Ladies and gentlemen, good day and welcome to the Q3 FY25 earnings conference call of KPIT, hosted by Dolat 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. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-toned phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you, and over to you, sir.
Thank you, Adhivik. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies Limited for giving us the opportunity to host the earnings call. And now, I would like to hand the conference over to Mr. Sunil Phansalkar, who is Vice President of CFNG and Head of IR at KPIT, to do the management introductions. Over to you.
Thank you, Rahul. Hello, all. Good evening and a warm welcome to the earnings conference call for Q3 FY25 of KPIT Technologies Limited. I hope all of you have had a great start to the new year and continue to have so for the remainder of the year. On the call today, we have Mr. Kishor Patil, Co-Founder, CEO and MD, Mr. Sachin Tikekar, Co-Founder and Joint MD, Mr. Anup Sable, CTO and Board Member, and Mrs. Priya Hardikar, CFO, and Sunil from Investor Relations. As we do always, we'll have the opening remarks by Mr. Kishor Patil on the performance of the company and the way forward, and then we'll have it open for questions. So now, I will hand this over to Mr. Kishor Patil.
Good evening, everyone. Very happy to take you through the results for quarter ending December 2024. At a high level, first, we would maintain reiterate our guidance for the revenue we had given at the beginning of the year, between 18% to 22%. We have raised our EBITDA outlook from 20.5% to 21% plus, and that is reflected also in the EBITDA margin for this quarter. Overall, on year-to-date quarter 3 FY25 revenue grows 20.7% over the last year Q3 25 YTD revenue. Similarly, YTD Q3 FY25 profit growth is 38% over the same period last year. For this specific quarter, revenue grew 17.4% CC, 18.1% year-on-year. EBITDA is 21.1% versus 20.8% last year. Year-on-year, there is a growth of 20.4% in terms of profit.
Quarter on quarter, there is a growth of 2% in constant currency and 1.7% in reported revenue. Overall, the growth has been largely during this period is driven by Asia, but we'll explain a little more on this. The overall deal wins have been $236 million during the quarter, largely driven I mean, they are quite balanced, driven more by Europe and followed by U.S. and Asia. The cash for the quarter is INR 9.68 billion. It has increased from INR 9.68 billion last quarter to INR 14.2 billion this quarter. This is a significant cash generation during the quarter. It's an exceptional one. Our DSO is 42 days, which we expect we typically have about 45 days. So, significant cash generation during the quarter. We have interim dividend of INR 2.5 per share as compared to INR 2.1 rupee per share last year.
The overall growth during this quarter or this close is driven by Asia, Powertrain, and Connected Vehicles. The revenue mix has really improved, and mainly our productivity continued to improve. As you might have seen year-on-year, there is per person productivity, per person revenue, per person contribution has gone up. As compared to in terms of people side, our attrition continued to remain the lowest. It is about half of most of the average industry attrition. There is a substantial investment we continue to make in people, basically make them AI readiness as well as improving the competency of our team. In terms of technology, the two top areas for us continue to be AI and cybersecurity for the investment along with our continued investment in the normal practices.
Looking forward to the next year, overall, we see very positive conversations with the clients, and our pipeline has significantly increased during this year. We do not report any specific numbers, but I may say that it has gone up by about 20% plus during this quarter. The pipeline has increased. It is increased mainly on account of two things. One is a couple of large deals, significant deals, and multiple broad-based clients. We have a very positive conversation going on with eight new clients, which we have been pursuing, and that has resulted into a broad-based pipeline for KPIT. It is across the vertical. I mean, it is, of course, led by PassCar, but there is a meaningful pipeline in Off-Highway, Commercial, Semicon for automotive. And this is mainly driven by two things.
One is many of large clients, OEMs, which includes existing as well as the new one. Some of them have come out of consolidation of partners they have, where they are looking at effective, quick implementation of SDV. And there we see natural orientation to come to KPIT. And the second part is some of these new companies which we are talking about, who are mainly in Off-Highway, Commercial, semicon companies who need different kind of solutions for the mobility in terms of largely driven by the architectural changes and SDV. So these are some of the reasons why the pipeline has gone up. It is fairly balanced between the geographies as well. Looking at the other part in terms of another big change which happened during the quarter is about the U.S. There are many changes which are happening.
All in all, we see that there is, in some way, positive momentum all in all. While some of the incentives on EV are no more, but what it means is basically they have given more options to the end consumer. And considering the fact that the consumers have a preference for electric vehicles, including, as you know, the Tesla, which is a U.S. company. And there is a significant segment who prefers EV. Naturally, it means also that the OEMs will look for alternate solutions, which means hybrid, which means fuel cell. And also, strengthening of their conventional programs. I think that means that there are multiple opportunities for us to engage with the OEMs. We do not see any significant challenges in terms of visa, etc., basically because we believe it is about the talent and not about the immigration, the issue is.
And so we believe that there will be a continued mobility for short-term techs as needed, whether it is H1 or L1 or any other mode. It doesn't matter. We are well prepared for continuing to increase our local presence as well. We believe that the people productivity is a major focus for us. AI investments will continue to make, and we will improve the productivity per person as we continue to do it. On the M&A side, we are looking at a few we continue to engage with a few companies. But looking at their sizes and what we see currently, we do not see that we will opt for QIP as we have in the short term. So we believe some of these acquisitions we will do through internal accruals on the basis of strong cash flow and borrowing.
We will not opt for QIP at this point of time. Thank you.
We can now have it open for questions, please.
Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bhavik Mehta from JPMorgan. Please go ahead.
Hi. Thank you. So a couple of questions. Firstly, obviously, we are in auto space, but based on a planned conversation, it will be happening the fastest between U.S. and Europe because we're talking. I know Asia does well, but between U.S. and Europe, I do see the recovery happening at a faster pace. That's question number one. The second is.
Actually, we couldn't hear you clearly. Breaking a little bit. Voice was breaking a bit.
Is it better?
Yes.
Yes. Yeah. So I was asking that, obviously, we have seen a slowdown in global auto volumes, and obviously, the recovery will take some time. But between U.S. and Europe, where do you see the demand from clients coming back sooner than later based on a planned conversation? That's question number one. The second question is, as OEMs move from EVs to hybrids or other alternative options, how does that impact the kind of work KPIT does with the OEMs? Do we see any headwinds on our revenues because of that movement from EVs to, let's say, hybrids or any other alternative options?
So let me answer the first question first. The way I understood the question was, where is the demand coming from? Recovery faster.
Yeah. Where we see recovery from our perspective, given the sluggishness in the total volume of the vehicles being sold. So as Mr. Patil mentioned earlier, it's led by Europe, followed closely by America and Asia. So it's a balanced sort of demand generation that we have created in terms of the geographies. And in terms of also, if you were to look at the breakup of the subverticals, it's obviously led by passenger cars, followed by trucks. And there are meaningful conversations with the off-highway OEMs. Primarily, off-highway and truck OEMs are from Europe and the U.S. So I hope that answers your first question. And the second question was sort of alternate propulsions. It's not just going to be battery electric vehicles, but there are other options that we have to make available. And what does that mean to KPIT? It's a great opportunity for KPIT.
And, we do a lot of the work in the battery electric, and we think that that will continue because there is still demand across the world for battery electric vehicles, including the U.S. The other part is actually the hybrid, and we think that in specific countries, many OEMs will actually have to focus on not only plug-in hybrid, but also the mild hybrid solutions, so that creates an opportunity because we are servicing some of the clients in the hybrid space as well, and especially from off-highway and truck perspective, there is thinking towards a next generation of conventional powertrain engines as well, so that creates an opportunity because that's the core of KPIT, historically speaking.
We think that it's a very positive thing for us, not only necessarily in the U.S., but we also see similar trends in markets like Japan, potentially in India as well, and some of the other markets across the globe. We really believe that it's a very good opportunity for our company.
I wanted to add one different dimension. I think somehow people relate all the expenses with EV. While that opportunity exists, as Mr. Tikekar mentioned, the SDV, as you look at it, it is much beyond EV in that sense. And if you actually ask me, the largest growth will be driven for us in terms of digital cockpit and autonomous in the next few years. So while we will continue to grow, as we mentioned, I just wanted to reiterate this basically because I think many times it is misunderstood that it's driven by only the EV part. Does that answer your question?
Yes, that's it. Thank you.
Thank you.
The next question is from the line of Garvit Goyal from Nvest Analytics Advisory, LLP. Please go ahead.
Hi. Am I audible, sir?
Yes.
Good evening, sir. Congrats for a decent set of numbers. My first question is on QORIX. We are observing a few developments that are happening when we visit your social media platform, particularly on the human resource side. Teams of Pune and Bangalore are meeting along with the new hirings happening. So can you put some light on where are we right now? And by then, we can expect revenue to start kicking in KPIT's books. So that is my first question.
So actually, I may just say that we are quite on track. The team is already in place. And to some extent, we are building this solution for a much broader base. Last time, I mentioned that we have open-sourced some part of it as a part of consortium for Europe. We have got one significant OEM as a client for QORIX. And we are also in advanced engagement with one European OEM. And also, our discussions about third partner, including in the OEM, is in advanced stage. So this is what I may say. You want to add anything? So I think this is where we are on the QORIX.
Do we expect anything in revenue to contribute in FY26 in KPIT's books?
So I may say that it continues to contribute in some way right now, but I'm sure it will be a contributor for the next year.
Understood, sir. And sir, in continuation to the question of previous participant, you mentioned SDV is much beyond the EV. So can you please further elaborate on it? You also mentioned you are doing it for one of your hybrid customers. So can you please put some more color on it? How it can be not a degrowing factor, the change in the terms policy is happening, that is not going to affect us?
So I think what Mr. Patil was trying to say is not all vehicle programs are just necessarily about battery electric vehicle or propulsion. The priorities for the OEMs are also in the areas of e-Cockpit, which is basically consumer experience. I think there is a lot of high spend in e-Cockpit and consumer experience. That's point number one. Point number two, cybersecurity is also becoming important. And thirdly, the autonomous driving level two to level three is also important. So again, there is investment. So I think what Mr. Patil was trying to say is the spend is not just about alternate propulsion. There are other areas where OEMs are making investments, and those also create opportunities for us. And let me have Anup Sable contribute to that, to what I just said.
If you look at in the past, how OEMs worked was primarily sourcing electronic components, which obviously, when you talk about electronics, there is software in it. So sourcing that and integrating the electronic software components into their vehicle. SDV is an initiative for right reasons to actually make sure that most of the software is actually driven by the OEM, controlled by the OEM, owned by the OEM. And as a result, the OEM's program, which was largely an integration program of maybe 20 subsystems supplied by the Tier Is, is coming down to actually developing software for all these subsystems. So whether it is cockpit, whether it is chassis, whether it is body, whether it is autonomous vehicle, and many more. And that actually drives different architectures.
So, significant amount of work in terms of making that happen, in terms of change of architecture, and writing more software on top of their architecture. So I think when we talk about SDV, we are talking about much more than e-powertrain. There could be a non-electric powertrain SDV also because fundamentally what the OEM wants to do in the future is get closer to the customer. And most of the customer journey or customer experience enhancement is happening through software now.
Got it. Thanks for a nice explanation. My next question is on the deal pipeline, with pipeline showing a strong improvement both year on year and quarter on quarter. So how do you see this trend shaping up in the upcoming quarters? What is the future prospect in terms of the pipeline and in terms of the deal?
So what we can say at this point in time, there are two things. One is we are very happy to see that there is significant improvement in terms of the deal closures that we have actually reported. It's not just the deal closures during this quarter, but also the pipeline buildup for potential closures in Q4, but more importantly, the closures in the first half of next financial year. And as Mr. Patil explained, we believe that there are opportunities for us to continue to grow across the three geographies and also across the three subverticals. And the fourth part, if we can, beyond the three subverticals, passenger cars, trucks, and off-highway vehicles, is what we can actually do with semiconductor companies to create much greater value for the OEMs. So there is another angle where together we can make a much bigger impact on some of the OEMs.
So net net, right now, we are very happy to see the progress that we have made in Q3. And we expect the trend to continue in the near future.
Got it, sir. And one small request, sir. We were looking to visit your facilities in Mumbai, and we tried reaching via investor desk on the email address which you are sharing with us in PPT. Further, we also called on the contact number followed by a mail to the Investor Relations, but no one is responding, sir. So kindly look into it whether there is some internal issue or what.
Please write an email to sunil.phansalkar@kpit.com, and I'll get back to you.
We have written on this email address only.
You can just re-forward it to me, and I'll get back to you.
Okay, sir. Thank you, sir. Thank you very much.
Thank you. The next question is from the line of Karan Uppal from PhillipCapital. Please go ahead.
Yeah. Thanks for the opportunity. The first question is on the potential Honda-Nissan merger. So do you foresee any risk to the existing work which you are doing for Honda, which may impact the growth for FY26? That's the first question.
So as you know, what is in the press is they are working towards creating an agreement over the next couple of quarters, and all going well, they will create one common entity where the two companies will get merged, and that's something that they will do in the next year. Honda is one of the most important clients, and for Honda, we are one of the most critical partners in their SDV and beyond SDV journey. We actually look at this as a greater opportunity. Not only from the work that we are doing for Honda, many of the things that we are doing for Honda where Honda is leading the way, so we believe that if all of this goes through, there could be opportunities for us to bring the Nissan part of the partnership also up to speed with what has been done.
Having said that, we also think that there are opportunities related to overall cost reduction in the vehicles, both on the Honda side as well as the Nissan side. That will actually become very critical. That's one of the reasons why they're actually coming together is to leverage the combined volume and improve profitability and the impact. So from our perspective, we believe that this is a very positive thing from KPIT's perspective. It's too early to say because I think there is a very clear roadmap that they have rolled out, and we'll go as things start to materialize on that front. And on top of that, I think we are in conversation with both the OEMs outside of this potential partnership. So yeah, net net, I think it's a very positive thing from KPIT's lens.
Okay. So no impact as such you are seeing at this point of time from this potential merger?
Hopefully in a positive way.
Okay. Okay, great. The second question is on the pipeline. So very bullish commentary on the pipeline side. But last time, you mentioned that the timing of deal conversions was a bit uncertain. So have you seen improvement in pipeline to deal conversion? And second question related to that is, any large SDV-related deal you are seeing in the pipeline?
So first thing is we have seen the good convergence during the quarter. So we do hope there are more positive conversions, positive conversations. But during the quarter, we have seen a very strong convergence, specifically being the last quarter of the year. So of course, I mentioned that there are a few larger opportunities in our pipeline. But the better thing I would say is it is across three verticals, across geos, and it includes more clients as we are adding off-highway and commercial to QORIX, as well as new passenger car vehicles OEM where we have not engaged till now. So it's a broader set of clients, and it is across a broader set of verticals. What I would just add to what Mr.
Patil said is in reference to your specific comments in regards to SDV. Most of the long-term partnerships that we have announced in the recent past were related to SDV. Going forward, that would be the case, but it would be much beyond that. As Mr. Sable explained, that there are different parts. So there is the SDV part and the variants of that. The second part is also the alternate powertrain. There is the overall vehicle cost reduction, cybersecurity. So we see all of these areas where we can have large long-term engagements.
Just to add to that, during this quarter, one of the engagement is a significant SDV program, which we have signed during the quarter.
Okay. Thanks, and all the best.
Thank you. Thank you.
The next question is from the line of Jinesh Shah from RSPN Ventures. Please go ahead.
Yeah. Hello. Am I audible?
Yes.
Yeah. So my question would be that we did see the market shift happening, and there were OEMs that were looking for cost reductions, so I would just, based on what you already mentioned about that you'll be hitting the lower end of the dynamics in top line, so firstly, can you talk about how are things right now with the OEMs? Are they still struggling to maintain their financial performance? And how are we seeing that in how it will be reflecting in the top line? So if you said that you'll be hitting 18% lower end of the guidance, then if I do the math, then for Q4, it might sum up to around 10% if I'm doing correctly by wide basis, so if you can answer that question, that was my question.
Yeah. And I will first, you are not fully audible, but as I understand, I will try to answer to the best of my ability. But the first thing is we mentioned that we are waiting for the guidance, which is, in my view, whatever I have seen, it is one of, if not the highest guidance or performance during not only R&D, but across all the companies. The second thing, I think it is I would urge you not to speculate anything. I think we have a strong quarter at closure. I've talked about a pipeline going significantly high and conversations across the verticals. I can only share that at this point of time. And we have increased our profitability guidance. So it shows that we are in a position to really have a meaningful engagement with the clients.
So the only thing what I want to say is there are two drivers. I will repeat what I have said. There are one is the large consolidation deals from the European partners, which many clients had, or high-cost clients they have. They see a significant value from KPIT, and they also see the value which comes from KPIT. So we are in a position to engage with them. And the second part is the new verticals, which are new subverticals where we are engaged. They are also journey towards SDV or the new architecture. So that is what is driving the pipeline.
Okay. Okay. That was helpful. And secondly, if you can just talk about one of the participants already talked about QORIX. So at that level, because we can see that we have some amount of loss coming in share in June, so how are we looking at going forward in next year's financial? Will it become profitable or something? I know that it's.
Currently, there is a share in loss from QORIX, and how do we see that going forward? Is that correct?
Yeah. Yeah.
Yeah. I think, I mean, in our business model, we had maintained that it will continue for some time. But at the same time, that the revenue cycle has started. In a new product company, we had expected that there would not be much revenues in the first 18 months. But at least we see some revenue starting from next quarter.
Okay. Thank you so much. Thank you.
Thank you.
The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Yeah. Hi. Good evening. Congrats on the solid deal wins and the quarter. I had a couple of questions. One is, I think not only for us, but across the industry, I think both the U.S. and Europe have been weak. And our strength in Asia has sort of ensured that we are better off. Just wanted your thoughts on from both these geographies, when do you see them sort of returning to growth for us on an overall perspective? That's the first question.
So Nitin, as I mentioned, I think the wins we had. I think they are led by Europe and across verticals. So I think the growth will come back by Q1, if not Q4. I hope it will return by Q4.
Got it, and I think in the last quarter, we were worried about some push-out of deal execution, and this is what even the other players are suggesting. You think that's sort of subsiding? and well, the deal closures are actually quite solid, but you think the deal to revenue conversion will be normal, or do you think that also gets pushed out a bit, or it's just normal for us?
I mean, I can only say that during this quarter, also we were not earlier when we talked about it. I think we have been in a position to get good closures. We are very positive about the conversations which we are having. So we do believe that there will be better convergence than what we expected earlier.
Got it. Got it. And the other expense has sort of increased almost 11% sequentially. Anything specific within that number, or how should we think about that on a going forward basis?
Yeah. It's an absolutely one-off kind of a thing, increase. I mean, but we continue to do that. So I think we had a substantial additional expense during this quarter where we have actually had a significant investment into both technology as well as management development, both for AI and competencies. And we did something on our own significantly. Also, we deployed certain consultants for the same cause, also for accelerating our journey to off-highway and commercial verticals. So that is the expense which has come during the quarter. It's not something which is substantial.
Okay. Got it. And just one last one. See, when we look at the rupee realization, it's at around 84. So, are we taking hedge losses on the revenue line? Is that how it works?
No, no, Nitin. If you look at it, our exposure to Euro and Yen is about 60%. And both of these currencies have I mean, the INR has appreciated against both these currencies as compared to the last quarter. Whereas against the dollar, it has actually depreciated. But our dollar currency share is lower as compared to the Euro and Yen. And that's why this realized rate that comes, which is nothing but the Rupee revenue upon the U.S dollar reported revenue, is a mixture of all of these currencies. And it's typically because of Yen and Euro, which is where the realization has been lower. Hedge incomes or losses are not taken in revenue. They are a part of other income.
Got it. Got it. And just one last follow-up, if I may, is from the large megadeals that we were talking about, how is that tracking? And how is the competitive intensity for those deals?
I think I can only say that we are always, fortunately, because of the experience and what we have, the competencies developed, we are in a prime position for most of the deals. And I have always said that we are in a very good position on that behalf. I think even from the competition side, the client is very selective because it is not about only price, but because of the competitive pressure on them, they want to get it done very quicker, as well as they want reliability. And the kind of solutions we have and the kind of innovation we bring to the table, that differentiates us very significantly. So from that perspective, we are in a good position. And not only that, that we are in a position to have some premium in most of these kind of deals.
That reflects into some of the performance parameters, both on productivity and profitability.
That's great. Thank you so much, and all the very best.
Thank you.
Thank you. The next question is from the line of Pranav from ASK Investment Managers. Please go ahead.
Yeah. Hi. Am I audible?
Yes.
Yeah. Just one question on the margin front. Considering a significant part of our acceleration is coming from the ROW geography, which is on the lower margin side relatively, how are we looking to offset this change in margins going ahead?
Can I understand your last comment?
Since significant acceleration is coming from the ROW geography, which is relatively lower margin as compared to, say, Europe, how are we looking to offset this margin headwind with a change in mix from geography point of view?
So that is, I think, an assumption from your side, actually. Our segment isn't too good. Yeah. So many times, we do not see any impact on our profitability because of that. Actually, the mix I think we have the same, if not better profitability as compared to the other part. Actually, if you ask me, we are getting ready for, if I have to say, pressure on cost to some extent. But we believe we will be in a position to really have benefits because of the investments we are making in AI and automation and the productivity. Maybe Anup, you may want to talk about it.
Yeah. So from an AI perspective, I think if you look at AI and how it works, there is going to be a significant advantage for companies that have data, expertise, knowledge. And being very focused on this vertical and the experience that we have gained and the kind of problems that we have addressed with the customer, we believe we are in a good position to start leveraging this using AI. And out of the three main applications of the AI, right, one is for what we need to do as a company, one is what we need to do as a company towards our customer, and third is what our customers need to do. We are very well positioned and appropriately invested in those areas.
On top of it, I may also say that we are also improving our mix of revenue towards either license, platforms, outcome-based revenues, which, where the margins are better. I think so we feel comfortable at this point of time.
Got it. Got it. Thank you.
Thank you.
The next question is from the line of Ruchi Mukhija from ICICI Securities. Please go ahead.
Congratulations on good execution in this quarter. I have a couple of questions. We have had a very good run in Asia over the last two years. Asia revenues have seen a 1.5 times jump. Do you see this geography to stay resilient and not see challenges that European or North American automakers are seeing today?
Okay. So let me answer that question. We do see growth coming from Asia in future as well. And when we look at Asia, we look at Japan, Korea, China, Southeast Asia, and India. And also now, there are one or two OEMs that are in the Middle East. So that's really Asia. And we believe that all of these markets, we are likely to see growth. So we remain bullish on Asia. However, I just want to reiterate what I said earlier. What is being reported as growth from Asia, it does have elements of Europe and U.S. because some of the clients that are actually from U.S. and Europe, large execution is happening out of India. So Asia is getting credit for it. But that's not to say that Asia will not lead our growth going forward. Does that answer your question?
Yeah. And then I had a few questions on margin. Now, in the prepared remark also, Mr. Patil highlighted, we are working on improving employee productivity. And we see that playing out in numbers also. Could you explain what is driving revenue or productivity? What are we doing to keep this labor engaged for us?
So, maybe this is the point I may share with you, one thing. If you look at last December, the same time, our headcount is almost 10,000. Only 50 people are more as compared to over the year. And our revenues, as you know, have gone up by 18% or so. So it shows what we have been in a position to achieve in terms of this. We do hope that with the other automation and the productivity measures, AI, as well as the business model, we could continue to do it. I don't know to what extent, but to a significant extent.
Okay. Now, coming to headcount part of it, for the last two quarters, we see headcount reduction. You also mentioned we have been helping our employee resources in a tight band. And this has been happening while we are growing our top line. So do we have room to further flex utilization, or are we expect hiring to increase from this quarter onward?
So actually, that was the reason I mentioned the first point, that you please do not link the revenues to headcount because if you apply the same logic, in one year, we have not added the headcount. So it's only 50 people we have added in the year as compared to the last December. So.
Now, to execute on the deals that we have once had?
Yes. So I will answer that question. But the only thing I'm saying is please don't put onto the headcount part only. So we, of course, have made offers in the colleges next year. But we are very selective about the talent which we want to hire in the AI-powered world and also the kind of domain we want. So we would be very selective in hiring people of this type or even the young people with different kind of orientation and aptitude. So I think as we are really playing a tech technology game, I think that's how we see as a talent. And I would request you not to look at that while we are making offers for the next year or so. But how it works out, I don't want to predict anything right now.
It depends upon. I mean, you should be happy if we are in a position to increase, get better revenues without adding to the headcount. But at the same time, we continue to hire and look for better talent. We continue to hire more in lower-cost countries, but the good talent, which is not cheap. So I think we continue to do that. Anup, you have any comments on the talent?
Yeah. So we are looking at how the talent competencies will change over the time in AI-first delivery. And we are working on that. We are confident that we have already progressed with what our assessment is in terms of what we want. And we have already put in place the mechanisms to identify, train the mechanisms or infrastructure that is required from AI perspective to leverage their talent. So all is in place. And going forward, next quarter and the next year, especially, we believe that we will push more of what we think as technology into what we deliver to the customers.
And to just answer your question, we are in a very good position if we are to hire. We can go out and hire because right now, we are really an employer of choice. I said our attrition is at the lowest. We are an exciting company to work for. So we don't see any issue anywhere in the world to hire, not only in India.
Thank you. Thank you and all the best.
Thank you. Thank you.
The next question is from the line of Abhishek Kumar from JM Financial Limited. Please go ahead.
Yeah. Hi. Good evening. Thanks for taking my question. I feel that we have expanded sort of our playbook. And correct me if I'm wrong. In terms of client base, we talked about eight clients out of our T25. In terms of offerings, we have spoken about Semicon at length, which we have not spoken earlier. And also in terms of subverticals, right, of HEV, etc.
Sorry to interrupt, Abhishek. You need to be a little closer to the microphone. You're sounding muffled.
Yeah. Is this better?
Yes, Abhishek.
Yeah. So my question was that it appears from outside that we have expanded our playbook, whether it's client base, offerings, or subverticals. And I also see, despite a decline in technical headcount, I see an increase in enabling sales personnel. And we just spoke about deploying some consultants for some of the new verticals. So am I reading this right? Is this a conscious strategy that we are trying to expand what we offer to offset or a potential slowdown that we are seeing and therefore investing ahead of the curve so that the revenue trajectory, etc., remain a lot more resilient?
I'll answer your question, but I didn't understand. In the morning, you mentioned. I'm just trying to understand.
The way, let me try and answer the question, then the way we understood the question is you're saying that we are expanding into three subverticals. We are expanding into more offerings. Does that mean that we are hedging in order to prepare for any kind of slowdown? Is that?
The question is the same, but I didn't mean that. I meant that we are investing ahead of the curve given some slowdown, etc., but we probably see opportunity in adversity, etc.
So at a high level, let me answer that question. We believe our share in the spend of the client can be more than doubled from where we are. But at the same time, looking at the industry, we want to make sure that we are more broad-based. And we are in the mobility, which is, again, the very, very similar technologies and the same type of clients. So that's what we are trying to do.
Sure. Sure. The second question is on, we had spoken about kind of offshoring demand from some of the European and U.S. OEMs. Where are we? Has that kind of demand sustained? Are we seeing some offset in terms of volume from those customers for the price discount or lower cost that we are passing on? Any color around offshoring? Do you see that continuing for next few quarters, or do you think that the brunt or the majority of the impact in terms of revenue deflation is already now in the base? Thank you.
Nothing is on our territory. It is client-specific, but for the last set of clients, we don't see any changes. And actually, it is reflected in the results, I think. The margin is increased, and the closures have been higher, both in dollar terms and this. So at a high level, we don't see it. It is very customer-specific. 90% of the clients, we don't see any changes in their behavior at all.
Got it. Thank you so much and all the best.
Thank you, Abhishek.
Thank you. The next question is from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Hi. Good evening, and thank you for taking my questions. My first question is just on the Nissan-Honda merger, which I think was discussed earlier as well. So I just want to understand, of your 63 active customers today, is Nissan a part of that, or is it something that you'd think is incremental if it were to come through a potential Honda merger?
I mean, difficult to give a client-specific answer, but as Mr. Tikekar said, it will be add-on to us in terms of it's a revenue growth opportunity for us.
Got it. Got it. That's helpful. Second bit is, I think for many quarters, your active client count, I don't know how much it matters, but your active client count has been at 60 clients, and I think after a period of five or six quarters, we've now seen it increase by three clients. You also gave some commentary in your prepared remarks that you've been able to sign on some new clients, so I just want to understand what is the nature of these clients? Are these new-age OEMs? Are these legacy OEMs you didn't work with? Are these semiconductor companies? Are they Tier 1s? Just trying to understand that.
So it is actually all of it, but let me give a bit of color on this. So there are a few OEMs which we did not engage earlier for both things. I mean, naturally, first, they did not have a clear roadmap for the SDV as well as the investment smarts for it. And their direction was, I would say, not consistent with what the solutions or this we have. But what we have seen is many of those are coming back to us, even the legacy OEMs. At least three, I can see, if not three to four large ones. And that really brings engagement with us, which is based on what they want to do and what they see what KPIT has done. So I think that is one part. The second is the expansion we have done in the off-highway and commercial part.
There are naturally clients from that side. And last but not the least is what Mr. Tikekar mentioned is we are trying to meaningfully engage with the semiconductor companies together, create the solutions which will be very significant for the OEMs. And I think with all these three, we are talking about the meaningful engagements with us. And now, on the number of clients, I think we really continue to work. As you know, we work only with 25. The number is 60, whatever. And we continue to engage, and we add when there is a really we believe that we are going to work together. We don't come into POCs or those we don't count really. At a point of time, we add when. Some of those will reflect in due course.
Just to add to what Mr. Patil said so that we avoid the confusion between T25 and 60, I would say more than 98% of our revenues actually come from T25. The remaining 2% contribute to the remaining 35 odd. And these are the clients. A, some of them came through old acquisitions. And there are many of them where we are actually small licensing kind of agreements and arrangements. For licensing, we do go beyond T25. So just for you to know, the focus continues on T25. The mix will change because there are more and more OEMs coming in from PassCar, and we will add some more from trucks and off-highway. Whereas the dependence over the last three years from tier one has gone down dramatically. So it's becoming almost all of it as OEMs in T25. So that focus remains. And as Mr.
Patil said, "We are very judicious about signing up new clients because we really want this to be a meaningful long-term partnership. And that requires time, but we are actually been putting in that time for the last few years.
Got it. That's helpful, and my last question is just on the topic of European OEMs that we've discussed a few times on the call, so just want to understand. I think the European OEMs are the ones within your mix which are large but maybe take a little bit longer to come back. I think you gave commentary that Q4 or Q1 is possible, so just trying to understand what are some of the things you need to see in the industry, in the broader environment, potentially for them to come back a little quicker.
So I think the first thing is the closures we have done during the quarter, right? I think there are fair closures from the European clients. So that's point number one. Point number two, the largest part of the, as we said, the maximum pipeline. I'm not saying it's the pipeline is across all the three geographies, but the largest is from Europe. And the conversation we see and the progress we are making recently gives us that confidence. And as I said, the reason for that is basically many of them were engaged with the local partners and high-cost, I think, engagements. But more importantly, they realized that many things they tried or locally, they would like to find a solution which is quicker and cost-effective. And that is where they are coming back to us.
Those conversations are progressing, and that's why we mention it in a positive sense.
Got it. That's very helpful. Thank you very much and all the best.
Thank you.
The next question is from the line of Bharat Shah from ASK Investment Managers Limited. Please go ahead.
Yeah. I think this call has come a little late. I have to get off the call to something else. But quickly, what I understood from your narration is that your clients' business challenges apart, their progress on the sales being good or otherwise apart. Fundamentally, we offer a solution and a capability which results in a relationship with auto client, which is not transactional, but which is a deeper engagement. And therefore, that gives us the ability to grow even when your clients are facing challenges. That was, in some sense, is a meaning I could derive.
Absolutely. And to add to that, I mentioned that our share in the client spend still can more than double. So putting what you mentioned and that part, I think we believe that we will be in a position to grow our relationship.
Bharat, I think you should become our spokesperson. You articulated it. You are spot on. I must appreciate that, the way you captured it.
Thank you. Which means we are not linearly correlated to the business issues and challenges and otherwise facing clients. We are fundamentally problem solvers for them and so long as these clients are going to remain in the business, technology flux, whether it is EV or hybrid or this or that, really is an opportunity rather than a concern for you.
Absolutely. Absolutely. And I think we have been talking about it for the last three, four years, that our revenues or the spend does not linearly connect with the vehicles sold, but it is about the product development and the future platforms they are creating. And to your point, you really articulated it well as Mr. Tikekar mentioned. So absolutely.
Thank you. Just one last bit. On CV revenues remaining softer, what has been the causal factor? Is it transitory kind of issues at the client's end, or it is more structural?
So it is actually very specific to one or two clients. And actually, we have made significant investment in these two verticals, Off-Highway and commercial. And we, again, want to engage only in a meaningful manner. That is certainly what we want to do. So it may take some time, but I mean, I'm sure we'll start seeing the results next year.
Fantastic. This has been very, very helpful, and all the very best wishes.
Thank you very much.
Thank you.
Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Yeah. Hi. Thanks for giving the opportunity and congratulations on good set of numbers. Sir, you mentioned about the pipeline, the growth being there 20% ROI. Can I get a broader sense as to how has the pipeline grown over the last three months, last six months? You mentioned the significant growth. Any number over there will be helpful. And also, what is the growth here in Europe? I mean, on a three-month, six-month basis, is the pipeline growing strongly for Europe? Some color on that will be helpful.
So we do not mention the pipeline, as I said. It would be misleading. But.
Sir, just the YY number. Sorry to interrupt, but just the YY or QQ number, not the absolute number.
Yeah, that's what I'm answering. Actually, I'm saying it is a quarter-on-quarter 20%. It is not year-on-year, the increase in the pipeline. It's a very significant number. It's a 20% increase in the pipeline, and it is led by Europe. There is a significant increase in the pipeline in Europe as well.
Sure. Sure. Understood. Correct.
Correct. Given the conversations, the kind of conversations which we are having on Europe, should we see our company growth levels coming back? I mean, the earlier growth which was there from one Q onwards? I don't understand this part. Maybe I will understand over the period of time. But this year also, we are having one of the best growth in the industry. But it's okay. I think we see the opportunities are good, conversations are good, and we'll talk about it in April.
Sure, and just the second question was on the change in the U.S. administration which is there. Now, incentives have also been phased out on EV side, so I mean, I understand these are early days, but what could be the possible impact for us given the fact that we have such a tremendous experience in the industry? How should we see the change in U.S. administration on the overall EV, and specifically, I mean, we are in the outsourcing side.
See, actually, we answered this question a few times earlier that actually it's a broadening of the products for the end consumer, and we work in all the three. We do not see any significant impact. Not only that, we see opportunities, actually, because these will be separate programs, and SDV is beyond EV, and I think we explained that earlier.
Sure. That's it for my side. Thank you very much, yeah.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for the closing comments.
So thank you, everyone, for your active participation. And if you have any more queries, please feel free to write to us. Thank you so much and have a great evening. Bye.
Thank you.
Thank you, ladies and gentlemen. On behalf of Dolat Capital, that concludes this conference. You may now disconnect your lines.