Q1 20/21

Aug 4, 2020

Ladies and gentlemen, good day, and welcome to KPIT Technologies Limited Q1 FY 2021 earnings conference call hosted by Dollart Capital Markets Private Limited. As a reminder, All participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dalit Capital. Thank you, and over to you, sir. Thank you, Nirav. Good evening, everyone. On behalf of Dalit Capital, I would like to thank management of KPIT Technologies for giving us this opportunity to host the call. And now I would like to hand the conference over to Mr. Sunil Phansilkar, who is EVP and Head IR at KPIT to do the management introductions. Over to you, Sunil. Thanks, Ramal. A very good afternoon and a warm welcome to everybody on the Q1 FY 2021 earnings call of KPIT Technologies. I hope all of you are continuing to take good care and staying safe. Today on the call, we have Mr. Pishore Patel, the CEO and MD Sachin Tikekar, President and Board Member Priya Hardikar, Senior Vice President and Head of Finance and Sunil from the IR team. So as we do For this, we'll have the opening comments by Mr. Kishore Patil on the performance of the company and the way we look a year ahead. And then we'll have this floor open for questions. So once again, a very warm welcome and I will hand this over to Mr. Tishore Patel. Good afternoon. I would like to take you through the highlights of earnings for quarter 1. So first coming at the revenue. Our revenues dropped 9% year on year, quarter on quarter and 14% from the last quarter, Q4 to Q1. The way we need to look at this is in view of a few factors. Number 1, most of our customers, their revenues dropped by more than 50% on an average globally. Number 2, if you look at all the engineering service providers, Most of them in automotive and transportation, their revenues have dropped somewhere between 12% to 35% quarter on quarter across the globe. It includes European, Indian and other players. So in light of this and in light of The guidance which we have provided for the last quarter of reduction in revenue of 15% over Q4. We did a share better by doing a 14%, restricting the growth to 14%. I would like you to give some little more information in terms of The details in terms of revenues. 1 is the strategic customer. As you know, the T25 is our backbone of our revenues as we have T21 as of now. The overall portion of revenues from these customers increased to 86%. What it means is our all the key customers and our the main customers continue to hold stronger during this time. And the other important thing as we have seen and which gives a lot of confidence is I must say that wherever there has been cuts in the spending, the customers have done, the cuts done with KPIT have been lowest among the vendors. So from that perspective, it gives us has helped us to increase our market share with our strategic customers. In addition to that, I think the key highlights includes the large deals we have been in a position to conclude during this time. So last quarter also we announced one large deal. During this quarter also we have a one significant bill in excess of €60,000,000 over the next 5 years. Now What we have seen is some of I mean these deals take some time to conclude, but this gives us a visibility over a longer term and It really underlines the relationship KPIT forms in a strategic way with some of these customers during this time. So this is the 2nd consecutive large deal we have concluded in this year and we have few in the pipeline. We have in addition to this, we have closed 4 to 5 deals, which includes 3 with OEMs across our practices, electric powertrain, autonomous, connected and also we did a couple of deals with the Tier 1s. So overall, as we could see is there has been winning of the deals across the geography, across the practices and customer segments. Coming back to the margin, I think the key part of that is we have been in a position to maintain EBITDA of 13.4%. So basically what it means is the overall the margins have been intact And as the growth comes back, the overall profitability of PAC will go up. Now two things I would like to mention is in this, the pack has decreased by 35% over Q4 and in spite of the EBITDA being the stable. Now there are few reasons for that and I would like to go into detail of that and the main reason has been depreciation. So if you look at the overall depreciation, which is RMB330 1,000,000 for the quarter, 125,000,000 is on account of lease. So more than 1 third part of this is because of the lease. Just to put it in the perspective, even during this year as compared to the last year, last year our CapEx was INR 60 crores or INR600,000,000. This year our total CapEx will be INR480 1,000,000. So overall, our CapEx is going to reduce, but the depreciation has gone up because of the lease. And if you really look at how it is going to pan out for the next year, In Q2, it will go up by 8%, the basically the depreciation. Q3, it will reduce by 8% and Q4, it will reduce further by 10%. Overall, we feel that Our depreciation will be you can consider at little less than 6% at quarter 4 and continue to be at that level as a model. So while there will be some variations, that's how we see that. We have not really incurred any significant Expenses in CapEx neither we intend to do that in any future near future. So it is only on account of release why this has happened. The reason it will go down is basically because during this quarter as we have said that we have taken a large facility, we established a large facility in Munich and the consolidation of other facilities in Germany to the Munich site as well as in consolidation of facilities in India. That will happen maybe by the end of quarter 3. So the full impact of this can be seen only in quarter 4. So Overall again to say that overall CapEx for this year will be INR48 crores as compared to INR60 crores last year. Coming to the cash and liquidity, we have INR394 crores net cash, which is an addition of INR 66 crores during the quarter. This is free cash to EBITDA ratio is 1 25%. So we continued significantly, I mean significantly for last 6 quarter, the cash generation has been very strong. While our data have increased from 66 to 72 from 66 in Q4 to 72 in Q1, It is on account of extended payment terms granted to 2 customers specifically and that will be settled, I would say in letters by Q4, if not in Q3. So I think The overall liquidity indebtedness is completely in according to plan. During this quarter, we established our Germany presence. It is a very strategic for us for multiple reasons. As you know, the KPIT's vision reimagining mobility and to establish ourselves As the leading software integrator across the world, it is very important that we have the global presence and deep domain knowledge. And from that perspective, we have established this office, which has more than 700 capacity. We will consolidate our other offices here as well as most of the new deals we will be executing and the large deal deals we will be executing from this office. This is very important because this allows us, 1, to be close to customers and be a part of critical, I would say for German companies in their critical programs to participate to attract the best talent across the Europe and outside too. So as I have mentioned in our press release, 25 nationalities, people from 25 nationalities work from Germany office. The third thing is it actually positions us well in terms of a global player with a deep domain knowledge as the customer all over the world do not visit only in India, but most of them do come to Germany office to see what is the latest there. Many of our practices are actually run out of German. Coming back to practices, electric powertrain, EDAS, connected continue to be our areas of growth. It's supposed to grow further during the year. Our pipeline is stronger in these areas. The software integration is a very critical positioning for us and that is important in all these domains. And we believe that that niche will help us to really win these large deals. And many of these large deals we have won are in the area of the software integration across the domains. In terms of people, which is the of course the backbone of the company. We continue to invest into building the competence with the people. During the last quarter, we had more than 20% of the people going through significant training during the quarter and really getting them ready for the assignments or the new skills. Now we also conducted a survey across work from home because 98 more than 98% of our people were working from home. And there were key highlights of it. With all our customers, we have Been sharing the data productivity data and they are I mean, I would say more than 95% of the people are very comfortable with activity what we have shown. And our people are very happy to work from home and they have shown a good productivity. They think it is a productive way. However, we have also Understood some gaps. And as this work from home will continue Beyond the corona, we want to really make sure that we establish very strong processes for this and ensuring that the productivity goes up when people work from home. Overall attrition has been around 11% And that seems to be on the lower side as compared as in view of our expectation and we expect this to go down further for some time. Going forward, I would like to give glimpse of the rest of the year. We will of course, we will not share specific number, but this will give you some idea about how the year will pan out. In quarter 2, we expect the cost savings to be whatever the cost savings we have taken the steps for. We will get this for the whole of the quarter. So we will save money in the cost. There will be higher depreciation as I mentioned 8% more than quarter 1 because our Munich facility depreciation will be there for the whole of the quarter. Overall, this will be a flattish quarter Q2 in terms of revenue as well as profits. In terms of Q3, if you look at, we'll have increase in the offshoring, the utilization will go up. Also as we had mentioned in the past that we have restructured the salary of many of our employees. We will basically restore the salary structure. So we will bring back the salary to normal levels. And during this quarter, we are expecting revenue growth, the margin improvement even after solving the salary restoration and there will be marginal improvement in EBITDA post salary restoration. In Q4, we further are looking forward to more offshore revenues, better operational efficiency, lower depreciation due to consolidation and other points I mentioned. We expect the revenue to go up, EBITDA to go up further and Pat to go further. So this is how the year will pan out for us. I think we feel in a much better place from the last quarter. We have a better visibility. We have been encouraged By the response from the customers as well as our employees, we have these wins and based on that we are in a position to give you this outlook. Thank you and we are ready for questions. Thank you very much. We will now begin the question and answer session. First question is from the line of Nitin Padmanaman from Investec. Please go ahead. Yes. Hi, good evening, and congratulations on the second consecutive large Deal Win and Strong Cost Management. I had a couple of questions. One is you did allude There has been a pipeline of a few more large deal wins. So any color you could give us on those are these of similar sizes? And Of the deals that we have won so far, is there any element of vendor consolidation or any such thing that we have gained during the quarter? Thanks, Nedik. I think I would say that we have few deals in pipeline of similar nature, I would say, and the sizes. But every deal is, of course, unique in its own way. So So first thing I would say that these deals will across the practices largely in EPT and Autonomous largely in EPT Autonomous, but We are very confident that in Connected also we'll see some deals. So One of these deals is like a vendor consolidation. It is based on that. And specifically what we talked about this quarter. But most of the time that happens basically not only from the cost perspective, but from a value proposition perspective. So basically, our value proposition for Some of these vendor consolidation is improving their productivity, better quality and making them successful with their customers. I think when the clients are in a position to see that, I think they are amenable to this idea. So Certainly, there one was on this. But the other 2, I see are very significant Also and strategic in other way where many of the customers are looking of disaggregation of hardware and software. And as I said, they are looking at independent software integrator, other than the hardware player. And that is where we have established ourselves or positioned ourselves as a very strong player. And that is where some of these deals have come from. But to your point, there are 2, 3 ways in which we are looking at large deals. 1 is Some of these trends, some of vendor consolidations. And the third is in terms of many of these customers are looking at owning of the software or having a better control on the software and that's where we are trying to work out propositions where we have a lot of assets and that really ensures them, 1, is quicker time to market, better quality. And I think these are our propositions for the last days. Sure. Had 2 more if I may. So one is If you look at our pipeline today versus how you would have seen it maybe a quarter ago, Do you think that it's sort of come back up quite well? And 2, in terms of whatever cuts We saw some from clients during the quarter in terms of spending. How much of that do you think would be short This is Sachin Tikekar. So let me answer the second question first. Out of the cuts, we have line of sight to more than 60% as we speak to come back during the course of the year. And obviously, we are not going to let go of the remaining 40%, we'll keep tracking it. But we keep tracking it Every week and right now, we believe more than 60% will come back during the course of the year. Sorry, Nitin, what was the first part of the question? The first part of the question was how does the pipeline look versus maybe a quarter ago, a year ago, how does it look in terms of visibility and conference. I think easy answer for quarter 1 is it's much, much better because even though we want to be Optimistic, we are going to be cautiously optimistic given the overall scenario. It's much better than what it was a quarter ago. Like I said, we remain cautiously optimistic if The pandemic continues to be stable, the way it is today. It's not going to go away, but if it doesn't through other challenges, things should get better during the course of the year. Sure. Great. That's very helpful. Our last data point question is, CapEx for the rest of the year would be around INR 15 crores, sir. Is that correct? After the CapEx for the year would be about INR48 crores is what we have said. Yes. So I asked this, Sunil, because so last year, at least if we sum up the CapEx from the investor updates, it works out to 106 INR 110 crores. Yes. So there is a difference between that and what we suggest. I was just wondering is it something? That number includes the right to use assets number and the real CapEx was INR 60 crores last year, if we exclude the right to use lease CapEx. Sure. Fair enough. Thank you so much. All the way. Thank you. Thank you very much. Next question is from Vedek Sarkar from Unify Capital. Please go ahead. Gentlemen, hi. Thanks for the opportunity. Two broad questions. I understand we don't disclose and discuss order book per se. But given the significant deal wins we've had in just the last two quarters, about $110,000,000 in just 2 client accounts, on a Y o Y basis, how much better off does our order book look. And given that we expect H2 to be significantly better than H1, are we in a position to kind of comment that we could go back potentially to the $70,000,000 $75,000,000,000 run rate by say the end of H2? Just wanted to give broad comments on that. No, I think it's a good question. As I mentioned, even though things have stabilized to some extent in the last 2 weeks and we remain cautiously optimistic. The world is still not out of the woods. So it's very difficult to predict beyond the point. All we can say is right now things are definitely looking up. And I think As per my earlier answer, we should see more the pipeline getting better as we get deeper into the year. Sure, Sachin. So for the rest of the year, which is basically H2, are we better off in assuming a mid single digit kind of a sequential growth because I mean we do have some kind of visibility as far as our ramp up in offshoring and all that is concerned. So Would a mid single digit assumption be way off the mark or would it be too aggressive? I think we would choose not to give any numbers. But I think you can see that we are pretty confident because we are going for a salary restoration in quarter 3. And we are saying after that we will be in a position to increase our profitability. And Q4, it will improve further. So to give you again, I mean, I can only give you directionally this, our pipeline is must I won't say significantly more, but it's about the similar what it was in the last year or so and qualitatively much better. That's how I would put it. And we see that as Mr. Tikekar mentioned, it will we hope it will improve as we go deeper in the year. Sure. I appreciate that. So which means in terms of the margins, obviously, pre COVID, our aspiration was closer to 15%. And we ought to have exited last quarter, which is Q4 at about 14. So is it probable that with some support from top line coming in towards the end of this year, Q4 exit can be closer to 14, 14 point Is that a number that we would aspire to realistically? Yes. I mean, if you look at we are at 13.4 Yes, 13.4%. And we have said that it will improve over the next couple of quarters. So that's a fair assumption. Okay. And lastly, on your other income, See, the carry that we see on your other income, it doesn't tally with the significant cash that is built up on your books. If we just explain how the mechanics work and given the significant accretion we expect for the rest of the year as well, how would one How should one model for other income for us to clear? So, other income typically will receive today is less than 2%. Yes, other income typically will have ForEx gains or losses and these are 2 types. 1 is, of course, on the hedging part, but second is on the conversion of foreign currency denominated assets and liabilities. And if the closing rates for these 2 quarters, consecutive quarters, the gap between the closing rates is not very high either way. The overall other income doesn't change. So last quarter actually if you look at Q4 and the quarter earlier, the difference in the closing rates was much higher and hence there were conversion gains. Whether as where if you look at this quarter and the last quarter, the gap in the closing rates was not very high. And hence those gains on convergence did not come to the profit and loss account. And that is the reason why other income has gone down as compared to the last quarter. So It is basically the conversion of foreign currency assets and liabilities. Of course, there is interest income part in it, which if you notice has been increasing gradually over the last 4 quarters and it will continue to do so going forward. Yes. Actually, Suraj, my question was more on the latter part which you alluded to because assuming a INR 400 crores net cash balance even though a very conservative 5% yield, I think our quarterly carry on that alone should be closer to 4%, 5%, which is not the number that we're seeing on our treasury income today. So, Pallantu, I would just like to cut you short there. I mean, when we see a gross cash of INR 400 crores, we have actually given a breakup of how much is in investment accounts And that too how much is in India and how much is outside. So as you know we are subsidiaries around the globe and it is not pure subsidiary of development centers outside. And the cash is also required to be maintained in those centers. So if you look at the breakup, I think we have been increasing the quantum sum up cash in investment accounts and we will continue to do so. So you'll see a gradual rise in the amount invested and hence the yield on the cash invested. And what kind of an effective tax rate should we assume for the next 9 months? The tax rate will not change significantly from the previous year. So it will be in the same range of about 18%. All right. Thanks all the best. I'll come back in the queue for more 2016. Thank you. Thank you. Thank you very much. Next question is from Imal Goel from Union Asset Management. Please go ahead. Yes, gentlemen, thank you and congratulations for good set of numbers in a challenging environment. Sir, my first question is on this $48,000,000 sorry, I joined a bit late, so pardon me if I'm repeating some of it. But if you could just highlight this $48,000,000 of CapEx, Where exactly is this going to be spent on? This INR48 crores will be mainly spent on our hardware and software Square Intangible, which is our routine course of CapEx for the business. Okay. The second question was just to understand the rationale behind the Munich facility. This would is this facility largely to consolidate your other smaller facilities because if I were to look at the current context of work from home gaining a lot of importance, I mean My intuition would tell me that there would be a lot more focus on greater offshoring Because as it is, you're having a very good productivity while working from home. So just wanted to know the management rationale on having another facility in overseas, which will probably even entail more costs. So how are you planning to sort of manage that? So 2, 3 things. Of course, as we have said in our IR update. This includes the consolidation of our facility, but certainly some of these deals which we are signing. These are Preeti, I would say, new business model, very I would say, these are 1 of its kind of deals and pretty intense in terms of domain and technology. So this will have a Reasonable on-site to option ratio, so it will require some significant presence on-site. And looking at the Few deals which we have signed and few deals in the pipeline, I think we will require that going forward. And as I said, I'm not looking at it only from this. We are almost looking at Germany as our 2nd corporate office. And that is very important to really establish ourselves in the leadership position globally. It is very important and we can leverage it in multiple way. All our Basically improvement in the profitability, etcetera is after considering this. As you know, Over last 3 years, I think we have substantially outgrown in terms of industry growth rates. And it is important for us to be in the market, specifically for some of these significant deals. So from that perspective, we have established this. Lot of domain knowledge which is required is not available to that extent outside many places. That place seems to where you can attract the talent across. Sir, how many if I were to ask, can you say that this facility will help you consolidate these smaller facilities? What will be then your total seat count in Germany in Zurich after adding this particular facility? What is the increase? About 700. Okay. So this 700 is entire incremental, but Would this not include the consolidation of the facility? It includes consolidation. Yes, of course, it includes consolidation. Okay, okay, okay. So now you have 700 seats total in Dharmesh at this point in time. Yes. Q1. Sir, my second question was on this microfuzzy amount that you have mentioned in the presentation. Could you highlight what is that all about? So this was a deal which we did 3 years ago and there is a earnout payment where we Every year we acquire a part of the ownership there. So we have currently own about 95% in Microphysic. There is still about 5% which we will do at the end of this calendar year. And what is the approximate outlier for that? It should not be it should be around 3,000,000 euros 3,000,000 euros Okay. So my last question was on the rationale of keeping cash on in overseas subsidies. If you can just highlight what probably holds us back on keeping cash in some of the stable liquid funds that of your peers too. So if you could just explain that? See what happens is during the end of the quarters Unexpectedly, the receipts come in, in those subsidiaries and some of the operational cash flows are required to be maintained in those subsidies for the 1st week of payments towards employment and other tax payments. So those operational cash flow availability needs to be maintained at the subsidiary level and therefore there are the outside India entity. So let me also add a little bit if you know the history of KPIT after the demerger, we had less than INR 70 crores of cash to start with. From there, we have reached about INR 400 crores Over this period, about 5 quarters. 5 quarters. That's a significant cash generation over 5 quarters. Now the initially, I think we had to settle and all that merger, demerger, there were multiple things we had to do in terms of entity restructuring and etcetera. So we could not really deploy them for a long term in terms of cash. So actually we have started doing that only from the last quarter and more from this quarter and of course we are also looking at How we can improve our guild also. So we will see that certainly some of this impact going forward. And we are improving the overall global cash management as now we have more flexibility with us. Right. So going forward, we will see more amount of cash being deployed domestically in maybe risk free assets? Yes. Got your point. And So last question from my end. If you could just hire out of your total employee workforce, how much is deployed overseas and how much is deployed here back in India. Around 1200 people are working outside India. 1200? Yes. Thank you, sir, and all the very best. Thank you. Thank you very much. Next question is from Mohit Jain from Anandati. Please go ahead. Hi sir, two questions. First is, is there a reclassification of strategy got top 25 accounts in this quarter and how should we assume it going forward like the account will move to 21 or will it be back to 25? So what we have done is this time, of course, there are the strategic accounts are 25, but the relationships that we have established, we believe are 21. So as we add to that 21, this number will change. There is no change in the number of accounts or the composition of those accounts. It is just that The 21 are where we believe we have good strategic relationships and that's the number that we have mentioned. So sir, the revenue breakup that you have given is from 21 or 25? 21. Last quarter it was 25, right? Yes. So we have given it. We have changed it for last quarter and we have changed it for the earlier quarter. Can you give me 20 five number for this quarter because we have a time series for 25. I will have to see it. I'll give it to you later. We'll put it on the website. That will help. And second thing is on your thoughts, specifically on dividend payout, given that now CapEx requirements are frozen and they appear to be low and your business stabilizing. So what should we expect in terms of payout for FY 2021? So I think our payout policy is not very different, but at the same time, till our salary restructuring for employees In effect, we will not do any dividend payment. As I said in quarter 3, we will restore the salary restructuring. Until that time, I don't think it's proper to pay dividend. No, no, sir. I'm not talking about quarterly payout, but in general, like you plan to increase payout ratio in sync with the In the quarter, do you think currently No, no, we have a payout ratio in mind and as we have always talked about closer to 25%. And we take a view in terms of any specific needs around it. But roughly, we have been in a position to pay do the payouts in that range. 25% for the period. Thank you, sir. That's all from my side. Thank you very much. Next participant is Madhu Babu from Centrum Broking. Please go ahead. Total on China and all that in terms of the EVT. And obviously, there are a lot of other companies coming there, that's right, tend to focus on the EVT. So on that, how can that be a driver? And second, in terms of Madhu, there is a disturbance. So if I'm not mistaken, your first question was any customers or new customers, new wins that we are seeing from China as a geography? Was that a question? Yes, on the EV, electric vehicle. On the electric vehicle, okay. In general, we saw so I'll answer this question first and then we'll take your next question. In general, as you know, China is the first one to bounce back. It was the first one to impact it. And we have seen a weak end of a recovery in China, at least for a short period of time for sure. And we are very optimistic about our growth in China. At this point in time, There are enough opportunities and enough conversations that are going on that gives us the confidence that during the course of the year, We have already added 3 new clients in China in last 1 month. And we'll build on those we'll build on the existing clients that we have and we'll also build our business based on the new acquisitions. Kamil, specifically on the electrification side, The business that we are getting, it cuts across all the three areas, largely on the autonomous side. Then there is The middleware component for the electrification where we are extending help and some opportunities on the connected side as well. So it's a fairly balanced business, the opportunities that we are seeing in China. Does that answer your question? I wasn't sure whether we understood your question properly. So I just want to make sure that Yes, yes, that was the question. And second on the capital allocation, we I mean just any plans for adding another adjacent vertical because I think P. Vijay Kumar:] Even concentration has though it is a good vertical to be in, but on the semiconductor or anything on that? Or Why not explore buybacks because the current stock price is, I mean, a bit undervalued and this could be the right time for looking at the buyback, a one time buyback? So, 2, 3 things. Number 1, I feel that the reason we came out of a substantially larger entity to a smaller entity is to focus and become the best in this globally. And that's what is our passion and division. That's exactly what we are going to do. We believe there is a huge headroom for it. I mean there are certain of course some temporary times, but we believe that there is a lot of work and lot of opportunity for us in multiple ways. One is even the number of strategic customers and we are very careful that We work with really the best one and who have a high market share and are dominant in a particular segment in Passenger Car. Commercial actually we started last year we brought a focus on commercial. We had a good success. We believe that will also grow over the period. It may not necessarily this year, but Beyond this, we see a significant opportunity in technologies like autonomous etcetera. People think that that's where it will get deployed first. So there are multiple areas in that. In the new mobility sectors also or micro mobility or There are many other areas which are evolving, we call it new mobility. So I think we believe there is a lot to achieve. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] So we'll be focusing on this and we'll make the investment which are necessary for this. We will not be right now focused on any other way in which apart from this. So to your second question, we are not looking at any other Capital Structuring or buying back products. Okay, sir. Thanks. Thank you, Madhu. Thank you very much. Next question is from Dipesh Mehta from SBI Cap Securities. Please go ahead. Yes. Thanks for the opportunity. A couple First, can you help us understand how much impact in Q1 was because of supply side issue where Because of the challenges which we face in terms of work from home kind of setup as well as client approval and because we have So To answer your question, the impact because of work from home, there was negligible. I think for us the transition was very good. Nothing that actually that really that was not significant to even mention. Okay. So even from client approval perspective, no kind of implication, only that is Largely reflected weak demand kind of. As Mr. Patil explained earlier on, our clients have had a rough quarter with almost seeing 50% year on year degrowth. So it was a tough period for them. And yes, we believe that So there is some our clients decided to obviously reorganize their expenses and We are tracking all of those and we believe that 60% of that will definitely come back before the end of this year. Understand. Second question is, I think some of your peer indicated about some of the autonomous related programs spending is showing some kind of cut and unlikely to return back sooner. So if you can help us understand what we are witnessing in autonomous program and how the spending pattern and clients' priorities, whether any change we have witnessed? Yes. As Mr. Patel explained earlier on, I think conversations about the future programs are still on. Especially in Europe, It's a priority for many of the OEMs and also the Tier 1. So we think that it will be an area of growth for us from our perspective. So just to add a little bit on this, see, autonomous includes the level 1 to level 5. So most of these programs which are postponed are level 4 and level 5. There is enough work for the level 3, which is called ADAS, so driver assistance. So there is enough work in that area. And we believe actually next 3, 4 years there will be more work in ADASI. Okay. And second, another question is about the consolidation opportunity, which we highlighted last time. We are seeing some of the consolidation opportunity, what progress we have made and if you can help us understand size of such opportunity because I think the 2 large deal which we suggested seems to be new business kind of thing rather than we have replaced someone. No, I think I just I don't know whether you joined a bit later, but I talked about the current quarter's deal, which includes consolidation of vendors, but and of course, it includes some displacement. But 2019. Of course, our value proposition seems to help us to for customers to go with us for factory. And the last question is about this microfuzzy. I heard you suggested about 95 percentage right now which we own. So this quarter, how much we incrementally bought it for the consideration which we paid roughly around INR 17 crores? So we bought about 12.5%. And the remaining 5 which we it would be Proportionate or there are some milestone and payment term might be different? So we have said that the maximum payout for that balance 5% would be about 3,000,000. Okay, okay. Thank you. Thank you. Thank you very much. Next question is from Ankit Booradia from VEC Investment Management. Please go ahead. Thank you for the opportunity. I hope everything is well at your end and with all the entire team. Just wanted to get a hands on if you could So some color on typically what is, so during like a forward guidance on any contracts that come up for renewal or completion for FY 2021, if you could just give us some color? There is nothing significant in that. I mean, there are, of course, programs come for renewal studies, but there's nothing significant most of our renewals for some large contracts are in place. And we don't see any we cannot call out any significant renewal, which is coming in the next few quarters. Okay. Thank you. Sir, could you show some color on other expenses? Typically, what The line items are contributing heavily on other expenses. Would the R and D expense also be part of the other expenses and what typically quarter on quarter are we incurring for R and D expense, if you could just get some color on that? So other expenses do not include R and D expenses. Other expenses include typically what we incur on our facilities and some of the other expenditure on staff. The R and D expenditure for the company ranges between the same percentage as we had in the last year and it is not part of the other expense. Majority of our R and D cost is people cost and that is captured as under the head employee costs. Okay, okay, okay. Okay, sure. And any patents You know that we filed in the last quarter or the quarter before? P. Vijay Kumar:] Not really. Last quarter, we have not filed any Okay, sure. Thank you. That is from my end and all the best. Thank you. Thank you. Thank you very much. Next question is from Senthil Kamran, Itor Financial Service Consulting. Please go ahead. Hi, thanks for taking my question. First is on the powertrain. Could you give some color of share between ICE and the electric? And Just to worry about how electric powertrain is driving the growth? So overall electric powertrain portion is higher than conventional powertrain. And I think Of course, electric powertrain business is growing very fast. But on the normal conventional power trend, We have been in a position to maintain the business with more in some kind of hybrid business also, hybrid technology is also part of that [SPEAKER SRINIVASAN VENKATAKRISHNAN:] As also we see that in markets like U. S, it is still quite significant. I don't know whether you saw Audi's announcement last month, which talked about they expect at least 2 revisions to their powertrain technology. So it is still there and we just ensure that we have a higher share and maintain our business, but the growth is primarily coming through electric bottlenecks. Okay, sir. And second question is considering the current stress in the auto sector, Do you see any opportunities for acquiring companies or any plans to do any inorganic acquisitions? So we will do an acquisition only if we think it will give us a significant strategic advantage. I think Most of the we have ability to get to a customer in a very short period. Any customers we are confident that Due to our competence and the niche we will be in a position to get to any customer. Unless we see a significant area of specialization by the company and which we believe we will not be in a position to quickly match. I think that remains the only area where if and when We do it. But it is not a real focus of the company as and when it comes along through a certain opportunities we will look at it. We are not looking aggressively in terms of acquisition stacks. Okay. Yes. Thanks. Thank you. Thank you very much. Next question is from Vimal Goel from Union Asset Management. Please go ahead. Yes. So thank you once again. My question was on Microfuzzy. If you could just highlight what is the total outlay for this particular asset and what has been the revenue for For Microfuzzy over the last couple of years? The total outflow would not be more than 20 It will be €3,000,000 including the last one that I talked about, which is about maximum about €3,000,000 So that's going to be the maximum outflow for MicroPredict. And what would be the total revenues here? Now it's difficult because when we did The revenues were under €10,000,000 and we have grown multiple of those revenues over the years. So today it is difficult to say what is MicroPussy revenue, what is I mean it is completely integrated. And we most of our electric powertrain practice contains those revenues, but it is integrated with KPIT revenue. So in a short way, I can say it is more than 4.5 times. Absolutely. Okay. Thank you. All the best once again. Thank you. Thank you very much. Next question is from Rahul Jain from Golub Capital. Please go ahead. Yes, hi. So I wanted to understand if you could Tell us about how most of your key clients are positioning in terms of their own spending and you were talking about that in most cases you are winning market share, but how you see their overall pie shaping up for this year and plans forward. Also in terms of Any change in their overall thought process because initially we were more looking towards shared mobility and now probably the new trend could be personal mobility. So any change in stance by the vendors also clients also in terms of how they want to repurpose their future plans on products launches and anything else? So let me answer that question in terms of the 3 sub verticals that We have because all of them have different strategies. When it comes to passenger cars, obviously their prioritization today is the future technology and it's electrification connected, the three things that we do. That is their prioritization. So they are prioritizing their spend on software at the expense of the other spend that they have. That's a clear trend that we have seen in all passenger car OEMs. When it comes to commercial vehicles, I think commercial vehicles also started to follow the same trend. Mr. Patil talked about Commercial vehicles bringing autonomous vehicles, so that has become a priority for them. So essentially, again, Software is becoming the center for them too. The last vertical is new mobility, micro mobility. I think what COVID has done is it's turned the whole model upside down. And now people are trying to figure out What's the right model going forward that will be that will benefit the consumer at the same time it makes sense It becomes in terms of business a viable model. That wasn't the case pre COVID. So Things are unfolding and we are also trying to see what it means to our business and where we can create value for them. Those are the 3 distinct sort of across the 3 verticals, those are the kinds of trends that we see. So in nutshell, software continues to be the center of their spend and they have to prioritize the spend on the newer technology and somehow do more with less when it comes to their other expenditure. Does that answer your question? Yes, it does. So primarily what I can The clue is they are in decisive on the new mobility side and there it's more like a status quo on the passenger and commercial side. What I was also looking maybe if not, it may be pretty a bit premature right now, but The way I don't know, of course, this is not the right indicator, but the way market is also valuing businesses in the auto industry, which are more futuristic versus the conventional players, is also maybe indicating that there is a trend toward lesser mobility overall and whatever limited is toward probably toward electric or autonomous side. So with this thought process in mind, do we see any Significant opportunity as well as challenges in the way our this T21 customers are looking into their own future. As far as these T21 customers are concerned clients, All of them belong either to the passenger cars or commercial vehicles at this point in time. And I think the whole reason why KPIT decided to A demerge was to really focus on the future of the technologies in the automotive mobility part. And we believe that trend will continue. Nothing has changed due to COVID. I think people have reprioritized, some things have gotten accelerated. That's the only shift that we have seen. But other than that, As you pointed out, there are 2 trends and there is a third one too, which is electrification and autonomous. I think people will continue to push that. The third one is the connected part, which actually goes hand in hand with autonomous, right? There is no autonomous unless there is connected. The value of that decreases substantially. So we believe that the trend to spend more on these three things at the expense of other will continue both across passenger cars as well as commercial vehicles. And just a small bit, if you see Some of the news flow around 5 gs technology also wherein probably it get bit deferred because of the pandemic factor. Do we see any impact of The adoption of this technology hampering the way people would like to work on the autonomous side? Or you think even the higher level spends would not be anyway linked to this infrastructure or are you linked the 2 because level 4, level 5 as Kishore said Yes, I'll postpone. I think it's a very valid question and you answered the question. Essentially, the spend on autonomous 1, 2, 3, especially what we call 3 will continue and I think it will get prioritized. People are going Slightly slower on the level 4 side and definitely much slower on the level 5 side. And level 4, level 5 is where you actually need 5 gs. For the first three, I think the existing infrastructure is adequate. Fair enough. Thank you. That's it from my side. Thank you. And A. Next question is from Ankit Kururia from VEC Investment Management. Please go ahead. Hello, sorry. Thank you for taking my question again. Just wanted to get a head around if you want to look at your forecasted EBITDA margin, Would it be better to look at it from the eyes of the verticals or the practices that we have? We look at them from both sides. I think it's important for us to have a very granular view on both sides. So we'll continue that's how we've been doing it for the last one and a half years and we'll continue to do so going forward. Sure. But could you give us some color on what would be say, if you were to look at, say, passenger vehicle versus commercial vehicle, Would we be able to granularly say the passenger vehicle tends to be more accretive than To be honest, it's hard to differentiate. I think there are similarities and the margins are also similar. Now new mobility is a different ballgame and our business right now is very small in that area. But between [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Commercial vehicles and passenger cars across the practices, they are very they behave very similarly from our profitability perspective. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Okay. Sure. Thank you. [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Thank you. Thank you very much. Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments. So thank you. Thank you for your participation on the call, and you take care and stay safe. Thank you. Thank you very much. Thanks. Thank you. Thank you very much. On behalf of Dollard Capital Markets Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.