Ladies and gentlemen, good day and welcome to Tata Technologies' 2Q FY 2026 earnings conference call. 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-tone phone. Please note this call is being recorded. I now hand the conference over to Mr. Vijay Lohia, Head of Investor Relations at Tata Technologies. Thank you, and over to you, sir.
Thank you, Yasheshri. Hello everyone, and welcome to Tata Technologies' second quarter of fiscal year 2026 results call. I'm Vijay Lohia, Head of Investor Relations. Joining me today are Mr. Warren Harris, CEO and Managing Director, Ms. Sukanya Sadasivan, Chief Operating Officer, Ms. Savitha Balachandran, Chief Financial Officer, and Ms. Geena Binoy, Chief Human Resources Officer. We'll begin today's session with an overview of the company's performance from our leadership team, followed by a Q&A. Before we begin, a quick reminder: we do not provide specific revenue or earnings guidance. Any forward-looking statements made during this call should be considered in the context of the risks outlined in the second slide of the quarterly fact sheet available on our website. Our press release and earnings presentation have been submitted to the stock exchanges and are also available on our website. We hope you've had a chance to review them.
With that, let me now hand over the call to Warren.
Thank you, Vijay. Hello everybody, and thank you for joining us. It's a pleasure to be with you today to discuss our performance for the second quarter of fiscal year 2026. This quarter marks an important step forward for Tata Technologies: a return to sequential growth and a reaffirmation of the resilience, innovation, and execution excellence that define our company. In Q2, we delivered 5.1% sequential growth in our services business and 6.4% overall revenue growth in Indian rupees. After a few softer quarters, it's encouraging to see momentum returning across our key accounts. This reflects both an improving demand environment and the trust our customers place in Tata Technologies. We continue to see strong performance in aerospace, which, alongside the industrial heavy machinery vertical, delivered 14% revenue growth in U.S. dollar terms.
This was driven by sustained demand and consistent execution across MRO, PLM, manufacturing engineering, and digital transformation engagements. The automotive vertical also regained positive momentum, recording a 0.5% sequential increase in U.S. dollar terms, a clear sign of stabilization and improving demand. Our technology solution business grew 10.6% quarter over quarter, with strong performance in both the education and the product segments. The education vertical rebounded as previously delayed projects went live, and we also closed a large deal in this space. With a healthy pipeline ahead, we are confident as we enter the second half of FY 2026. We also closed three large deals during the quarter, one with a tier-one automotive supplier where Tata Technologies has been engaged to harmonize its product data and information technology landscape across a series of recent acquisitions.
The second is for the development of a heads-up display unit for a Scandinavian OEM, showcasing our capabilities in delivering advanced in-vehicle digital solutions. The third is our first direct deal with a German OEM, focused on traditional body engineering services that will contribute to all future vehicle programs, highlighting the accelerated progress we continue to make in this region. These wins exemplify both the scale and diversity of our engagements and demonstrate our ability to deliver complex, high-value solutions across multiple regions and segments. Our EBITDA margin for the quarter was 15.7%. However, adjusting for one-off cyber incident-related expenses that we booked in Q2, relating to an attack that we reported earlier in the calendar year, margins improved from 16.1% in Q1 to 16.4% in Q2, reflecting steady progress in operational efficiency and cost discipline.
This performance underscores our balanced approach, focusing on margin improvement whilst also protecting delivery capacity in anticipation of growth in the second half of this year. We've made deliberate choices, prioritizing capability building, customer delivery, and innovation investments over maximizing short-term margins because we believe this approach best positions us for sustainable long-term value creation. A major strategic milestone this quarter was the signing of a definitive agreement to acquire ES- Tec, a move that significantly advances our European presence and automotive engineering capabilities. This acquisition provides direct access to Volkswagen as a key customer, strengthens our leadership position in Germany, and adds deep expertise at the top end of the systems engineering automotive V-cycle. With a team of over 300 highly skilled engineers, ES- Tec brings advanced capabilities in ADAS, connected driving, and embedded software, areas central to the industry shift towards software-defined intelligent mobility.
ES- Tec's longstanding relationship with Volkswagen, the world's leading automotive R&D spender, together with Tata Technologies' industry-leading automotive services portfolio, opens the door to deeper collaboration on next-generation mobility programs, including EV platforms, software-defined architectures, and virtual validation initiatives. This acquisition also creates substantial cross-selling and portfolio synergies, enabling us to engage more deeply with OEMs as they navigate their way through the once-in-a-generational structural changes that are currently defining the global mobility sector. Q2 was also a quarter of strong operational and innovation milestones. We successfully introduced the digital key feature for an Indian automotive OEM, enabling iPhones, Apple Watches, and Android devices to function as smart keys. We launched WATTSync, our digital battery passport platform, which combines blockchain-based traceability and AI-driven insights to help manufacturers meet global sustainability regulations and unlock new business models like battery as a service.
We achieved A-SPICE Capability Level 3 certification, reinforcing our credibility and readiness to collaborate with leading global automotives. We announced a strategic partnership with Synopsys to enable virtual validation in software-defined vehicles, accelerating OEMs' ability to integrate and validate software more efficiently. We expanded our European footprint with a new office in Munich, strengthening our engagement with OEMs in the region. We secured key projects with major automotive suppliers in North America and Europe, including PLM implementations, product data harmonization, and battery management systems development. We partnered with the government of Maharashtra to establish a center for invention, innovation, incubation, and training, deepening our commitment to developing future-ready engineering talent in this state. We scaled our BMW joint venture to over 1,000 employees. We also invested in employee development training. Over 7,200 employees in this quarter were trained, including 1,200+ in generative and agentic AI.
We also received, and we're very proud of this, gold at the 2025 Brandon Hall Group Excellence Awards for our employee recognition program, celebrating our culture of engagement, collaboration, and excellence. Together, these achievements demonstrate the depth of our innovation, the strength of our partnerships, and our focus on building future-ready capabilities across our business. Looking ahead, we remain optimistic about the second half of fiscal year 2026. We are seeing encouraging signs of recovery across all three major industry verticals, with large deal wins providing strong visibility into future growth. While Q2 performance was solid, we anticipate some moderation in Q3, followed by a sharp recovery in the fourth quarter. As you may have read in the press, JLR 's IT systems are in the process of being carefully restored, and we are, at the moment, grappling with the implications of that.
To sum up, Q2 has been a quarter of meaningful progress. We've delivered a return to growth, improved margins, strengthened our strategic presence in Europe, advanced our innovation agenda, and continued to invest in our people and partnerships. I want to extend my sincere thanks to our employees for their commitment, to our customers for their trust, and to our shareholders for their continued confidence in our company. As we enter the second half of FY 2026, we do so with renewed confidence, a robust foundation, and a clear focus on delivering sustainable technology-led growth. Thank you, and I'll now hand over to Savitha to take you through the financial details. Before I do that, let me extend a very happy Diwali to everybody.
Thank you, Warren. Hello and a warm welcome to everyone joining us on the call today. I'm pleased to report that we delivered a sequential revenue growth of 6.4%, reaching INR 1,323 crore this quarter, despite operating in a macro environment marked by economic uncertainty. On a constant currency basis, our total revenues were up 4.5%. Our services business, that contributes 77% of our total revenue, grew 5.1% sequentially to INR 1,013 crore and by 3% in constant currency, in line with the outlook we shared during the last quarter's call. While we continue to see some delay in ramp-up of large deals and protracted decision cycles, this quarter's growth was supported by contributions from deals closed in the last quarter, along with a strong performance in the aerospace and in the industrial heavy machinery segments. These segments delivered a 14% sequential revenue increase in U.S.
dollar terms, driven by steady demand and consistent execution across MRO, PLM, manufacturing engineering, and digital transformation engagements. Looking ahead to the second half of fiscal 2026, we remain cautiously optimistic. While Q2 marked a return to growth, we expect some moderation in momentum during Q3, primarily due to the near-term temporary headwinds. That said, we anticipate a recovery in Q4 supported by recent deal wins, improving demand signals, and normalization of customer operations. Our technology solutions portfolio, which contributes the remaining 23% of our revenue, delivered a strong 10.6% sequential growth this quarter. This performance was driven by strong momentum both in the education and in the products business. The education business saw a meaningful recovery as previously deferred projects moved into execution. With a healthy pipeline and continued traction across key accounts, we remain confident as we enter the second half of fiscal 2026.
Our EBITDA margin for the quarter stood at a reported number of 15.7%, which includes a one-time consulting expense of approximately over INR 10 crore that was incurred in connection with an incident that was referenced by Warren in his remarks. Adjusting for this exceptional item, our normalized EBITDA margin came in at 16.4%, reflecting a 30 basis point improvement quarter over quarter. We also continue to upgrade our digital infrastructure, our global footprint, such as the opening of the new office in Munich, as well as in people capabilities in line with our business requirement and outlook. Looking ahead in Q3, we anticipate some margin pressure due to the upcoming salary revision and some temporary headwinds in our customer operations as they continue efforts to restore their systems. Reported EBITDA came in at INR 208 crore, up 3.8% sequentially.
Our share of profit from our joint venture with BMW grew 10.6% sequentially to INR 5.3 crore, while the net benefit from the joint venture stood at INR 13.6 crore, contributing 6% to our overall pre-tax profits. As a result, our operating profit or EBIT grew 4.6% quarter on quarter to INR 190 crore. Our other income saw a decline of 24% sequentially to INR 48 crore, driven mainly by the lowered unrealized foreign currency gains of about INR 18.5 crore compared with INR 25.3 crore in the previous quarter. As a result, our profit before tax declined 3% quarter on quarter to a number of INR 226 crore. On a year-on-year basis, our profit before tax was up 3.9%, and in the first six months of this fiscal year, our PBT is up 5% compared with the first half of last fiscal.
Our effective tax rate remained flat at 26.8%. Recently, our profit after tax was down 3% to INR 165 crore. In the first six months of the fiscal year, our PAT is up 5% on a year-on-year basis. In terms of collection efficiency, we saw an uptick in DSO, which stood at 109 days as of September end from 87 days in June. This increase primarily reflects broader business conditions and certain customer-specific temporary situations that have impacted payment timelines. Our net cash position, as a result, stood at $123 million at the end of September, compared with $159 million at the end of June. We continue to, however, operate as a debt-free balance sheet company. That said, we expect our DSOs to gradually revert to their historical range over the next couple of quarters as these temporary factors normalize and collection cycles stabilize.
Turning to our operational metrics, our total headcount at the end of the quarter stood at 12,402 compared to 12,407 in Q1, remaining broadly stable and aligned with our calibrated hiring approach. During the period, we continued to invest selectively in strategic talent across digital engineering, embedded systems, and AI-led transformation to strengthen differentiated delivery and long-term growth. We also advanced internal mobility, rotation, and reskilling through our internal tech university, enabling talent repurposing as well as improved utilization. Investments in upskilling continued to accelerate, particularly across areas such as SDV, AI, and cybersecurity, to deepen technical expertise and build a future-ready workforce. Our trailing 12-month attrition rate rose modestly to 15.1% compared to 13.8% in the previous quarter, reflecting natural market movements and industry normalization. Attrition remains within acceptable levels, supported by strong employee engagement and internal career pathways.
We continue to emphasize retention through growth opportunities, continuous learning, and leadership development, ensuring that our talent ecosystem remains motivated, capable, and aligned with the company's transformational agenda. Before I conclude, I'd like to also briefly touch upon a strategic development during the quarter, the signing of the definitive agreement to acquire ES- Tec. We expect the transaction to close in Q3, subject to customary closing conditions and regulatory approvals. Post-closing, our immediate focus will be on ensuring a smooth integration, aligning our go-to-market strategies, and unlocking synergies across talent, technology, and customer relationships. We are confident that this acquisition will be attractive to our growth and margin profile and will further strengthen our position as a trusted partner in the automotive engineering ecosystem. To conclude, Q2 has been a quarter of meaningful progress and renewed momentum.
Despite operating in a complex macro environment, we've delivered sequential growth across both services and technology solutions, maintained profitability, and continued to invest in strategic capabilities that position us well for long-term success. While we expect Q3 to reflect some temporary headwinds, including seasonal factors, we remain confident in our ability to navigate these challenges and return to a much stronger growth in Q4. Our focus remains on deepening customer relationships, driving operational excellence, and building a future-ready organization through continued investment in talent, technology, and transformation. Thank you to our employees for their unwavering commitment, to our customers for their continued trust, and to our shareholders for their support. We look forward to building on this momentum in the second half of fiscal 2026. Before I close, I take this opportunity to wish you and your family a very happy Diwali.
We hope the festival brings you lots of joy, good health, and success your way. We'll now open the floor for 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. An operator will take your name and announce your turn in the question queue. Participants are requested to only use handsets while asking a question. Participants are requested to limit their number of questions to two per participant and rejoin the queue for any additional questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take our first question 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 around the contracts which you mentioned. There was some lumpiness and delays in education-related business from the previous quarters. That's been an issue this quarter. I just want to understand what would be the approximate case of that contract which was.
I'm sorry, your voice is breaking, sounding muffled.
Is it better now?
Can you try again, please? Yes, go ahead.
Thank you. My first question is just around the education business. You mentioned that there were delays in education business contract actualization in the past few quarters, which has benefited this quarter. I just want to understand what is the sizing of that deal which has benefited this quarter.
In terms of the situation that's played out in education, earlier in the calendar year, there were some delays in terms of getting access to some of the innovation centers that we were equipping with the next-generation capabilities and training curricula that support our education value proposition. Those centers have now come online, and we've been able to play some level of catch-up in Q2. We also have continued to reinforce our order book. I referenced one deal that we closed in Maharashtra in Q2, but there have been other deals that we've closed. We expect continued momentum in technology solutions and specifically in education in the coming quarters.
All right, thanks. Just to follow up, I just want to understand, we've seen close to 11% Q2 growth in technology solutions. Is most of that growth, let's say, in terms of if you were to quantify it, is all of that growth due to the lumpiness benefit? I think education and technology solutions tend to spot the lumpiness in the third quarter and the second quarter. I just wanted to follow up on if any quantification you're able to provide around the lumpiness of this deal.
The improvement was both in products and in technology solutions. The first quarter of our fiscal year is typically a soft quarter for products, and we've seen improvement in that. In the second half of the year, as a number of maintenance contracts continue to get refreshed and renewed, the second half of the year is a good seasonal period for our products business. We expect continued growth in education, and we also expect to enjoy the seasonal benefit of the improvement in the second half of the year that typically underpins what happens in products.
All right, that's helpful. Second question is just around your prepared remarks. We have, I think, done much better this quarter in terms of Q2 growth than the previous two, where there were potentially macro headwinds that were delaying decision-making at some of our core customers. You did mention that you're cautiously optimistic on the back half, maybe Q3 will be seasonally weak, but you're hopeful that things pick up in Q4. I just want to understand, based on some of the recent deal wins, do you think Q4 can be sort of equally as good as this quarter in terms of Q4 growth you've been able to deliver in the core business? Any additional color you're able to provide on what's giving you confidence around potentially better Q4 in this part of the recovery in the cycle?
Yeah. Just again to provide confidence, in quarter one and at the beginning of the fiscal year, I've commented that we expected strong momentum in this year based upon the conversations that we were having in the fourth quarter of last year. Last year was somewhat unsettled because of the election in the U.S. and some of the EV incentives in Europe running off. Early part of the calendar year, we had some very, very good discussions with our customers about new products and the contribution that we could make to that.
We saw some of that get somewhat undermined by the tariff announcements at the beginning of Q1 that not only impacted the North American manufacturing sector but also impacted those customers in automotive, aerospace, and industrial heavy machinery that looked to sell into the United States because everybody was impacted, I think, in either direct terms or indirect terms through their supply chains. What we anticipated in Q1 is starting to play out in Q2 because the uncertainty that was there after the tariff announcement is starting to clear, and most of our customers are getting now aligned with the new normal in terms of the tariff environment specifically. Many of those investment decisions that we were looking to intersect with at the beginning of the fiscal year have now come through in Q2, and that's what's largely driven the improvement that we've seen. We expect that to continue.
Our customers and the markets that we serve are largely product-led, and in all of the sectors, there has been some impact as far as investment related to some of the geopolitical and the macroeconomic issues. Whilst not everybody will agree with the changes that have been enacted, at least we've got clarity now, and our customers, as a result of that, are returning to making investments in the next-generation products that stimulate the demand that we support. We are expecting a continued improvement from the perspective of the needs that our customers are looking to place with us.
All right, thank you very much.
Thank you. We'll take our next question from the line of Manik Taneja from Axis Capital. Please go ahead.
Hi, thank you for the opportunity. I just wanted to get qualitative inputs on a couple of things. You are saying that third quarter should probably be soft. Q4 is when you expect a sharp rebound. Just to understand if that is, that comment essentially is on an organic basis or given you will probably include this acquisition and thereby that's supporting the revenue growth momentum. That's question number one. The second thing is if you could give us some qualitative sense in terms of our automotive vertical performance between anchor customers and external customers, how they may have done in the second quarter, and how should we be thinking about the prospects between these two segments on a go-forward basis?
Thank you for the question. I think our comments in terms of our opening remarks relate to our organic performance. As has been referenced a couple of times, Q3 is seasonally soft, given the festivals and the holidays in different parts of the world. We, like everybody else, are going to be impacted by that. Our commentary is related to seasonal issues and specifically one or two customer situations that we are looking to quantify at this point in time. As far as automotive is concerned, one of the things that was very pleasing in Q2 was that we were able to drive growth across the three industry verticals. Even though the aerospace and industrial heavy machinery verticals delivered double-digit sequential growth, we were also able to squeeze out growth in automotive. That's really the first time for a number of quarters.
We really think that that augurs well in terms of the industry and by association, the prospects for Tata Technologies.
Sure. Would it be possible for you to essentially give us some sense on your double-digit aspiration that you had through a better part of this year? Do you still think that's a possibility for FY 2026, or probably given the way we've performed and given your expectation for third quarter, that expectation may not turn out to be true? You know.
Our aspirations of double-digit growth will always be there. I think at this point in time, our objective and our target will be to ensure that the order book and the momentum that we take into the next fiscal year will provide a platform for double-digit growth in FY 2027. I think at this stage, I certainly do not want to quantify specifically what we will look to drive in terms of growth in this fiscal.
Sure. The last one on the BMW joint venture, you've achieved the 1,000 headcount mark much ahead of the initial plan by December. Are you willing to share some more milestones or the progress that you expect on that joint venture over the next couple of years?
What I will say is both in quantitative terms and also in qualitative terms, the JV continues to exceed the expectations of both Tata Technologies and BMW. We've exceeded the headcount targets through the teams that we're managing in the three hubs: in Pune, in Bangalore, and in Chennai. That momentum we expect to continue. I think the brand has really been established now in the Indian context, and that's affording us the opportunity to attract and retain some of the brightest automotive talent in the industry. What's also encouraging is the fact that the type of work that is being undertaken by the JV is of a very high level of complexity and sophistication. The feedback from BMW and the teams in Munich specifically is that they are very, very pleased with the work that is being undertaken.
I think that augurs well not only for growth but the type of responsibility that the JV will increasingly be given.
Sure. Thank you and all the best for the future.
Thank you.
Thank you. Next question is from the line of Abhishek Kumar from JM Financial. Please go ahead.
Yeah, hi, good evening. Warren, you mentioned in your initial opening remark that Q3 headwind is because of delays in JLR , IT systems still being restored, etc. I just wanted to understand what is the visibility we have at this stage of these challenges getting resolved during the quarter? What would be the potential impact from JLR alone in Q3? A related question is that when we say headwind in Q3, are we referring to some decline in sequential growth or just lower growth for Q3?
I think as far as JLR is concerned, let me just qualify the comments that I made at the beginning. We are very much involved with supporting the phased restoration of the IT infrastructure at JLR , and I'm very, very proud of the work that our teams have undertaken to support the ability of JLR to bring back up their production facilities and their core enterprise IT systems. We are working with JLR to ensure that all of our teams that are strategically important to JLR are in a position to continue the contribution that we've now made for many, many years. The comments that I made are that JLR themselves are still going through, as they bring up their systems, what their short-term priorities are.
Whilst they're going through that exercise, I think it's prudent for us to signal that there could be, and I want to stress could be, some impact in the next couple of months. The visibility on that is something that will only play out in the next two to three weeks. Right now, I'm not in a position to quantify. All that I will say is that we are working hand in glove with the JLR teams. We're doing everything that we possibly can to support their phased deployment of their IT systems, and we're going to do everything that we can to ensure that they're in a position to restore their operations to where it was before the attack.
Yeah, so potentially Q3 can be a negative quarter from a services perspective, negative growth quarter?
At this point in time, I'm not going to size what the impact of JLR is going to be because I simply do not know. Outside of that, we are going to continue to reinforce our support towards growth, and we are doing everything that we can to ensure that we build upon the momentum that we've established in Q2.
Sure. My second question is on your acquisition. ES- Tec looks like a very exciting asset. They're growing very fast. What are the kind of synergies we see? Is the buyer of their services versus what we would typically sell to at in Volkswagen similar? Do we have to leverage on their relationship to build more relationships? Savitha mentioned it's margin accretive. Any color on their margins? What we are seeing is on-site-centric niche firms like this generally are margin dilutive for IT services firms. Thank you.
Yeah, I think one of the things that attracted us to the organization were two things. One was the capability that they have at the top end of the automotive V-cycle. They do an awful lot of work in the area of systems architecture, functional and specification definition, and they do a lot of work in and around test and validation. To your point, that's very high-end and very niche and complex work. They've not only been able to protect themselves during the recent downturn and continue growth, but they've also been able to reinforce their strategic position as far as the Volkswagen ecosystem is concerned. Because of that special position, they have a great deal of influence at the top end of the Volkswagen group.
Certainly, we are expecting that influence and the trust and confidence that Volkswagen has in them to influence our ability to be able to sell the broader Tata Technologies portfolio to Volkswagen. One of the things that we're working very hard on right now is to identify what lines of service we should prioritize as part of that pursuit of synergies. As far as margins and growth are concerned, we expect ES- Tec to continue the momentum that they have established. We are not disclosing the specific margins that they support, but we do not expect any impact upon the unit economics of that asset as a result of the transaction.
Sure. Thank you and all the best.
Thank you.
Thank you. We'll take our next question from the line of Puneet Lainswala from WIN Investments. Please go ahead.
Yeah, hi. This is Puneet here. I wanted to ask a few questions regarding the aerospace division, which we look forward to knowing what exactly is the core we plan to explore in the aerospace division. Like, is it more about the passenger vehicle segment or any other segment where we eye to venture into?
If you look at aerospace, you know, there are a number of domain areas that we are developing capability in. We are developing capability in aero structures and interiors. We are developing capability in propulsion systems. We are developing capability in MRO systems. We're also leveraging our experience from automotive and industrial heavy machinery to help aerospace customers deploy digital solutions to address one of the big challenges of the industry, which is manufacturing throughput. We are investing in those areas, and we are seeing double-digit growth across all of those domains. You know, we have not only built a relationship that we're very proud of at Airbus, but we are growing within the Airbus supply chain. We are also investing very heavily in North America, specifically with the propulsion system manufacturers.
This is an area that has demonstrated growth whilst automotive and industrial aerospace has been somewhat flat, and we expect that to continue. We are confident because of the growth that is projected for aerospace, but we're also confident because India specifically and the Tata Group will play a very big part in the aerospace industry in the future. We intend to take full advantage of the opportunity that that represents.
Thank you very much. I'll go to my next question. In the coming years, once the tariff and everything is settled down, how do you see the aerospace affecting or making its mix in our revenue structure ahead?
I think that the OEMs will have to factor their sourcing decisions and their supply chain decisions against the impact of tariffs. I think if you were to canvas opinion from the big players, Airbus and Boeing, and their associated supply chains, whilst tariffs are important, building as many aircraft as the demand requires at the moment is an even greater priority. Our view, and I think this is the view of the industry, is that accessing capability will be more important than the implications of some of the recent tariff regulations that have been rolled out.
Okay, thank you very much. Thank you very much for your reply. I'm done.
Thank you. We'll take our next question from the line of Rohit Jain from Tara Capital Partners. Please go ahead.
Yeah, hi, thanks. My first question is on attrition. Attrition levels have moved up, let's say, noticeably from last quarter to this quarter and are at multi-quarter highs. What's your thought there? The second question is on margin. You highlighted that there's going to be margin impact in the coming quarters because of wage hike. Can you help us quantify that? Thank you.
I'll have Geena or Savitha or I talk about attrition.
Yeah, so there has been a slight uptick in attrition from 13.8% that we had in Q1 to 15.1% now. This attrition is broadly in line with the trends that we are seeing in the industry. A little bit of this is on account of the engineering area, and we see some uptick in the attrition in this area. This is mainly because we are losing some talent to the GCCs and the OEMs. That's the only comment I have on this.
Okay, and on the margin?
In terms of margins, we're looking to balance the capacity that we believe that our growth expectations in the second half of this year and next year will require, with the ongoing pursuit of ever improving and optimizing of the profitability of the company. That balance is something that we will continue to strive to affect.
No, but given that you have wage hike in the next quarter, can you quantify the impact of wage hike without looking at other, you know, push and pull factors?
All I will say is that we've rolled out wage increments or salary increments for about 88% of our employee base. We are, as we always do, applying the various operational levers that will allow us to mitigate the impact of those changes. As we do every year, we'll look to offset operationally the cost and the impact of the expenses that are related to the increments that we are committing ourselves to.
Sorry, just to hop on this, given that next quarter is going to be a weaker quarter because of the factors that you've highlighted and the fact that we have wage hike also in that quarter, is it fair to assume that next quarter the margins could be lower than the actual reported margins this quarter? Is that the right takeaway?
As Vijay said at the beginning, we don't provide specific guidance on revenue or margins, so I'm not going to quantify it for you. All that I will say is that we've rolled out salary increments that will represent an incremental expense in the third quarter, and we will apply the traditional levers to do what we can to offset that.
Okay, fair enough. Thank you. Thanks a lot.
Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Vijay Lohia for closing comments. Over to you, sir.
Thank you all for joining us on today's call. We hope we've addressed most of your questions. If you have any additional questions, please feel free to reach out to the investor relations team, and we'll be happy to assist you. Wishing you all the best and goodbye from all of us. Thank you very much.
Thank you, members of the management. On behalf of Tata Technologies, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.