Unlike IT service companies, many domestic IT engineering service firms, which include two Tata Group entities, are currently witnessing a majority of their revenues coming from non-American regions. For instance, Tata Elxsi and Tata Technologies said major portions of their revenues come from Europe and India.
While Tata Elxsi said during Q2 results that revenues from Europe formed the largest part of its earnings, Tata Technologies’ filings with the Registrar of Companies showed that the bulk of its revenues comes from India, followed by Europe.
Engineering service firms like KPIT, Cyient and Axiscades also derive larger parts of their revenues from non-American regions. This is in a stark contrast to IT service companies like TCS, Infosys, HCLTech and Wipro, all of which derive the bulk of their revenues from the Americas.
During the July-September quarter, Tata Elxsi saw Europe pipping Americas to become its largest market. During the first six months of the current fiscal, Tata Technologies’ share of revenue from Europe comprised 30% of its overall income. The company’s share of revenue from the North American region was about 20%. Two years ago, North America accounted for about 32% of its top line, while Europe was responsible for 31% of its total revenue.
Axiscades’ North American (USA and Canada) revenue constituted 34.1% of the September quarter revenue, but its European revenue contribution stood at 37.4% in the same quarter. In the June quarter, its North American revenue constituted about 35.4% vis-à-vis Europe’s contribution of 33.5%.
KPIT, another Pune-based ER&D service provider derives about 52% of its revenue from Europe. Its American revenue is about 30%. Similarly, Cyient’s non-American revenue is around 57%. A year ago, non-Americas region contributed less than 50% to Cyient’s top line.
Pareekh Jain, founder, Pareekh Consulting, said, “Many of the world’s leading ER&D players by revenue are based in Europe. Thus, before Covid-19, European companies used to outsource a large number of deals to these ER&D players. But after Covid-19, auto and manufacturing companies started looking to reduce cost and hence outsourcing to Indian IT Engineering companies from Europe increased rapidly”.