Automotive and mobility industry-focused software company KPIT Technologies on Wednesday reported a 28.26% year-on-year growth in profit after tax to Rs 83.50 crore and a 26% growth in revenues to Rs 744.83 crore for the September quarter. KPIT has increased the FY23 outlook to 31-32% and the Ebitda margin outlook has been increased to 18.5-19%.
Despite the upward revision of guidance, the KPIT stock, which opened at Rs 660 on Wednesday on the BSE went down to Rs 615 during the day but recovered by the end of the day to close at Rs 649.50, a 1.63% drop. Kishore Patil, managing director and CEO, KPIT, remained confident about the company’s future growth and did not expect any headwinds from macroeconomic uncertainties.
They had improved their guidance based on the pipeline of business, long-term visibility of growth, conversation with clients and the kind of work they were focused on, Patil said. KPIT was working with 70% of the global ongoing projects in the area of software-defined vehicles and it was this pipeline that gave them the confidence to increase the guidance. All KPIT’s revenues were from existing OEM clients, who have made substantial investment commitments on these prime projects as the future of OEMS was at stake. Their clients had well-defined programmes and clear timelines, he added. KPIT was expecting a couple of mega engagements to get closed in the coming three to four months.
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Sachin Tikekar, president and joint managing director, KPIT said they were working on long-term projects and their business would not get directly impacted by these ups and downs. He did not expect any reduction in spending by their clients. The company had bagged five new big deals during the second quarter of FY23 with three in the US, and one each in Europe and Asia, he pointed out.
The company had a revenue pipeline of $ 142 million during the second quarter, which was an all-time high. Growth was led by digital connected solutions and electric powertrain domains and growth in the commercial vehicles vertical.
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KPIT was now focused on execution and delivery and to ensure this the company had given its employees one of the highest wage hikes in the industry. Patil said they had given the entire global team a double-digit hike compared to the mid-single-digit hike earlier and this was expected to bring down attrition below the 20% levels in the next two quarters. Attrition was easing out and was expected to become better by end of FY23 with a focus on talent development and retention with increments and promotions higher than the industry. The gross impact of these wage hikes was 300bps. The wage hike impact on EBITDA was 90 bps but they managed to reduce this impact through improvement in other areas.
KPIT gets 40% of its revenues from the US, 40% from Europe and 20% from Asia. Recent deal wins include multiple programmes from an American car manufacturer in the middleware and electric powertrain domains and a multiyear engagement with a US CV maker in the powertrain domain. It also got into an engagement with a European car maker for an electric power train and an Asian car maker for a strategic programme in the connected domain.
KPIT had completed the acquisition of Technica and this would get reflected in the Q3FY23 numbers of KPIT and also give them two new development centres in Spain and Tunisia. Technica has an annual revenue run-rate of Euro 42 – 43 million with EBITDA margins in the 20% range.