Q3 20/21

Jan 29, 2021

Ladies and gentlemen, good day, and welcome to the KPIT Technologies Q3 FY 'twenty one Earnings Conference Call hosted by Dollitt Capital. As a reminder, all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation 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, Alicia. Good evening, everyone, on behalf of Dollitt Capital. I would like to thank KPIC Technologies Limited for giving us the opportunity to hold this call. And now I would like to hand the conference over to Mr. Sunil Fantael, who is the VP and Head IR at KPIT to do the management introductions. Over to you, Sune. Thank you, Rahul. A very warm welcome to everybody on the Q3 FY 'twenty one earnings call of KTIT. While we are still in January, I would take this opportunity to reach all of you a very happy, healthy and prosperous 2021 and beyond. I hope you have been able to go through the investor release that we have uploaded. And on the call today, we have Mr. Tishore Patel, Co Founder, CEO and MD. We have Sachin Tikekar, President and Board Member Priya Hardikar, Senior Vice President and Head of Finance and Matt Patel from Investor Relations. As we will practice, we will have the initial comments On the quarter and the way we look ahead from Mr. Kishore Patel, and then we will have it open for questions. Once again, a very warm welcome to all of you, And I will hand this over to Mr. Sathiya san. Good afternoon. I am very happy to take you through a satisfying quarter 3 for 2018. Our revenue growth has been 6.7% quarter on quarter. Our profits has increased. PAC has increased 50% quarter on quarter. Even if you look at year on year, Our EBITDA for this quarter has been higher than 10% over last year. The growth has been driven mainly by T25, which is in our strategy. 85% of the revenue still come from T25 And that is exactly what it will also happen in future. ECP, That is electrical powertrain has contributed highest to the growth. In terms of geographies, Europe grew by 14%, USA by 5%. And in case of verticals, the growth has been across verticals, mainly passenger car, commercial as well as new mobility. The Impressive performance on the profitability has come on account of better quality of revenue, Increase in the productivity and operational efficiency, consolidation of offices which has given us benefit in terms of cost. As we can see, our revenue per employee have gone up during the quarter regionally. If you really look at Last eight quarters, we have consistently been increasing the cash for the company, Net cash for the company, cash conversion has been very strong. It happened during this quarter also very difficult quarter in that sense because of the holidays, But we continue to have a very strong cash conversion and the net cash goes beyond 6.29 Yes, it's mentioned in the press. Sorry. The stronger balance sheet, the balance sheet remains very strong. In case of bill wins, typically the broad based OEMs have driven basically the wins which we had during this quarter. We had one special win, which is a Triumph 2 wheeler. We are proud about this win basically because this is a It's a business model and in case of a 2 wheeler, this is the first real in production, you can say, connectivity platform. And Many have tried this but has not yet succeeded, specifically in view of new generation tools which We believe this could have a reasonable potential. But we are also very happy about being the first in bringing such a technology. If you look at the Q4, I would say that we are very optimistic and confident about Further normal growth in terms of revenue. Also, we are looking to increase our EBITDA I think we started this year on a very difficult note, Specifically being only focused on the mobility sector, which was one of the most impacted sectors. But by the end of the If you look at, I think we are very confident that by Q4, we will have a better performance As compared to the last quarter Q4, in case of EBITDA, PAT, net cash, we have also We made a lot of strategic things during the year, which we have announced and these are in new technology areas. We have also done a lot of work in terms of development of team, leadership development And competency development, which really would go well for us as we enter into the new year. So we have made this year complex in spite of a very difficult year. Looking forward, I feel that There will be I mean as you might have seen some announcements like again has announced more than 10,000,000,000 Dollar investment into electrification, Volkswagen has made such announcement. So there are very high investments which will happen in these technology areas. I believe for multiple reasons, both in terms of compliance as well as for competitive reasons, next 4 to 5 years, There will be a significant investment into new technology. And KTIT being arguably one of the largest And the most well placed player in this space, we would have our fair share of business from this bank. I may also say that the unique position in KTIC has Phuket itself in which is independent key software integrator becomes a very important positioning and need for the OEMs as they are adopting new technologies. So we see a very positively looking into the next year and beyond. Thank you. Sir, would you like to begin with the Q and A session? Yes, please. Thank you. Ladies and gentlemen, we will now begin the question and answer session. And 1 on their touchtone telephone. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have the first question from the line of Mohit Jain from Anandradi, please. Hello, sir. One is on the top line. So while we shared our outlook for next quarter And we don't share TCV data unlike some of our peers. So what kind of visibility, growth, etcetera in terms of your pipeline? And any color on FY22 how things are looking at your end given that offshoring is likely to stabilize at current levels? Yes. So 2, 3 things. I think I gave you outlook for the next in the sense how the environment will be for the next year and beyond. That was my main purpose of talking about the investments and the announcements by the new OEMs, including some large Happening like a PSA and matter with few large OEMs. But from our side, I would say the pipeline is strong. I think during this quarter, we have increased our pipeline substantially. We believe that we are in a well placed position in terms of pipeline. We always talk about some Regimental means which we have been announcing. So from that perspective, we look at it very positively going forward into the next year. We are very well positioned getting into the next year. From the offshoring perspective, I think we still on the offshoring And also the different business model, as I mentioned. But I think that would happen. It really depends upon which customers because it also depends upon the maturity of our customers as well as the type of technology. But we believe that After we have delivered multiple production programs over last few years, we are well placed to make more offshoring upon next year. Okay. And the second one, at the time of listing, we were talking about this 18% kind of EBITDA margin in 3 years. So where are we given that option has gone up? What is the growth in target now? And by when do you think full benefits of cost optimization will come into play? We had mentioned about 16% to 18%. We are happy that we are closer to the range. I'm sure we will do all that. Dollott Capital. I mean, we will be year by year, but I think right now, I would stick with what we are showing here. And we will, of course, still Improve our profit as we get from here, but I would not give any number right now. Okay. But no planned investment into SG and A or something which can eat into our current What about you? No, there is nothing significantly which will impact the margin. Okay. Okay. So last year headcount, there was this reduction of like almost 500 people, while demand environment continues to be strong And Kamil, you're talking about hiring. So what is the current? When do you think headcount stabilization will be done there? So what we did From our perspective, we have done Basically, every year, we take up about 4% of our bottom up. I think we went ahead and did that little early this time ahead of our appraisals. Also about 1% or so, little more than 1% we That I think those actions we took, which have resulted into the reduction into account. But at the same time, up to September, from April to September, we will have 600 people on board from the call, yes. And of course, we will echo you as the year progresses. Okay. Thank you. That's all for making. Thank you. Thank you. We have the next question from the line of Please go ahead. Congrats to your teams on the strong quarter. So the question was regarding your revenue growth for this quarter has been driven A large portion of it has been driven by the powertrain business. I want to know what is your outlook on the rest of the practices, which is autonomous, A TAS and Electric. And just one suggestion, if you could just give some broad breakup as to what will we do in the other line item, that will be great. My second question was on the margins. If you could just break that up, if you could just break the EBIT margin improvement on a quarter on quarter basis As to how much has come from consolidation of facilities, how much has come from reduction of headcount and how much has come from improvement in utilization of the offshore? Thank you. So this is Sachin Nikekar. I'll answer the first part and so Gill will take up the second part of the I think that we take a yearly view rather than a quarterly view because there are always programs coming up and programs getting over. In general, the trend seems like that electrification is going to lead the way. That's the trend and KPIs in a great place When it comes to 3 geographies, we'll see a balance growth coming from all 3. Secondly, after our key three offerings, There will be growth. And again, during the course of the year, some will grow more than the others. But we believe that In Q4 and getting into the early part of the New Year, we'll see more balanced growth That's the answer to your first question. The second part was that you wanted to know a little Just one, the other segment of what we do there. Yes, if you look at the practice of pickup, the adult segment currently involves diagnostics, It's vehicle engineering and Designing. Okay. Okay. Yes. And if you just comment on the margin, the second part of the margin Hi. We haven't given any specific concern. At a broad level, let me put it. The management impact has been Both on the basis of quality of revenue, which I would put into offshoring, productivity improvement and license revenue And productivity and the second is operational efficiency. That would be heavily the contribution. Consolidation of offices would be marginal. Sir, how much was license revenues in this quarter? I don't think we give this detail I'm going with it. Thank you, sir, and all the very best. Thank you. Thank you. Thank you. We have the next question from the line of Nitin Badmanaban from Investec. Please go ahead. Hi, good afternoon, everyone. Congratulations on a great quarter. Sorry to interrupt, sir. There's a slight background disturbance. Could you please switch Is it better? Yes, yes. Yes. Sir, I think the first question was upon the strategic 21 client. Do you see how do you see the growth profile across those 21 clients? Are you seeing consistent growth across them? Or Do you think that there are areas where there is some percentage? Just your thoughts will be for 'twenty one. Overall, Nitin, if you look at the FY 'twenty one, I think all of them dealt with What they had to do during the pandemic, especially in the 1st 6 months. Now that they have taken Some of those costs out that were not a priority. They are actually reprioritizing their spend. And fortunately for KPIT, the spend mostly is going to be in electrification, autonomous driving and connected vehicles led by a digital cockpit. So when it comes to T3 areas, almost all of our T21, T25 clients have made a commitment to make these investments. So from that perspective, Overall perspective, I mean, different clients are taking a different view. But from KPIG side, I think there is a common part, which is prioritizing investments in these three areas. That's what we see at an aggregated level when it comes to RFP 25 client. Do you think the tentative news on spending post the pandemic can that is sort of true and from here on, things should definitely improve I think that's a fair statement, Nitin. And it's a gradual process, Right. It's not an on and off switch. As most of our clients get more confident into the future And as they have a better handle on their overall expenditures, they are having more and more conversations about their future production programs with us. So it's going to be a gradual process, but absolutely trending in the right direction over the last 6 months. And so I think you answered this partially, but this one will dig in a bit more. If you look at the With AD ADAS and connected vehicle. AD ADAS, I understand there will be some reprioritization of trends for pandemic. But do you think that is sort of bottomed out in terms of where we are today in terms of the numbers? And on the connected basis side, Both of clients and whatever incremental that they're seeing, do you think this is also sort of bottomed out? I don't know what you mean by bottomed out. But I think if you look at all of the OEMs that are there from the passenger cars All of them have announced some of their new production programs. Some of them got shifted by a year or so. And then there have made some tweaks within. So for instance, some of the OEMs said that instead of Level 5 of autonomous, There will be more spend on Level 3, maybe getting into Level 4. That kind of reprioritization has been done. When it comes to Connected, There are two sides to connect it. So connectivity within the car, which has to do more with the spend that they have in areas like digital profit And then connectivity beyond outside of the vehicle. Outside of the vehicle, given the pandemic has certainly become very important Because you want to be in part of the connection. So they are reprioritizing that. And they are also prioritizing digital profit because that's going to be the way forward. So across all these three areas, we see signs of Not signs of commitment, but I think there are commitments by our clients to get into these programs. I wanted to add 2 things. One is during the last few quarters actually in Autonomous. One of the largest programs we have in moving offshore because this was a new technology area. Earlier, all our people were on-site, Right. And it took us some time to really know some of these skills and have confidence for customer and as well as ourselves to move with offshore. So I think that has been also one significant part in some of these cases. Alright. To add what Mr. Takeda said, I think we have in mid line, I think we are very limited So Whatever is best in terms of bottoms out was the revenue number in these two practices. So I think you alluded that the AD ADAS was because of offshoring. But in terms of from a absolute perspective, do you think this is sort of a Our bottom here is more through the funnel. That's what I was trying to understand. Yes, yes. As I mentioned earlier on, Going forward, we see more balanced growth across the three areas. That's very helpful. Thank you for touching on. Thank you. Thank you. We have the next question from the line of Ashish Agarwal from Principal India. Please go ahead. Mr. Ashish Agarwal from Principal India. Mr. Agarwal, are you still connected with us? As there The next question is from the line of HR Gala from Finvest Advisors. Please go ahead. Yes. So I have a few questions. In your journey to Increasing the EBITDA margin, how do you balance out the margins in different geographies? Because given the same volume of business which we are doing in U. S, U. K. And the rest of the world, more or less, The margin differential is very high. So how do we understand that? And do you think it can level to a particular level so that the company as a whole Can you see a 16%, 18% type of trajectory? That is my first question. Yes. So I think the 3 things I would like to mention. I Typically, we look at, as you saw, geographical margin, but I will give you some examples. First is, Strategically, we decided to invest into certain geographies more. These are like a development center. These are not marketing offices. And these are leveraged across. The important part is many of the new technology work we have done in some of these geographies, which we have leveraged in the other geographies. So it becomes very difficult from that perspective. But to your point, certainly over the period, we will see that. But as you know that there are some of the More advanced clients, which are more demanding and the new technology work which we do initially Because a lot of that work gets done on-site and then moves offshore, which I was explaining just some time back. I think Those are some of the impacts. But of course, we are very careful about this. And these are the leverages we have in the future Where we will be in a position to improve some of these margins regionally well. Okay. That was the first question. The second question is, So can you tell something about this Triumph tie up? You said that you are the first one to do and it has not been dropped out anywhere in the world. So what exactly we are going to do in that? What we have is a connectivity platform for 2 wheelers. And We did a program with Triumph, where Triumph is one of the first companies in 2 wheelers to have a connected Platform that is working very efficiently and effectively. Now that we have done this together, The asset actually belongs to KPIT. Triumph is our 1st partner to get this out. But now we really want to Given the pandemic, I think micro mobility is becoming important. So more and more 2 wheeler companies as they get into the electrification and so forth, They also want their 2 wheelers to be smart and connected. So all the global OEMs in 2 wheelers want to have similar platform. Now some of them have made efforts to build this platform on their own, but there is something that is still lacking. So now that we have proven use case with Triumph, We are getting more and more inquiries from 2 wheeler OEM whether we can work with them in a similar fashion. Okay. So when do you think this app will get commissioned? No, it's already underway. Okay. It's already underway. Okay, okay. And what will be your revenue like? Will it be per P. Vijay Kumar:] Or you will charge lump sum amount for how it will be? Vijay Kumar:] It's both. So there is what you call NRE, The non recurring engineering fee, which is upfront. And then there is depending on the size of the OEM and what they want, There can be 1st single monthly, quarterly, yearly charge. So there is NRE plus fee. Okay. As I mentioned in the earlier commentary, I think this is not one of the largest means for us in terms of volume, but I think it's very Critical to bring the technology, make it work in a new domain on the new 2 wheeler and the being first as well as the business model. I think that's why we mentioned it. It has a potential. We'll see how it goes. Correct, correct, correct. Okay. Next question is, a couple of quarters back, we announced that big contract. Do we have any such more contracts in offering? Yes. I think most of our business is driven by the production programs and What we have done is certainly led to multiple such possibilities in future. So there are it is a part of our pipeline. It is part of our pipeline. It is part of the pipeline. So the way Automotive industry or mobility industry works, it's not about contracts and deals, it's about long term engagement. Yes. Once you are in a partnership model, they have multiyear programs that come out. And as long as you continue to be a partner, that Creates tremendous value. I think it gets renewed. So that's the kind of model that we are trying to put together. So all of these relationships We have long term visibility into their program. And naturally, if we continue to create value for them, we'll be The partner of choice, right, to so that's the kind of model that we are trying to get into. If you look at How Tier 1s work with OEMs? This is the model that they have. So as a software integrator, we are also trying to Build a similar model working with new OEMs and Tier 1. Very good, sir. And last question from my side. As far as balance sheet is concerned, which you have given On Page number 18 of the presentation, there is a big jump in the other's liability from INR 306 INR 4.9 crores. So what will be the input? We'll put the information on the website. Yes, we'll put the information on the website. There's nothing significant or No, I mean, it has increased by INR 100 crores. So I was just wondering that Well, if you have, I think, probably items like your unbilled revenue and things like that, I don't know. There can be something more. So Yes. We'll put it up on the website. The information we put it on the website. But there is nothing significant. Just to tell you, even in case of our We are one of the lowest in the industry, we think, Mark. So nothing coming to mind quickly. I think we'll look it on the website. Okay. But it's not something like that amount of debt which is due for payment in 1 year or something? Because we don't have any debt basically. No, we Fine. I will get back to you. Thank you very much. Wish you all the best. Thank you. Thank you. We have the next question from the line of Ashish Agarwal from Principal India. Please go ahead. Yes. Thanks. Am I audible? Yes. Okay. So two things. First of all, just on the growth side, Given the fact that in this fiscal year, we have signed couple of large deals, right, And I think that will give you good growth momentum going into FY 2022. I just wanted to understand what stops you to grow at high teens or Even next year, 20% next year. And secondly, we have now considerable amount of cash in our balance sheet. What is the usage of cash plan? Yes. On the first side, I think we have said that we are Quite focused and will grow what we have grown. You have seen us over the period that we have always given some of the better results. So I do not want to take any number. We'll give some of maybe some picture maybe end of this year. But certainly, I think we see we have a very positive environment for us to grow. So that is the only thing I can say at this point of Our pipeline is good. Our environment is good. Our positioning is good. So I can feel only Sorry? Sorry, I just want to understand the pipeline when we say it's good. If you can just quantify in terms of What would the growth in that pipeline would be, let's say, on a year on year basis or something like that? Some of this data, we do not I have not shared. And as you have seen in the last year, we have given more and more data, and we have been consistent on it. Some of this data, we don't give because it is very confusing in some cases. That's why we are not giving. But I mentioned that our pipeline has increased significantly, and it gives us confidence from the adequacy of pipeline for growth in future. So I would leave it at that point of time right now. And we'll give a little more color at the end of the year. So that is what I would say. In case of cash, absolutely, I think there are 2 key things. I think we Certainly, we'll look for some, again, niche acquisitions. We are not looking at any large acquisition. Even though there are opportunities, we will not look at it. We will look at niche second acquisitions, which will help us in accelerating in certain new technologies Our customers. These are the 2 specific areas where we may look at. So that certainly we are looking at, but naturally, We are very, very choosy on many of these deals. So I think secondly, in many of the technology areas as well as Kumar, as I have said in the past, I think we feel very confident that we can acquire any customer very quickly As well as we can build many technologies based on our investments we have made. So it has to be a special to really get into that. But we are looking at it actively in certain areas. So that is another point. We will beyond this year, We will also look to increase our payout ratio beyond this year. So I think that also we intend to do. So with that, I think This is where we will be with the cash. Thanks a lot. Thank you, Ashish. Thank you. We have the next question from the line of Ankit Agrawal from Yellowstone Equity. Please go ahead. Yes. Hello, sir. I had a few questions. Yes, please. Yes. The first one is on Revolo. Can you update as to how is it performing and what are the plans going forward? I think we have said it in the very earlier, maybe about a year back, That when we started as a new company, we decided that we will not do anything with the hardware and we will focus only on the software technology. Our new positioning is completely software integrator positioning to allow OEMs to integrate new technologies into vehicles. So based on our Revolio, the software which we have developed and the assets has been a part of our EPT Practice, electricity power EPT means electric powertrain practice. And that is one of the best Growing practice and that has certainly given us advantage both in terms of assets available with us, whether it is in battery And actual experience of integration of hardware and software, which has been a part of our EPC package. But as a product, we have discontinued selling it in a particular full product solution. So we have just taken the software ahead. Got it. Got it. Okay. And the second question is regarding the inventory write off This quarter, I think there's some mention of around INR 6 crores of inventory write off. Could you give more context around it? I don't think there is any mention in the inventories write off this quarter at all. I think there is some If you look at our P and L snapshot that we have circulated as well as the published financial statements, I don't think there is any lengthy write off statement at all. Okay. So probably Okay. So that was for March 2020, sorry, my bad. Okay. And then the third question is on depreciation. If I looked at your depreciation related to some of your peers, it appears on the high end. What could be the reason for this? So there are 2, 3 reasons I think we have been sharing this. And actually, at the beginning of the year, for investors, I had Even a quarter wise breakup of how it will work. See, the first thing is 2 years back when we demerged from the earlier company, all our assets have been new. So we had a new camper. Every asset is new. So that increased our depreciation. Also some of the Facilities which we have taken in Europe as well as outside rental because of the accounting standard that has also been capitalized. So with that, we had a significant higher portion. But as you have seen on we had given clearly that it will Move in a particular direction and reduce by the year, and it is exactly in line with that. As our As a year ago and our revenues increased, I think that will come down. Okay. Okay. Okay. That's all from my side. Thank you so much. Thank you. Thank you. We have the next question from the line of Vimal Goel from Union Asset Management. Please go ahead. Yes, sir. Thank you for the follow-up. So my question was on your on-site and offshore mix. You highlighted that some of the projects that you won earlier will sort of transition to offshore. Given the current pandemic, A lot of clients would have realized the benefits of executing projects offshore. What is your view? Will this Will offshoring be a structurally will show a structurally higher trend going forward? Or will we revert towards that normal on-site The project gets executed on-site first and then goes offshore, just like that. So will that trend the same? Yes. So there are two points I mentioned. I think one is I think in case of a very new technology, both clients will feel more comfortable. In case of new technologies, whenever They come or a new very complex program when it comes. They feel comfortable doing it on-site as well as Even from our side, to moving that kind of a complex for offshore immediately is not as easy As in case of our generic IT work. So we have been in a position to do it over a course of time This is in some practices more than the others. Also in some cases, access to certain infrastructure is also important with the Right. So depending on that, we do. But overall, as a direction, we do see that we can do more work in India. So in conclusion, your offshore rates are still suboptimal, so to say, and they have Some way to go forward or some way upwards. I don't understand what you mean our rates are suboptimal. You mean Yes. By percentage, I mean, there is a lot of Yes. Yes. Because some of your peers are as high as maybe 68%, I don't know what Your rate is right now, but maybe it could go higher from the current levels. Yes, sir. Would it be possible to disclose these on-site offshore mix going forward, sir? See, we have most of the times, we have said also that these are full price projects. And sometimes in this new technology I mean, for example, 1 of these autonomous projects we did, I think at a point of time, it was 100% on-site. And it is not we are not priced based on on-site and offshore. We then started moving it to our offshore as we feel comfortable, Etcetera. That is the reason we don't share these details. Fair enough. No problem. Thank you so much once again and all the time. Thank you. We have the next question from the line of Nitin Panmunaban from Investec. Please go ahead. Yes. Hi. Thanks for the opportunity, Vijay. Sir, if you look at the revenue per employee, it's gone up quite nicely, up 16% sequentially and up almost 9% year on year. Now I just wanted to understand, is this purely driven by Utilization or will there be some something like a licensing or something driving that number? Because if I look at headcount is lower than same time last year, but the revenue per employee is also higher. So either utilization is much higher or there is some additional I think kind of revenue, I just wanted your thoughts on all 1st thing about Yes, there are two points specifically, As I mentioned, once certainly utilization has gone up. I think we tightened that. That is certainly one element. But the second element is On the basis of productivity and fuel license revenues, as I mentioned, see what happens is many of these projects We have taken based on productivity, and we have seen a reasonable improvement in the productivity over the last year. And I think that has helped us and also some license revenues, not significant but reasonable value. So, sir, just another question and maybe just a little bit of your exposure. If I look at the 5 years Until fiscal 2020, fiscal 2015 to fiscal 2020, we grew at our 15.5% status. And during those periods, we never had any of these large deals or any such things. And at this point in time, I think it's the first time that we have seen 3 large significant deals come through. So when we think about this category, is it Fair to assume that compared to the earlier growth trajectory that we should actually be higher or is there something That I'm missing in the underlying math. I can only say that one is the way we are doing the business is also changed. I think we are taking a more full responsibility of the project. I think we have established ourselves very well, And that is exactly where most of the OEMs are. Many of the OEMs are moving to new architectures of their vehicles And the larger programs on electrification or autonomous. And we are in a position to take a substantial ownership of many of these. I think that has really led to that. I would say it gives us more visibility into future and more Both in terms of how we operate and hopefully over the period more monetization of assets which we build, I think that is the benefit we will get. I'm sure in some way it would help us for growth. So when we think about it, it should reflect not only some growth but also in terms of Margins and revenue per employee all put together? Certainly, I think that is reflecting a bit in the last Thank you. We have the next question from the line of HR Zala from Finvest Advisors. Please go ahead. Yes. Just can you broadly tell us what kind of Capital expenditure plans we will have? So capital expenditure plan, we are still working on our strategy for AOP FY20 Capital expenditure plan will depend on how we will utilize the capacity and looking at the new deals that we will win. We've put Together is the plan. Okay. And how much it will be in the current zone? That's correct. Just to explain further on this, there is no significant Capital facility we are looking at and nothing out of turn for our so it will be everything which is normal in the course of this. And I think you will be also taking assets on lease also. So Assets on lease, I don't know what you're referring to. The lead The right to use assets. So right to use assets are basically the lead facility, the offices. Yes, okay. It's just that Patil mentioned that we are not looking at any more new additional CapEx, Significant back CapEx increase. Okay. Because that has also increased about INR 100 crores in this 9 months period. So I was just wondering that whether you will have these kind of recurring requirements or no? No. Okay. Thank you. Thank you. Thank you. Thank you. We have the next question from the line of Ashish Kachol here from Lucky Investment. Please go ahead. Yes. Good afternoon and congratulations to the KPID team for a good set of numbers. Thanks, Satish. My question is basically, Kishore, if you could talk a little bit about the scalability longer term of our business because Some of our peers in the engineering and design space seem to be working across multiple verticals. So the scalability in those kind of seems to be a little more assured than our company, which is focused on a single vertical versus automotive. So could you kind of just share some of your thoughts on how much our company can scale to eventually in 3, 5, 10 years, whatever, dollars 500,000,000, dollars 1,000,000,000 There is a what is the eventual scalability potential of our company until we run out of customers and a disproportionate share of their R and D budget? So Ashish, I think it was a very well thought strategy we picked up on being on one single vertical Because we wanted to be a leader in one area, which hopefully helps us to grow weaker and have a higher market share actually. That has been our cases that as a company, we wanted to be a leader globally in one practice. Now what is happening is there are 2 sets of customers. 1, there are Many conventional OEMs, which are our major customers of T25, and there are few new generation OEMs. Now as you know that the because of the legacy, the conventional OEMs, they have to do a lot of work on their software. And there are companies in the new generation, Including Tesla, and there are a few more, which have started building their own Basically, the whole software and the vehicle in a different architecture. Now what has happened is all these conventional powertrain conventional companies, OEMs, they need to react So this significantly. And I think next 4 to 5 years, you will see some of the highest spend in this area. Now this is going to be complex. This is Driven by change in the architecture, it will be driven by domain. We believe that we are in one of the best places to capture this opportunity. Naturally, it will be a mix of what they deal and what they work with us with the partners. Now some of which they of course as the valuations are driven by multiple factor, one of them is owning of the IP assets. Many of them are building their own platforms and they intend to do this. But there, they need a partner who can help them accelerate that. But more important is the software integration where multiple software coming together in the Which is not what they have developed, but outside of vehicle and also the hardware and software integration, etcetera. I think we are We have positioned ourselves very strongly in that area, both because of our assets and experience in the production program. So I think at least next 5 years, I can talk about I see a significant opportunity. As a company, we have said in the past also that we believe there is a significant potential because I guess most of the companies will as the business mainly moves on software, I guess, ongoing basis, I mean most of them will start spending more than a €1,000,000,000 annually over the period is I feel. So we will have a significant opportunity to grow, but we will relook at this maybe when we are double the size of Where we are, whether there are any other verticals we need to look at. Until that time, we see we are in a very good position, and we would like to Maximize what we have built. Sachin, you want to say? I'll just add to what Krishnan said is, Ashish, if you look at it, The vast majority of our revenues actually come from passenger cars, and there is tremendous headroom to go within passenger We have just scratched the surface when it comes to commercial vehicle. And commercial vehicles are also looking at making Investment in electrification, in AD ADAS and in connected vehicles. So we think that, that's going to be another subvertical that will grow for us. And we are also looking at new mobility. All of this will lead to new mobility. And we believe that there will be opportunities for us to grow within those also. So within Mobility, I think we think that there is enough headroom to grow in passenger cars and there is untapped potential both in commercial vehicles and in new mobility. So given all of this, we believe that for the next 3 to 5 years, there will be enough headroom for us There is enough growth that is available for us, right? Thank you, gentlemen, and all the very best. Thank you. Thank you. We have the next question from the line of Rahul Jain from Dollard Capital. Please go ahead. Yes. Hi. Congratulations on very strong quarter. Just two questions. Firstly, we have seen that the peers In the same way, space are talking very positive commentary also on the order side of the business. But My general question is that with the kind of volatility that we have seen in this Vertical or cyclicality also in the past and also given the project kind of a nature involved, Do you think a long term predictability is a possibility? All the opportunities are huge, but can those kind of So I think I would just like to put it in 2 buckets. First is we have many times mentioned that their technology spend does not depend on number of vehicles they sell. So that is that actually because of more specialized platforms they need to build and the new technology they need to Bill, I think it is disproportionate to number of cars which people are selling today. So they have to make significant investment into technology. As I mentioned just before, I think the new architecture programs, many of them will put in over the next 4 to 5 years, and that will be the largest trend area. And we believe so for next 4 to 5 years, we see a significant opportunity for us ahead of them. From that perspective, I would say that at least for a reasonable period, we see good potential for Okay. And just to add on that, I think from a service offering And the areas that we are focusing, we are pretty much aligned the way the industry is moving. But from a focus Client portfolio perspective, do you think the way the industry would shape up we are with the right A set of customer today itself, obviously things that would evolve significantly over the next 5 years as Various countries have different time line of achieving electrification. No, that's a great question. And what we are saying is we have put together a process, which we look at twice a year. We look at our T25, we look at there are 2 factors that we take into account. 1 is what is their positioning In this changing environment, are they the ones who are going to make it? And secondly, what kind of value KPIT can create for Right. I think if the answers to these questions is yes and positive, those are the clients that we want to engage with from long term perspective. And that's how we have selected our current list of T25. Having said that, we understand that this is a dynamic market. There are disruptors, the new mobility players that are coming into it. We know that some of our conventional OEMs are going to make it. We know that some of the newcomers will disrupt again. So every 6 months, we sort of do a deep dive to look at Where the T25 stands and what are the new ones that are likely to disrupt the play and what is KPIT's value proposition to them, Right. These are the aspects that we evaluate. So even though we are focused, we want to keep the process Fairly dynamic. So that we are not blindsided by the changes that are happening in the environment. Does that answer your question? Yes, sir. Just a small more nuance on it. And as you know, we are seeing a trend, not just Auto company making more of a tech product, which we initially call it, historically, the power setting mode, Electrical. It's the other way around as well, where asset companies are making also the sale. So from that perspective, do you think our relationship has been the right partner is a bit distended that And the volume, let's say, the Kurdistan model, which we have done well so far. Yes. I think what you are saying, what I called The disruptors, you're probably calling them technology companies, right? Is that what the question is about? You're absolutely right. And that's what I mentioned. We understand that the disruptors are technology companies themselves who want to get into mobility space. We are keeping a very close eye And we have also initiated some partnerships, right, that will help us to create greater value for them. The value proposition is getting fine tuned, and we believe that in the next year or so, we'll have a very clear strategy and clear value proposition for these disruptor companies. So we are monitoring them very, very closely. We are also building partnerships and ecosystem so that when the shift happens, we are ready for the shift. Having said that, we still believe that many of our existing, what you would call, conventional OEMs and Tier 1s Are making significant investments and we believe some of them are going to be very successful in the new model as well. So keeping focus on them is equally important. As we have no further questions At this time, I would like to hand the floor back to the management for closing comments. Please go ahead, sir. So thank you everybody for your participation. And if you Have any questions later on, please feel free to write to me, and we'll be happy to get back to you. Thank you, and have a great evening. Bye. Thank you very much, Thanks. Thank you. Ladies and gentlemen, on behalf of Dollitt That concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.