Ladies and gentlemen, good day and welcome to KPIT Technologies Q1FY26 Earnings Conference Call hosted by Dolat Capital Markets Private Limited. As a reminder, all participants' lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Rahul Jain from Dolat Capital Markets Private Limited. Thank you. And over to you, sir.
Thank you, Moderator. Good evening, everyone.
On behalf of Dolat Capital , I would.
Like to thank KPIT Technologies Limited for.
Giving us the opportunity to host this earnings call.
I would like to thank.
The conference to Mr. Sunil Phansalkar who.
Is Head Investor Relations at KPIT to do the Managing Introduction. Over to you, Sunil.
Thank you, Rahul. A very warm welcome to everyone on the Q1FY26 earnings call of KPIT Technologies Limited. On the call today we have Mr. Kishor Patil, Co-founder, CEO and MD, Mr. Sachin Tikekar Co-founder and Joint MD, Priya Hardikar, CFO, and myself.
On the call as we do always.
We'll have the opening remarks by Mr. Kishor Patil on the quarter performance and the way forward. We will then have this open for your questions. Thank you for joining this call. I will now hand this over to Mr. Kishor Patil.
Hello. Welcome to Quarterly Investor Call. I will just go through quickly the key highlights of the quarter. Year on year growth has been 12.8% in terms of rupee terms and 8% in terms of dollar terms. EBITDA has grown year on year quite at 12.4%. It remains, we are very happy that in these uncertain times the EBITDA remains strong at 21%. EBITDA at 17% PAT is INR 171.91 million. There is a variance as compared to the last quarter, basically because of the one-time income we had last time. This was because of the Qualcomm investment into Cores as well as certain INR 272 million because of the currency changes. The wins during the quarter had been $241 million, which has been across mainly in terms of powertrain and connected area both across U.S. and Europe, largely in the passenger car segment.
Basically, in the passenger car vertical in terms of commercial, there is certain drop and it is very specific to this year ramp down. It happened in a client which we believe now will go into the growth mode from one quarter down the line. In terms of overall quality of the revenue, fixed-price projects have moved from 60% - 62.5%. It is very important because this allows us moving to the business model which we would like to move into in the future. The headcount has been 12,545 from 873 from the last quarter. Pipeline. Overall, the pipeline remains strong. We believe that based on what we have won and the way the movement of the pipeline is appearing in last few weeks, also some of the wins we had.
I think we have this pipeline based on the passenger car segment, but we believe the commercial there will be off-highway and commercial also the growth which will kick in the next few quarters. We are also very bullish about China and India. We can see that the pipeline from both these geographies have increased and you have seen basically announcement about the JSW Motors engagement which we have won. I must say that we are very bullish about where we stand in terms of AI competency and the kind of solutions we are in the process of building. In terms of AI-infused mobility, we believe based on our interactions with the clients as well as overall industry players, we are ahead in terms of our AI journey specific to mobility.
This gives us a very substantial competitive advantage in the next as compared to the competition to win more business. As you know, the geopolitical issue because of the tariff and the intense competition between the OEMs and the China competition is still there, but we believe it will be settled down in a quarter and we believe that the solutions approach is what the clients are looking for to bring the speed and reduction of the park. We believe that along with our product and platform strategy and this AI based solution, we will be in a position to have certain wins and H2 will be higher than the H1. As we move into the second half, we will start gaining the growth momentum. This is what I have to say today and we look forward to any questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use a handset 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 JP Morgan. Please go ahead.
Hi.
Thank you. Just one question. Kishor, you mentioned that you expect the tariff rate and uncertainty to shut it.
Down in a quarter.
Is this based on planned conversations that we are getting confidence that things will start improving from Q onwards?
Yeah, I mean what we see in the newspapers and overall what you know and what we talk to government and understanding and of course the plan, I believe by the in a quarter or so I think there will be more certainty. Right now we believe because we have a very strong pipeline and I think the scale up is not happening because of the uncertainty or wherever there is a priority. The client is coming to us specifically when they really need a speed which is required for most of their completion of the program. That comes at the cost of some kind of a cannibalization also of the existing business also. We believe that as that, I think the spend will start happening and that is of course based on the planned conversation as much as they see it right now.
Okay, thank you.
Thank you. The next question is from the line of Karan Uppal from Phillip Capital India. Please go ahead.
Yeah, thanks for the opportunity. The first question is on the overall deals.
Have you seen any pickup in.
terms of the project which was stalled or delayed due to macro uncertainty in the last few months, do you expect Q2 to stabilize or could there be some additional drop in revenue in Q2? Yeah, that's the first question.
I think I will tell you about the environment. We don't talk about quarter to quarter and anything specific, but I think in quarter one as well as quarter two, the way we see is that if you remember last year, we had some one-time income, which I mentioned also at the end of the year last time, and many of that income had gone, but I think it has been compensated by the new wins or some of the start of the project. Already we see some of that, but I think they are not ramping up to our, had not ramped up to our expectation in quarter one and quarter two. We do believe that in H2, sometime in the H2, it will start growing, it will start ramping up. Based on our conversations, as I mentioned, and the growth momentum, we will see.
Okay.
Can you please mention about the demand trends you are seeing across various geographical markets like Europe, Asia, and U.S., and the recent U.S. and Europe as well as U.S. and Japan trade deal? Would that have any positive impact on the R&D spending that brings some certainty with respect to tariffs on offer?
Absolutely, I think there are some certainties getting in as you talked about Europe, US, and we believe as it settles down, I think the clients, even though there will be an additional cost, I think at least there will be a certainty to some extent, and that will probably push, we believe that will push them to really move forward in terms of certain programs and stay. There is still less clarity in terms of Arabs, in terms of Mexico and Canada, which is important to some clients, specifically in Asia, but you know, also some places in Europe, and that is also required, and I hope that also comes in this time. That will further help. Even today's, you know, clarity is helping is what I feel.
I think as I mentioned, H1 is something which will remain a little unstable or uncertain to some extent as I have been talking. We see now H2, certainly we believe that you will start seeing the growth in H2.
Okay, the last question is on the pipeline. Could you mention about the segments where you are seeing good demand in terms of HGV, ADAPT, connected, hybrid would be helpful. Last time you had mentioned two large deals were there in the pipeline in Europe. What's the status of that?
I think overall the growth in terms of domain has been more in terms of powertrain, connected, and autonomous, though this quarter it doesn't appear like that. In one quarter down the line, you start seeing that. I think these are the areas, and Europe, we believe, we are looking for some. There are many deals in the process. In Europe, some of these deals have started ramping up, as I said, slowly than what we expect. They have started converting. The other thing I must say is that as India and China, we believe that they will start contributing meaningfully to our revenues in the next six months or so. What you have seen, some of one announcement today, it will start kicking in to a certain extent from the next quarter.
Even though initially it will be in Q3, it will start, but it will be small to begin with. It will start scaling up. It will be over the next three years or so. Reasonable contracts, and it will start scaling up. We also are very pleased that China pipeline is coming on. We hope and we believe that we'll be in a position to start some of these projects. Also, Europe, our pipeline is strongest, as I have been talking about. I think that will help us, and U.S., I think specifically on off-highway and commercial, we see that we will start seeing some growth in the quarter down the line.
Okay, thanks.
Thank you.
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Yeah, hi, good evening. I think it's been pretty solid execution. A very tough quarter both on deal wins and margins. Wanted your thoughts on a couple of things. First is I think we've had a lot of OEMs make a lot of announcements like I think Honda spoke about their change in plans on or at least pushing out plans from an EV timeline perspective and a lot of things. Daimler today, there was a new guidance on lower volumes and so on and so forth. There's a lot happening. It'd be good if we could sort of contextualize what is happening from a spend priority perspective. If you compare now versus last year on how they are looking at those spends. That is one. Second is I think we have seen a good almost 20% growth in deal wins both on a TTM basis and year-on-year basis.
Now for the older deals, are you seeing versus what was originally signed, is there any change in the scope or anything because of these change in plans? Are you seeing any impact or that continues to sort of hold true in terms of what the original scope and scale of those deals were. Those are the two questions to start with.
Nitin, let's start with the first question. In terms of the spend, obviously there is a lot of prioritization, reprioritization that's been done given the cost pressures that are being faced by all the OEMs across the globe. The basic thinking is they're making investments in the features that make sense and that they have to bring into production immediately in order to remain competitive. There are two specific. I think for everybody it's becoming a default that everybody has a smart cockpit or a new cockpit. Secondly, it has Level 2+ autonomy. I think this has become the number one priority for most OEMs. It has become a default in China and now it's becoming a default in the Western world as well. That's one area where everybody's prioritizing their spends. Along with that comes cybersecurity and functional safety. They go hand in hand. That's the second part.
The third most important part is when you are putting these features into production, they require extensive validation. We are seeing growing demand in terms of validation. These are the areas where the spend is growing. We believe that as someone mentioned earlier on, the electric powertrain is taking a little bit of a backseat at least. The programs have been pushed out by many OEMs, especially the ones outside of China. However, the hybrids have become prominent and in trucks and off-highway there is also a talk of ICE, some additional investment into internal combustion engines. We are also seeing some demand coming up there. Those are the areas in terms of technology, in terms of the newer architecture, which was actually for the first generation of SDV, they are all coming to fruition between now and next one year or so.
The next architecture was supposed to come into play by 2028. For that, the work would have started by now. That's definitely getting pushed out by a year or two. These are the kind of changes that we are seeing in terms of preferences and prioritization for the OEMs. What was the second question, Nitin? Sorry, if you could remind me.
Yeah, the second question was that our deal wins are up like almost 20% this quarter and even on a trailing twelve month basis. If you look at the trailing twelve, basically suggests the order book is very solid. Now the question was on this order book which needs execution with all these changes that are happening, does this change the scope and size of those deals in a view because of these reprioritizations and change. In reality, would it still be a 20% increase on a TTM basis or that number would have come down because people have changed what they want to spend on. Easy question. From a visibility perspective, is it the same as what the number suggests?
The visibility? You're right, the visibility continues to get better at the same time because of the. There are two reasons. One is the reprioritization of existing programs that has had an impact even though there is growth. On one hand, there is reprioritization in the existing program which has sort of not helped us. The second part, also for the existing program, there is a demand to do them in a more efficient, effective manner in terms of instead of providing the service, providing the solution. That means using more of our tools and accelerators to speed up the program so that they can be launched faster. That means cannibalization in terms of some of our competitors, but at times our own business. Even though you're seeing a lot of growth on one hand, these are the two factors that are sort of dampening that growth to some extent.
We believe that that's something that will happen less of in H2 of this financial year.
I think one thing I may want to add is if you look at the fixed-price projects, they keep on going up. We are now at 62.5% - 60%, and this is very important because then we get the flexibility to deliver it in a multiple more efficient manner, et cetera, and also change certain business models. I think that has all helped us to maintain the profitability as well.
Got it, got it. That's very helpful. Just one last one, if I can squeeze in the cannibalization in the business which you had explained. We were always known for using tools, accelerators, you know, having pre-built code tested to be error free. We were anyways doing it at the moment. Could you please explain how that cannibalization is working at the moment? What exactly is happening? If you can just give a simple example.
Absolutely. I'll give one example and I think earlier we were doing a validation, take an example. Right now, as Mr. Tikekar mentioned, it is an area where most of the projects and programs are in the process of validation. They are basically, that's what is happening now. Many OEMs are realizing that they are delayed and they have to catch up very quickly to have a better validation with better quality but much quicker. For that, we have brought in a very good solution in terms of AI-driven validation. This is a big priority for the OEM. They have given us a reasonable size order, prioritizing over other spend, and we have one such kind of deal. In that case, because they are.
Not in a position to increase their.
They had to slow down or cut down spend somewhere else, and that has also impacted. Did I answer your question?
Yes, absolutely. Thank you so much, and all the very best.
Thank you, Nitin.
Thank you. The next question is from the line of Aman Soni from NVEST Analytics Advisories LLP. Please go ahead.
Hello, I'm I audible?
Yes, Aman, can you speak up a little bit?
Yes. Good evening sir and congrats for the resilient performance despite a tough quarter. The first question is on this new tie up as JSW Motors' first new energy vehicle is expected to reach the market in the second half. Can we assume that like you mentioned in the opening remark as well, Q3 we will be starting the execution? I want to understand what is the size and scope of this contract, that is one. Is there any strategic correlation between KPIT Technologies Limited's recent entry into China and securing this partnership, given that JSW Motors India's operations involve a joint venture with a Chinese automotive company? That's my first question sir.
We don't like to comment on more details on the client project, but I may say that this is specific to India program and a lot of work. We will be bringing in what assets we have, and we will be adopting it more for India market. I think that's what it is. This will be about three years, kind of a program, and many times the program which we'll undertake is that I cannot talk about the numbers on this specific program.
Got it, sir.
Secondly, on this sodium-ion battery tech, considering the formal transfer of this technology to Cores in February 2025, could the management provide an update on the current progress of commercialization and manufacturing activities? Additionally, does KPIT maintain any transparent visibility or any direct involvement in Cores' battery production process?
At a high level, I can only say that it will take. Of course, they are making the right investment. They have hired a CEO from Europe and moved into India, and significant investment in commercialization in order to go through two stages. Because battery is a very intricate kind of technology and the investments are pretty significant, but they are all committed to that. If you look at both these things, I think it will take about two to three years for us to start getting the license revenue. Till that time, we expect the factory to be stable, the production to start coming, and achieve a certain threshold from where our royalties kick in.
Just a follow up on that. You mentioned two, three years, but I remember in one of the interviews management had mentioned like VCL will be on the road based on sodium-ion technology in India in a period of just one year. What was that, sir?
I don't know which interview you are talking about, but it could be a battery not manufactured through our technology or the device. It may be something else. I mean, there are vehicles on the road even with hydrogen, but these are all pilots, and that kind of a thing happens because even with the sodium. We have run some vehicles with the pilot production done in Europe, but those will be few of them.
These are not mass production yet. These are only pilot.
Understood.
Lastly, on any update on the coating side, whether we have made any addition in terms of new clients.
I think there is one big European OEM which is in that process where we are in the advanced stage of engaging. We'll probably know in next quarter or two.
Got it.
Just one more thing on the hydrogen fuel cells, what is the update on that technology part?
I think this is a piloting of this technology to get hydrogen at a high scale. It will take some time. We are piloting it. I guess you might have seen also some PR also on this. It's happening in multiple ways. Apart from the coaching shipyard we did, I think we are doing in some other cases also some pilots. It will take time to be commercially viable and revenue earning for us.
Understood, sir. Thank you very much, sir.
All the best for the future.
Thank you.
Thank you, Aman.
Thank you. The next question is from the line of CA Garvit Goel from Nvest Analytics Advisories LLP. Please go ahead.
My questions are answered.
Thank you.
Thank you.
Thank you. The next question is from the line of Vimal Jamnadas Gohil from Alchemy Capital Management. Please go ahead.
Thank you for the opportunity, sir, and congrats. Good quarter.
Thank you.
sir.
I just.
We've been talking about making some inroads in China, and now we have a very firm inroad in India as well. After this announcement, I just want to, could you just put some more light on the nature of work in these two geographies, especially China? What kind of work are we doing? Is it very different from what we've been doing for clients across Europe and U.S.? What I mean is, are we directly entering the core architecture over there for the Chinese OEMs, or are we looking at a partnership route to enter these OEMs? If you can explain more on that, please.
Thank you.
Currently in China, we have at a high level, we are looking at all the three stakeholders. One is global OEMs in China, which we are engaged, our existing clients, and we are engaged some of our existing clients in China. Now with a better presence, we are improving our engagement with them. The second thing, which is a little different because the ecosystem in China is very different, we are working with some Chinese Tier one, specifically, to get a better understanding of innovation and technology which is coming in certain areas like digital cockpit and autonomous and some of these. That is the second part. There we are working with them in China as well as outside China. The OEMs, we are engaging with them specifically through Tier ones in some cases, as I mentioned to you, and searching is more outside.
This is how we are working.
To add to Mr. Patil, we have certain products through our subsidiary, Technica Engineering, and we are seeing a lot of traction for our products in the Chinese OEM ecosystem. There are five or six Chinese OEMs with whom we have already built a partnership for our products, and we hope to enhance our reach to larger OEMs through the products.
Right, Sir, my second question was on margins. Given the kind of reset that we've seen with macro challenges and we are also looking at different avenues like off-highway, commercial vehicles, how should we look at margins in light of the fact that we've been fairly confident in the past of expanding margins through offshoring and fungibility of our overall workforce? If you could throw some light on the long-term trajectory of margins after what has happened in the recent.
Past, right now I would say in foreseeable future we believe we can maintain the margins at 21%. I think as we have seen, unless the currency plays very havoc. We don't know that part. We don't know but as long as it is in a reasonable way we should be in a position to maintain at 21% EBITDA. We do believe in the medium term we can increase the margin as I have been saying and as it stabilizes in next few quarters, we will talk about our strategy for future both for growth and the profit as the increase profit.
Understood, sir. Helpful. Thank you so much and all the very best.
Thank you.
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 headcount planning for the year. I think the last three years we've had between 15% and 30% sort of headcount addition in 2022, 2023 and 2024, and 2025 was sort of a little bit of a reset year where it was flat. Just going forward this year with back half recovery expected, I just want to understand how you're looking at sort of headcount additions just given that I think this quarter we've had a slight maybe net reduction in headcount.
Yes. I'll answer this in two, three ways. One is, of course, our growth has been flattish for the last few quarters, and maybe we are expecting another quarter of growth in that range. Looking at that, of course, we manage our headcount based on how we see the next quarters. Right. Based on that, what we have done is, if you look at the last year, our attrition is around 7% or so on an annual basis. At that range, we have not changed, we have not added the bench as we generally would do. That's where we are, and naturally, we continue to hire freshers, we continue to go to campus and get teachers because they are more, I would say, AI amenable and ready to learn more. I think that we continue to do so. Right now, that's how we have done it.
As we get more productivity, we are getting more productivity. As I said, we have moved to 62.5% in terms of fixed-price, significantly higher than last year. If you look at it, we believe we can go further on this path. We will change our business model too, and we believe we can get better productivity advantages on that. We will put this together. I must say, and I have been saying it for the last two quarters, that I think the model where you relate headcount to revenue will be difficult in the future. While we do expect that in some cases we will still do it in the short term, I think over the period we believe that we will be in a position to enhance our productivity substantially and move towards more product and solutions.
That has actually helped us during the last few quarters in terms of margins, and we believe that our portion of that business will keep on going up.
Got it. That's helpful. My second question is just around, I think, the comments you've made on potential good momentum exiting the fiscal year, back half to be better than the first half. We have seen very stable and good level of deal wins over the past four quarters, even if you look at it on a year-over-year basis. It looks like you are able to win business in this tough environment. Maybe conversion into revenue is taking slightly longer. I'm just trying to understand, as you look into the back half, maybe even if next quarter is only a slow recovery in the back half, do you see visibility in your pipeline or conversions for that sort of 5 - 6%, maybe higher than that kind of quarter-over-quarter growth that you have done for almost 15, 16 straight quarters before FY2025?
I just want to understand what sort of trajectory you expect in the back half, just given that your wins have been relatively strong in a relatively hard environment.
Yeah.
Yeah. I think let me say that we will start walking before running. That's how I would put it. I believe that as we first mentioned, you know, because of the uncertainties, the clients do not have an extra budget. Their prices have changed. I think Mr. Tikekar also explained right where they are into production programs, they are changing towards most of the people have pushed down their new architecture programs by a year or two, and they are trying to really make sure that they are in a position to deliver the current program effectively with better quality and add some features in the current program because they know that they are already behind and their current program specs are not good enough for them to win the program win in the market. They want to add more features in that.
I think that kind of a change is in the priority. Basically, they are moving the budget to that extent, and they are cutting or reducing their budget or not spending more on the other part. That has really slowed down our, as the certainty or I would say in the external environment comes in, the start spending and that's when you will see the net realization of new wins and basically the growth will come back more.
Got it. That's helpful. My last question is this around Caresoft. I think this is also something which you indicated might help you in the China offering to potential customers there. I think the mid-quarter update you had indicated it's something that's nearing closure towards end of June, early July. I just want to understand when we think we can close that and start consolidating results from that.
We are in that process. We have certain, I would say, conditions which are still not fulfilled. We are waiting for that. We do hope in this quarter it should happen. It's not happening on the 1st of July, that I can tell you. We'll see, you know, and we'll keep you informed as and when it happens.
All right. Thank you very much, and all the best.
Thank you. Thank you, Sandharoo.
Thank you. The next question is from the line of Manik Taneja from Axis Capital. Please go ahead.
Thank you for the opportunity. I recently had some clarification questions regarding our segmental margins. If you could talk about what's driving the quarterly volatility when it comes to segment margins, especially when it comes to the European markets as well as the global geography. The second question is over the course of the last couple of years the two large events with Asian OEMs contributed to a significant part of our growth in FY2023 and FY2025. When you spoke last quarter you were essentially expecting much more broad-based growth in FY2026 given the way things stand and your commentary with these closures in India with JSW Motors and also your expectations on China, if you could talk about how you are thinking about the broader contours of growth across the three markets those would be the two questions.
In terms of segmental margins, I think if you look at it, it is basically recorded, basically the entity financials, those are getting converted at the currency rate that apply, and this quarter we have seen some changes. Alongside that, as Mr. Patil mentioned, we have seen a significant change to fixed-price base model, and that is also driving the changes in the business model and thereby the margins that you see in the segment.
Sorry, just to clarify on this fixed-price mode, is that translating into some near-term pressure on margins in certain geographies where you are seeing this move, and is this a certain geography-specific move towards, or moving towards, fixed-price?
Not really. I think our first step is to see it goes back to solving the client's problems and making sure that we are meeting their priorities for that. If their expectation is that we'll do things cheaper, better, faster for them, the first thing that we have to do is convert all the programs into fixed price so that we can actually apply our own tools, accelerators, also the AI-infused solutions to do that. I think this is the first step towards that. It does impact the revenue, but it doesn't impact the margin to some extent as Mr. Patil explained earlier on. From that perspective, there is not much of a difference that you've seen in the last quarter in terms of the, you know, you talked about the segmental margins across the three geographies. It hasn't really impacted to that extent.
I think your second question was about growth across the geographies. First, let's talk about Asia. As Mr. Patil explained, our investment in China, our investments in India will pay off. As we get into the second half of the year and the next year, we are seeing some of the larger engagement that we've been able to close. They are from Europe and we believe that Europe will continue to drive our growth in future. Even though you've seen in the recent past, for year on year there was a degrowth. We believe that Europe will lead the growth for next several quarters to come. In the U.S., as Mr. Patil explained, it's not only the car OEMs that we are working for where we'll see some growth coming, but it would be complemented by the growth that we'll have from off-highway and truck segments.
These are early days again in the U.S. These are all new clients and we are establishing those relationships at this point in time. Over the next few quarters, we'll be able to see more growth. Net, net, we see opportunities to grow in all three geographies. The timing of that will be different. If you take, you know, next three to four quarter kind of view, we believe that there is protected growth.
Across the three geographies.
Sure. Appreciate the color. Last question, essentially the clarification question with regards to these hikes for the year, typically we tend to do them in the second quarter. Any thoughts on what are you thinking?
Can you repeat that? What was the part? Sorry, can you repeat that question?
Typically, we tend to implement wage hikes in the second quarter. I just wanted to understand how you're thinking about it. We thank you for the current year.
Yeah, we are going to do that in a different way. We are basically, as we talked about, our business model and client expectations are changing. We are looking at all our HR processes including hiring, training, appraisals, and compensation. We have also done the complete benchmarking with the new set of talent which we will compete, not normal talent which we have been competing with if at all in the India market. I think from that perspective we are realigning ourselves. For example, one example I am giving you is our variable pay was less percentage as compared to the industry. We will introduce the variable pay more in line with the market. Similarly, we will create more incentives based on outcome in terms of productivity or AI adoption and hence the productivity.
We are making certain changes both in terms of the overall HR processes and that we should be in a position to do by its end of Q2, and then we will basically do our rollout next quarter.
Thank you and appreciate the great deep color. Thank you.
Thank you.
Thank you. The next question is from the line of Keshav Karwa from White pine Investment Management Private Limited. Please go ahead.
Thank you for the opportunity. My question was what are the strategies that you have implemented in the China market as well as in the India market, and how are you seeing the demand shaping up in the next, let's say, 2-3 years?
I n both the markets, as in India markets, we are seeing reasonable traction actually, and we believe that we would like to make sure that we are dominantly, you know, present in different parts of the market. Frankly, also beyond business, we bring the best of the knowledge we have across the world to really build ecosystem in India, which will help them in the long term for the industry to compete with the best in the global part. I think that's what we intend to do. It makes a lot of commercial sense and also growth.
It includes working with the established OEM but also with the challenges which are coming in, specifically EV and new technology, and like, I mean, we have seen in JSW Motors or some of these which will bring a new vehicle, like I think some people mistook it for the existing vehicle, so these new programs and et cetera. We will basically bring it, so new kind of vehicles, and whether it is in passenger car or commercial or electric truck, electric buses, electric cars, and really establish India for India model across the ecosystem. That's what we are trying to do, and we are seeing a reasonable traction. We are also working with the GCCs, I must say select GCC where we can really, which are our global clients. They believe that some of the programs they are implementing, and many of them are looking at India.
They are working through their GCCs sometimes, in that case also we are making sure that we are working with them where we can add a differentiated value proposition, specifically based on our accelerators and reduce the time to market. I think these are the two cases in which we are working here. I just spoke about China. If you can just refer again, I think I elaborated that sometime back, that we are how we are working with global OEMs, tier 1 as well as Chinese OEMs in China and outside.
Okay, sir, thank you for answering my question.
Thank you.
Thank you. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Thanks for the opportunity and congrats on.
A great execution again in a difficult macro.
Sir, this one question as some of your remarks implies that the contribution from.
India and China may go up.
In that scenario, it may have some margin impact because margins in this country could be slightly lower versus company average.
I would encourage you not to assume that because I think as we talked about, we are changing the business model, trying to do it in a different way, using different areas. Over the time we will also talk about how we are building the platforms and products which could become the significant part of our business. I think we are using some of these in these markets to maintain our market.
Okay, thanks. This is fair enough. This last thing in terms of for the exports to happen in China, the invoicing can happen in dollar or in the local currency.
It can happen in local currency as well as in dollars. It depends on the engagement, client engagement. There are restrictions from the legal side.
Okay, because local currency may have a currency volatility. I do agree it's a small percentage to the overall revenue.
You should also note that we already have a subsidiary in China and that actually does the transaction action with our clients, which is a local China currency.
The costs are also in China.
Okay, fair enough. Thanks and all the way.
Thank you, Sandeep.
Thank you. The next question is from the line of Nihar Manohar from Caroline Asset Management. Please go ahead.
How large or how material are these pipelines as of now? They don't contribute much to the business. Will it be sufficient for us to offset the slowdown which is there in Europe and given part of the piece? I just wanted to get some color around that. How would be the billing rates here? Will the billing rates be quite lower versus the general?
I encourage you to just look at the answers I gave just now, that how the margins will shift. The model is not about pin model, it is not about the build rates. It is about the overall solution, how we start the platforms and the products, and then of course AI-infused mobility solutions. These are the changes in the model we are bringing. Of course, we do a normal business also, but with all that, we are comfortable with the margins we can maintain. I will not give any specific numbers, but I can tell you that in two years this will be a three-digit number in terms of revenue, India, China together.
Second question was on the European real back-to-back profit cuts. Also talks of healing of models. Does it structurally face a challenge for us for the 3% - 5% kind of growth that we as a player and as an industry used to have? Does it face a challenge to that, or should we see third quarter for us being once again back to the range of 3% - 5% growth that we used to have?
I'll not give a quarter wise answer. I mentioned this that first we have to start walking. I think the world is stabilizing. I think we have to look at that. We have a very strong pipeline and this we said that the momentum will come at the end of the H2 for sure. How much, how it really still the world? Nobody, neither you, neither I can predict. I think we have sufficient pipeline to accelerate once things settle down.
Sure, understood. Just lastly on your production platforms, I mean you're trying to build up a business model, some two to three key production platforms, some color around that, you know, how are you trying to monetize it? What are your products and platforms exactly? What is the strategy around that will give you helpful? That's the question.
Right now we can talk only about something specific, but we'll lay down our strategy overall, etc., in next couple of quarters. As you know, we as a technical, we have range of products and we have been building the products which are tools mainly for validation, and you know, and those kind of products, also the network basically product for the vehicles. This is one thing which we have been selling to all the OEMs, including where we are not having the best of the OEMs in the world, both American as well as Chinese. I mean, and of course European. I think these are the products, and also there are a few other products which, I mean, Cores, you know, it's JV, but you know, the Cores. Similarly, we are looking at a broader strategy in terms of production platform which will unveil in the course of time.
Understood. This last question was for FY24, FY25. What was the pressure, addition pressure, hiring in FY24 and FY25?
I think we do not talk about these numbers, but these are in three-digit number. We continue to, as long as they pass our criteria of doing the education and passing our trips, then we do hire them. That's what I can say right now.
That's it for me, sir. Thank you very much.
Thank you.
Thank you. The next question is from the line of Abhishek Kumar from JM Financial Limited. Please go ahead.
Yeah, hi.
Thanks.
First question is on TCP number.
You guys mentioned in the mid-quarter.
Update that a lot of your dealings now are cannibalizing your own revenue.
In that context, how should we.
Look at this $240 million number. Because this is a gross number, from what I understand, it might have cannibalized some of the revenues that you're already doing.
Maybe two part question.
One, if you can just tell us what would be the net number, ballpark, or another way, do you think we need to win more to actually get the same effect as we would have got if we had won $40 million maybe a year back?
Abhishek, there is no doubt that we need to continue to win more because there are tremendous headwinds. There are three factors. One is last year we had substantial one-time revenues that were licensed. Second is we also talked about, you know, through the different business models in order to help our clients, how we are at times not only cannibalizing the market share of our competitors, but sometimes our own market share. The third factor is the reprioritization of the programs and that remains fluid for now till the time where the uncertainty exists in the minds of the OEMs. Our hope is that things will settle down over the next one or two quarters. After that we'll be able to have more clarity in terms of what that means. The TCV, just so you know, the TCV value is actually over a period of time.
Secondly, the TCV, also the start of the program, also depend on the ability of the OEM to accelerate growth. We'll see more results coming out of the OEMs in the next one or two weeks. We'll have to see. The trend hasn't been good for the last couple of quarters for them and we need to keep that in mind. We always take a long-term view of these partnerships and through this difficult time we are going to be their trusted partner. We do believe that things will stabilize in another quarter or two and then we can go back to our growing ways. That's the best.
To the extent that.
We can answer your question at this point in time.
Yeah. Thanks.
One quick last question from my side, especially on Japan. The growth in JPY currency, things like a sharp decline, I think, despite cross currency benefit. While we understand this was a difficult quarter, as we look ahead, do you think this was just a pause in the program with some of the OEMs there, or there has been a strategic rethink and therefore we will have to wait and see how this pans out.
I think that's a really good question about Japan. We have had tremendous growth over the last couple of years because of our engagement in Japan. That was on the back of largely one OEM. The thing that we are doing is there are three other OEMs with whom we have started really advanced conversations, and we believe that towards the end of the year we'll start working with them as well. We'll have more broad-based growth coming from at least four OEMs in Japan by the end of the year. What you've seen maybe for now is a glitch. It may continue for another quarter or two. As we get towards the end of this financial year, we'll have broad-based, consistent program coming out of Japan.
Thank you and all the best.
Thank you.
Thank you. The next question is from the line of Anand Bhaskaran from KSEMA Wealth Management. Please go ahead.
Yeah, good evening, can you hear me?
Yes, Anand.
Yes, yes. That was a good set of numbers. I just wanted to know your, just to get a perspective of the hiring process now. I guess you heard like many company owners are basically saying that they will completely change the hiring process from counting.
The number of employees to actually sourcing the.
What is it getting, focusing on output revenue rather than revenue per employee cut? So what will your company, like, you know, adopt going forward?
Basically, you think it will focus on.
Employee count or will you look at the gig economy and then say okay, we will hire employees from time to time and focus on the output respect.
Two, three things. Number one, we also start looking at changing the quality of our employees, which is good. We are investing quite a lot in training and improving their competencies both in domain as well as on AI side. AI, you know, understanding of AI and having that mindset is very important. We do believe that sometimes operations can do a good job. We continue to hire them. Basically, our criteria of skills and the competency has changed both for freshers as well as laterals. In terms of gig economy, it's not still as much as prevalent in India. We would like to try that. It really happens more as a subcontractor and some individual players. It's not as mature market in India yet for that. We can do it in bits and pieces.
I must tell you that in other way we do believe that interns and freshers are really contributing very well in terms of our AI status. As I mentioned, we are looking at the whole HR process in view of the changes in the technology as well as what the clients are expecting.
Okay, do you see any significant, like, say, employees crowd down? Because you heard, like, many IT companies are, you know, laying off a lot of our employees as well, compactly, and probably focusing on more contractual employment. Do you think that in your case that would be the way going forward?
First thing is we are a bit different than IT. The second thing is we are looking at changing the business model more. If you see KPIT , last 3 years their revenue per person has increased, and we do hope that the changes will help us to continue to maintain that.
Okay, okay.
One last question is, do you have any guidance for the next two, three years in terms of revenue growth?
I mean I had said it, but right now I think we'll come back when we have not talked about this year, and we will not talk about this year. We will come back when we believe the markets are a bit stable.
Okay, thank you.
Thank you.
Thank you, ladies and gentlemen. That was the last question for today. I now hand over the conference to management for closing comments.
Thank you everyone for your active participation on the call and have a great evening. Thank you and bye bye. Thank you.
Thank you on behalf of Dolat Capital Markets Private Limited. That concludes this conference. Thank you for joining us and you may now disconnect your line.