KPIT Technologies Ltd (KPITTECH) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator (Dolat Capital): Ladies and gentlemen, good day and welcome to KPIT Technologies Q2 FY '27 earnings conference call hosted by Dolat Capital. 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 conference is being recorded. I now hand the conference over to Mr. Rahul Jain. Thank you and over to you, sir.
Rahul Jain (Dolat Capital): Thank you, Naznin. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies for giving us the opportunity to host this earnings call.
Rahul Jain (Dolat Capital): And now I would like to hand the conference over to Mr. Sunil Phansalkar, who is Vice President, CFNG and Head of IR at KPIT to do the management introductions. Over to you, Sunil.
Sunil Phansalkar (KPIT Technologies Ltd): Thank you, Rahul. A warm welcome to all on the KPIT Q2 FY '27 post-earnings conference call. I would like to take this opportunity to wish all of you in advance a very happy Diwali and a prosperous new year. On the call today, we have Mr. Kishor Patil, Co-Founder, CEO and MD, Mr. Sachin Tikekar, President and Joint MD, Anup Sable, Board Member and COO, Chinmay Pandit, Board Member and Head Americas, Priyambada Hardikar, CFO and yours truly from IR. So, as we do always, we will have the opening remarks by Mr. Kishor Patil on the performance of the quarter and the way we look the year ahead and then we'll have it open for questions. So, once again, a very warm welcome to you all, and I'll hand this over to Mr. Kishor Patil.
Kishor Patil (KPIT Technologies Ltd): Good evening and thank you for joining the call. Welcome to quarter two earning call. Some time back we had given how KPIT's growth will pan out and in terms of specifically how the Q2 will look like. And we are happy that we are in line with our expectation, and some of the we we can see some of the early results of the strategy we have put in place. So, in order to really understand this, let's go into details. So, overall growth has been 6.5% year-on-year, in rupee terms 1% in terms of quarter-on-quarter. We were expecting more flattish and in terms of CC terms, again it is 0.5% quarter-on-quarter and 0.2% year-on-year. So, looking at this, if we go one level below, commercial off-highway and commercial has grown 27% year-on-year and 17.6% quarter-on-quarter. So, as we had mentioned, this is one of the growth drivers for now and future we are looking at. The passenger car, if you really look at, we are down by about 7% year-on-year and 4% sequentially. I would like to mention here that while passenger car looks like this, if we take out our two top accounts, the the impact we have, a sharp decline we had due to cancellation of their programs or cutting of their expense is 13% of the total revenue. So, what this means is we have been in a position to make up that drop due to our growth in off-highway, commercial and also the products. So, this is how we have been in a position to make up. The pipeline is healthy. We have got reasonable wins, and now 89% of the wins we are it's a very active pipeline. And we we see that while it is taking some time for realization, it's an active pipeline, and we feel much more comfortable with some of the opportunities on hand. I would like to come back to the products. The products revenue, which we have talked about, and we will talk about this more later in the year, maybe early next year, in more detail, how we intend to do, but this we have a 5% growth quarter-on-quarter during the during the quarter and 25% year-on-year. So, so overall services revenue has been flattish, but the product has grown 5% quarter-on-quarter and 25% year-on-year. In terms of profitability, our EBITDA has grown from 17.2% to 17.8%. This 600 basis point, largely it is because of the business mix as the products contributions are higher as compared to the services part and solutions part. And we have continued to make investments in terms of technology.
Kishor Patil (KPIT Technologies Ltd): During this quarter, our, investments, into R&D has gone up by a couple of million dollars. So, cash has, is about 6.2 billion. It has, been, come down a bit, basically for two-three reasons. One is that there was a dividend payment of 1.4 billion rupees. There was an acquisition payment of Symo- in the sense, the initial payment of, Symotech, about a billion. And, the DSO has, increased from 51 days to 53 days. [cough] The wins, I I talked about the wins. But the wins have been mainly in terms of autonomy, connected, and ADAT. In terms of AI, if you really look at we continue to make good strides in that. We believe that this will be, for now and in medium term, a very significant differentiator. The Beacon product has been very received very well. And, as, most of all our almost all our products the Beacon is the basis for that. While we also will take the Beacon as a market to marketing due course. So, this is this is how in in case of AI. The in services and solutions of course, on all of our deliveries, many of the our deliveries, we have started using this. There are nine more than 9,000 users of, you know, the plat- AI platform, overall AI product. We have more than 5 million, transactions if I, I would say, which has happened, during the quarter. 12,000 engineering agents have been built. So, this is a significant change which we have made, and it is quite well appreciated, by the clients. Roughly around 9% of the revenues, come from the what we call AI-first projects. So, as I said, it's very normal now to use AI in almost, everybody uses AI in every project and product. This 9% is where we say that this solution is based on AI and it makes a significant differentiation. And we use it to go to markets. So, this is the progress we have made and we expect this to go up significantly. On the people side, the, sorry, the fixed-price projects have moved to about 70%, which is significant. It's very important because over as we move towards AI more and more, I think these are the projects where we can get both the productivity or we can move in terms of on, differentiation. So, that that is, very important. People attrition was a bit higher during this quarter. It was mid-teens. But, we, as we predict the next quarter, it is go- coming down substantially. We have done our increments, during the quarter for certain grades, initial grade between A to D, A to E, grades. So, we have made the, increments and, some other increments will get done during this quarter and some in the last quarter. So, we so, of course, this is, so, that's why we do believe the attrition will come down, reasonably. And, because we have in advance we understand the attrition for the next quarter. This will come very close to what we were earlier. I wanted to also talk about, you know, that, so, in terms of adjacencies. While we have been, we believe that overall need for software will keep on increasing in the mobility part. There is a significant opportunity, even though right now there are certain headwinds in the market, over the the the the content of the software is going to go up in in the car. And, the software-defined vehicle is important for most of the OEMs. It will transition to AIDV, where KPIT, with Beacon as well as few other products, will be in a prime position to take that re- take the opportunity as it has done in the SDVs part. So, I believe that
Kishor Patil (KPIT Technologies Ltd): That opportunity is we we believe we are excited about the opportunity including pass car into certain segments. However, we believe that we can extend some of this expertise into some of the adjacencies. As we have been talking about. It is so, over the period, this will allow us to have a more addressable market with we using our using our assets, technology products which we have built and the domain. So, one thing is we're talking about energy tech where some of our clients already have like for example Cummins do does work into energy tech areas and we can take it to another 15-20 clients and similarly in the deep tech areas. So, these are the two areas where we are now ex- creating specific offerings which we have, are packaging for this specific verticals and we will be going into this adjacencies in due course. It will take time for us to, even though we believe that early successes will come in two to three quarters, but it will take time to have a meaningful impact, but this is what we will we we have already initiated. I we do believe that we we are really excited with on the AI native deliveries, AI products which we have. The overall products changed, the way we have done from the architecture to after sales, the solutions we are building around the products and adjacencies. So, while we while our performance is, as I said in line, but muted to certain extent, we feel very we believe remain confident about in the mid term growth and excited about the opportunity we have in front of us. Thank you.
Sunil Phansalkar (KPIT Technologies Ltd): We can open it for questions now.
Moderator: 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 touchtone 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 Rishabh Rathi from Goldman Sachs. Please go ahead.
Rishabh Rathi (Goldman Sachs): Hi, good evening and thank you for the opportunity. My question is around the geography-wise sales and we had talked about like two major customers winding down. If I can just see Europe actually we've seen a sequential decline, but Asia has picked up in 2Q versus 1Q. So, if you could just give some color whether going forward we can see more sequential decline and is there some positive develop- development in Asia, ex of the customer decline?
Sachin Tikekar (KPIT Technologies Ltd): Hi Rishabh, this is Sachin Tikekar. So, the two clients where we've seen a sharp decline, one happens to be in Japan, which is part of JKC and the other one is in Europe. And it's primarily because of these two clients, you see degrowth in the two respective geographies. There is growth in Americas, as you can see, in in the US quarter on quarter, year on year. CIMA which we split from Asia, so Asia has two parts, one is JKC, Japan, Korea, China, the other part is Southeast Asia, India, Middle East. And that's where we again see growth primarily driven by fairly well-rounded growth, primarily driven by India in in CIMA. So, the way to look at the split is the issue is actually with these two OEMs where the revenue has gone down by more than 30% and we do believe that in the next couple of quarters that both these clients will bottom out and till that time, there is an opportunity for us to bring broad-base more resilient growth. And what we mean by that is, the growth will happen, a, in existing clients of passenger cars, in new clients that we have picked up in passenger cars, b, more clients in of
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