving good traction and likely to nullify Softness in Air Force, Air Force kind of program? Thanks. So first is, you know that we always said we will not it's very hard For us to be on-site offshore ratio and we will not give for two reasons. One is many of them are a fixed price engagement. And if you see even in the last year, There is a significant change in the contribution business because of on-site offshore. It is not it's very hard to track it, So we don't give it. The second is in some cases, not many, but in some cases, our pricing mechanism is also based on output. So that is another reason why we do not give it. So but overall, I can tell you that on the contrary this side, there will be At least 5%, if not more, shipped in favor of offshore in the last year, and we hope that continues. That is Point number 1. The point number 2 was on autonomous. If you really look at, I have answered that question. I think we don't see any softness. This year more adoption of Level 3 vehicles and I have said it in India also you will see more of some of those vehicles till Level 3 coming in next year. The supply side, I think Last year, we had a low attrition. Year before also, we had one of the lowest attrition in the industry. And we will have a higher attrition in for stage 1 and it will stabilize by H2. That's what we think. But from your question specifically, we have given offers to about 600 plus people from Canvas. And we are also now moving towards quarterly hiring model parallelly along with the campus model, which will allow us more flexibility as well as, I would say, just in time mechanism also for supply chain. Because either way, It becomes difficult so that we can also adjust the ratio between lateral and pressure. So looking at The environment we can adjust to that ratio. So that's where we are. We feel reasonably confident About H1 where we have tied up our end. So just last related question is about Pyramid, whether you think employee pyramid can be good margin lever or you think considering required skill, employee pyramid is limited kind of scope to Leverage kind of from margin perspective? Yes. I mean, it is certainly not as It is not as leverageable as it is in a normal pure IT maintenance kind of a program. It is not exactly like that. But certainly, what we are trying to do is our focus on creating assets, training as well as tools is high. So by which it is certainly a lever, as I mean, I think in the next year, we will see some benefit out of this because last year, we did not have pressure. And certainly, it's a lever for sure. Understood. Thank you. Thank you. Thank you. The next question is from the line of Rajesh Kotari from Alta Asset Advisors. Please go ahead. Thanks for giving me an opportunity. Sir, basically, these new programs in which we are dealing with our top customers, 20 customers. These are basically for their model launch primarily for Indian or Asian market or it is for the global? Global market, of course. They are all global. I mean, naturally, Asian manufacturers would have Asian. But European, American and these are all global launches for most of the OEMs that we talked about in the past. Okay. Why don't you ask this question because if I look at the European market, The EV sales are already buzzing, one of the highest sales probably is happening in EV compared to U. S. Market. So there it means So many programs have already done and so much spend is already done, correct? So I'm just trying to understand that what is Samadhi already walked on it. So we have done a good part of that work in terms of the opportunity because these programs, let's assume it is for 2 years, 3 years, 5 years. In that case, the revenue growth cannot be 15%, 17% because it's the best of the times. In that case, the revenue growth needs to be much more higher, correct? And maybe after that it may plateau out to maybe 10%, 11%, 12% or maybe 8%, 9% in the long term. But in the short to medium term, it needs to be significantly higher because these programs are very big programs. Absolutely. And if you look at our engagement with BMW where we have made It has been very high. And actually, different clients are at different stages and our engagement cycles with them are at different levels. But certainly, the engagement can be very pretty significant and as I mentioned over the years. So, do you question the question you wanted to ask was whether at the end of the major EV programs that pipeline will die off. So actually it doesn't happen like that Because although they may have an EV program which comes to an end this year, next year there are further improvements required in the EV program, maybe a different battery chemistry will come up, Different battery management systems will come up, maybe their voltage will change. So all these things means continuous upgrades and changes. If you were to look at the internal combustion engine, which has been around for about 100 years, We continue to do extensive work in internal combustion engines because there also there was change from now towards electronic controls, there was change towards More efficiency, higher requirement of energy efficiency and all that. So similar things will happen in electric vehicles also. The motor manufacturers will continue to have better and better quality motors. The materials of motors will change. Therefore, the motor ECUs, motor controllers will change. So it is not going to be the end of improvement in 1 single call. It's going to be a continuous improvement for I don't know how many more years. Sure. Yes, of course, it is a constant struggle. But so is it possible for you do you have any idea in terms of say On average basis, typically, this kind of spend is how much percent Of the total, say, for example, for 1 car, typically how much, say, with a midsized car, then how much typically such spend is a percentage? I don't I didn't quite understand your question. But very broad figures we gave earlier, This overall trend, Mackenzie sales will grow by 10% to 12% over the next decade, which I think is a fairly good I think we can go by that number. The composition of that can Like for example, there was heavy spend on L4, L5 for autonomous. Now people are really focusing more on L3, getting it right. So those kind of reactions will continue to happen. But I would think that it is useful to look at the aggregate and that market is 10% -twelve percent growth. Okay. Thanks, sir. Thank you, sir. Thank you. Thank you. The next question is from the line of Jagdamesh Khan from Artis Ventures. Please turn it. Thank you, sir, for the opportunity. So what I see is like a huge cash pile up of around And the other is, if that is not done, so what kind of return are you expecting on this cash sign up on an annual basis? Any guidance on this? So we are working on our cash cycle as well as the improvement that we can do in our income side year on year basis. But we believe we'll be able to improve the return in the current year than the last fiscal. We can't give you the exact numbers, but The income side will definitely improve. Any way around, you say, 25% post tax? No, I can't give you the numbers because the investments type of investments are sometimes different. So Those numbers can't be given, but the income will certainly improve. And if you look at the cash, we give the breakup as how much in India and how much is in overseas accounts? Because we have subsidiaries, we have delivery centers, which are outside India. So there are, of course, cash requirements there. So the whole cash is not which is in India and which can be invested. So I think in our investor update, we gave that breakup as to how much cash is in India and how much is outside India. So that breakup also needs to be considered. But if you look at the income that we are generating, it is increasing every quarter. If you look for the last 4 quarters, the absolute number is going up and that trend will continue going forward. And so what I understand is a large part of this cash generation is also on account receivables, deals which have reduced significantly. Am I right, Amel? Yes. Thank you so much. That's all for me. Thank you. Thank you. The next question is from the line of Sumit Bokarna from Kotak Securities. Please go ahead. Thanks for giving me this opportunity. Just wanted to understand, do we carry any risk on the software as we write? And if yes, how are we hedging that? So it is similar as you get into any software development. Of course, in some of these programs, we have a higher responsibility. There are multiple ways in which we do. I think one is going into very detail in terms of putting the responsibility what will be You know who will own what kind of a thing. In very rare cases, I mean, we typically have a cap on liabilities in most of our programs. So that is there. And the third is we naturally take If there is any specific contract where the liability is higher, we take a specific contract related insurance, liability insurance. So these are the 3 core ways in which we do. Also we take out the carve outs in our agreements. Our agreements are very tight And that is also something which we work very closely. And one of the missions that Mr. Pandit and Patrick spoke About improved 0 defect delivery. So our focus continues to remain delivering the defective products to our clients. Right. The diagram from which I am coming is that recently Tesla was trying this autonomous car and it hit and some accident happened. So I'm just trying to understand if you Those liabilities we don't take. There is no indirect liability. We don't take any impact. And what are currently you have mentioned, if my understanding is correct, that your pricing is more on a fixed So, contract basis, fixed price contract basis. So, going forward, is there any possibility that we also try to Your revenue sharing model on the number of cars being sold and the software used on those cars? So, I don't think that It's a great model. While we do have wherever we have certain, there are 2, 3, if I have to say, platforms which we are going to start where we get Royalty kind of a royalty or per car basis revenue. Royalty is a wrong word maybe, per car revenue. See the 2 things. 1 is when you start developing the software, The car comes into production after 2, 2.5 years. Secondly, you don't know whether it will be that model will be successful or not. And so certainly that is not something which is available and as I said more OEMs want to really own the software. So from that perspective, this model is very limited for Houston. And also as you know, more number of cars may go down over the period, right, and value out of a car will work. So I think in multiple ways, the model is very limited in its purpose for its purpose. Okay. Thanks for the clear suggestion. Thank you. Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments. So thank you everybody. I hope We have been able to answer your questions, but if there are still any more questions, please feel free to write to me and we will be happy to get back to you. So take care and stay healthy. On behalf of Learmonth Capital, That concludes this conference. Thank you for joining us and you may now disconnect your lines.