• Revenue Growth: 20.7% year-to-date growth over last year Q3 FY25.
• Quarterly Revenue Growth: 17.4% in constant currency, 18.1% year-on-year.
• EBITDA Margin: 21.1% compared to 20.8% last year.
• Profit Growth: 38% year-to-date over the same period last year; 20.4% year-on-year for the quarter.
• Cash Generation: Increased from INR9.6 billion last quarter to INR14.2 billion this quarter.
• Days Sales Outstanding (DSO): 42 days, typically around 45 days.
• Interim Dividend: INR2.5 per share compared to INR2.1 per share last year.
• Deal Wins: USD 236 million during the quarter.

• Warning! GuruFocus has detected 1 Warning Sign with BOM:542651.

Release Date: January 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• KPIT Technologies Ltd (BOM:542651) reported a strong year-to-date revenue growth of 20.7% and profit growth of 38% over the same period last year.
• The company has seen significant cash generation, with cash increasing from INR9.6 billion last quarter to INR14.2 billion this quarter.
• KPIT Technologies Ltd (BOM:542651) has maintained a low attrition rate, about half of the industry average, indicating strong employee retention.
• The company has a robust pipeline, which has increased by over 20% during the quarter, driven by large deals and broad-based client engagement.
• KPIT Technologies Ltd (BOM:542651) continues to invest in AI and cybersecurity, enhancing its technological capabilities and future readiness.

Negative Points

• There is a slowdown in global auto volumes, which could impact demand from clients, particularly in the US and Europe.
• The transition from electric vehicles (EVs) to hybrids and other alternatives by OEMs may pose challenges in terms of revenue adjustments.
• The company faces potential risks from the merger of key clients, such as Honda and Nissan, which could impact existing work and growth prospects.
• KPIT Technologies Ltd (BOM:542651) has experienced an increase in other expenses, which rose by 11% sequentially, impacting overall profitability.
• The company is cautious about mergers and acquisitions, opting not to pursue QIP in the short term, which may limit expansion opportunities.

Q & A Highlights

Q: Between the US and Europe, where do you see demand from clients coming back sooner based on your conversations? Also, how does the shift from EVs to hybrids impact your business with OEMs? A: Demand recovery is led by Europe, followed by the Americas and Asia. The shift to hybrids and other propulsion methods presents a great opportunity for KPIT, as we are involved in both battery electric and hybrid solutions. This trend is positive for us across various markets, including the US, Japan, and India. (Sachin Tikekar, President, Joint Managing Director, Executive Director)

Q: Can you provide an update on the Coric initiative and when it might start contributing to revenue? A: We are on track with Coric, having secured a significant OEM client and are in advanced discussions with another European OEM. We expect Coric to contribute to revenue in FY26. (Kishor Patil, CEO, Co-Founder, Managing Director, Executive Director)

Q: How do you see the deal pipeline shaping up in the upcoming quarters? A: We have seen significant improvement in deal closures and pipeline build-up, with opportunities across geographies and sub-verticals. We expect this trend to continue, driven by passenger cars, trucks, and off-highway vehicles, as well as collaborations with semiconductor companies. (Sachin Tikekar, President, Joint Managing Director, Executive Director)

Q: Regarding the potential Honda-Nissan merger, do you foresee any risks to your existing work with Honda? A: We view the merger as a positive opportunity, potentially expanding our work with Nissan. We are a critical partner for Honda, and this merger could enhance our engagement with both companies. (Sachin Tikekar, President, Joint Managing Director, Executive Director)

Q: How are you addressing the margin impact from the growth in ROW (Rest of World) geographies, which are typically lower margin? A: We do not see a negative impact on profitability from ROW growth. We are focusing on AI and automation to improve productivity and are shifting our revenue mix towards higher-margin areas like licenses and outcome-based revenues. (Kishor Patil, CEO, Co-Founder, Managing Director, Executive Director)

For the complete transcript of the earnings call, please refer to the full earnings call transcript.