Tata Elxsi Ltd (TATAELXSI) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the Q2 FY '26 '27 Earnings Conference Call of Tata Elxsi Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shashank Ganesh from EY. Thank you, and over to you, sir.
Shashank Ganesh (EY): Thank you very much, Sagar. Good evening to all the participants in the call. Good morning, if you're logging in from the Western side. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. Therefore, it must be viewed in conjunction with the business risk that could cause significant result, performance, or achievements that differ from what is expressed or implied by such statements. To take us through the results and answer your questions today, we have the senior management of Tata Elxsi, represented by Mr. Manoj Raghavan, Managing Director and CEO; Mr. Nitin Pai, Chief Marketing and Chief Strategy Officer; Mr. Nagendra Rana, Chief Financial Officer; and Ms. Sneha V, Company Secretary. We will start the call with a brief overview of the past quarter by Mr. Raghavan, followed by a Q&A session. We would appreciate your cooperation in restricting yourself to two questions to allow participants an opportunity to interact. If you have any further questions, you may join the queue, and we will be happy to respond to them if time permits. With that, I would like to hand over the call to Mr. Manoj Raghavan. Over to you, Manoj.
Manoj Raghavan (Tata Elxsi): Thank you, Shashank. Good evening, everybody, and thank you for joining us today. I hope you and your families and your teams are doing well. We appreciate your continued interest in Tata Elxsi and are pleased to connect with you to discuss the performance for the second quarter of FY '27. During the quarter, we remain
Manoj Raghavan (Tata Elxsi): strength in execution, advancing our strategic initiatives and investing in capabilities that position us for long-term growth. I'll now take you through the key highlights of the quarter. In the second quarter of financial year '27, we reported an operating revenue of rupees 1,055.7 crore, growing 2.3% in constant currency. We reported an EBITDA of rupees 231.4 crores, growing 7.1% quarter-on-quarter and 19.7% year-on-year. Our EBITDA margin for the quarter was 21.9%, a 70 basis point improvement over the previous quarter. The transportation vertical reported a quarter-on-quarter growth of 2% in constant currency terms, aided by new deal wins. A notable win is a strategic multi-year deal from a leading automotive OEM for a next-generation cloud-based telematics and connected vehicle ecosystem. In the aerospace segment, we continued to see business traction, albeit on a small base. I'm pleased to share with you the strategic collaboration with Sarla Aviation to support the development of Shunya, a pioneering step towards India's first indigenous electric vertical take-off and landing, eVTOL, aircraft. We also won a strategic engagement from a global aerospace supplier for development of a test rig and validation of a commercial aircraft systems. Our media and communication verticals registered a quarter-on-quarter growth of 3.4% in constant currency. This growth was driven by sustained ramp-ups across key engagements and AI-led deal wins. During the quarter, Tata Elxsi secured a strategic AI engagement with a global technology leader to develop a GenAI-powered virtual assistant focused on multilingual intelligence and delivering digital experiences at global scale, further further strengthening our position in that rapidly evolving GenAI ecospace. Our healthcare and life sciences vertical too recorded a healthy growth of 3.5% quarter-on-quarter in constant currency terms. One of the notable deals in the quarter was a win from a global renal care leader to develop its next-generation home dialysis systems, spanning end-to-end product engineering from user experience and mechanical design to embedded systems and regulatory compliance. During the quarter, Tata Elxsi implemented a wage increase across its workforce as a part of its continued commitment to retaining, rewarding, and nurturing top talent, recognizing that its people remain the foundation of company's long-term growth and innovation. A continued focus on delivery excellence enabled us to expand EBITDA margin by 70 basis points sequentially, despite the impact of the annual wage revision. Overall, during the quarter, we delivered delivered strong operational execution and resilient growth across customers and in all industry verticals. In terms of regions, US and India did very well for us, while Europe was soft with the predominance of automotive revenues from that region. While the global business environment continues to evolve, we see sustained opportunities emerging from our clients' priorities around innovation, digital engineering, AI adoption, and product modernization. Having said that, Q3 is typically a short quarter with fewer working days. While we await customer-specific direction and possible furloughs, we remain focused on sustaining growth in the second half, while continue to invest in our differentiated AI-first offerings and driving operational excellence. With that, let me conclude my remark. Thank you for your continued support and confidence in Tata Elxsi. We'll now be happy to take your questions.
Moderator: Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then 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 handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one.
Moderator: Your first question comes from the line of Bhavik Mehta with J.P. Morgan. Please go ahead.
Bhavik Mehta (J.P. Morgan): Hi. Thank you. A couple of questions. Firstly, you know, good to see broad-based growth this time. Just wanted to understand how sustainable is this growth momentum over the next couple of quarters, right? I mean, what I'm trying to understand is was it helped by certain large deal ramp-ups which won't repeat going forward or is it really broad-based? And hence, you know, the possibility of the momentum continuing is higher, you know, this time around. And the second question was on the margins. Again, good to see margin expansion despite wage hikes. But how are you thinking about margins in the second half, you know, from a headwind and tailwind perspective? And also you had a lot of one-offs last time. How much of that has reversed this quarter and, you know, how much of that are yet to reverse, you know, in the next two quarters? Thank you.
Manoj Raghavan (Tata Elxsi): Okay. Thanks Bhavik. So, if if I take that question from a growth perspective if you look at our or, you know, Transportation or the Automotive vertical, I think we are fairly, you know, confident of growth in in the US geography as well as the India geography that has, you know, grown smartly for us. we Japan is something which has been pretty flattish, but we are hoping that that will continue to grow. US continues to Sorry, Europe continues to be soft. There are deals. There are large deals. There are, you know, opportunities, but again, deal closures, we are still, you know, it's a it's a wait and watch. So, so I would I mean the situation I don't think has changed very much from the last quarter, especially from a US sorry, from a Europe, you know, perspective. But, however, I think, you know, other geographies we are pretty confident of continuing the growth growth path. So, so that is from an from H2 perspective, we are still, you know, positive and we hope we will be able to continue that momentum. From a media and communication, you know, vertical, I think for the last two quarters, we have shown you know, consistent, you know, growth, and and and as you rightly said, some of that is due to a deal ramp ups for the deals that that we've already closed. having said that, again, even in the Media and Communication, you know, vertical, we are seeing some sizable opportunities, that are there and we hope we will be able to continue the growth momentum in in H2. From a healthcare and life sciences perspective, I think we bottomed out last quarter and and and finally we are able to show growth. And and again, we see we see a good visibility of you know, deal pipelines and so on. So, I'm I'm hoping that even in the Healthcare you know, business of us, the H2 will be better than H1. So, overall, I would I would say, yes, the only worry still seems to be the the slowness in in Europe from the Automotive perspective, but other than that, I I hope that, you know, all other businesses, H2 will be, you know, better than H1 for us. On on the margins, Nalin, if you could take that question? Sure. Thank you, Manoj.
Nagendra Rana (Tata Elxsi): So, on the margins just to give you a quick sense of where the growth came from, so about 60 to 70 bps was the cross currency benefits that we had in the quarter and the balance, you know, you know, 10 to 20 bps is basically operational leverage that has played out, as well as, Bhavik, to your question, a lot of the one-timers, which were there are sort of Most of them have gone away. Now, this was obviously large part of this was offset by the wage hikes that we undertook. So, but, you know, the operational leverage and the one-timers going away was sufficient to sort of mitigate the wage hike. From a margin trajectory perspective, what we expect is we expect operational leverage to continue playing out through rest of the year. So, while, you know, obviously there will be associated costs increased with revenue increases, we do see a slightly upward margin trajectory that should be playing out in rest of the year.
Bhavik Mehta (J.P. Morgan): Okay. Got it. Thank you.
Manoj Raghavan (Tata Elxsi): Thanks, Bhavik.
121 more turns of this transcript: log in to Stocksigma to read the full call.