“There is some tentativeness in the automotive industry, especially in Europe.. In Europe, all OEMs (original equipment manufacturers) are going through a little bit of financial turmoil… If you look at the US too, the financial situation of some of the clients has driven to this tentativeness,” said Priyamvada Hardikar chief financial officer at KPIT.
Having said that, Hardikar noted that these companies have large reserves, and hence the softness will be temporary.
“We are engaging with our clients and they will figure out which way to go in their own deliveries and prioritise, which is where there is little bit of a lag. It will take maybe a quarter or two, to kick start our projects,” she added.
The Pune-headquartered automotive-focused IT firm reported a 44% year-on-year rise in consolidated net profit at Rs 203.7 crore and a 22.7% increase in revenue at Rs 1,471.4 crore for the July to September quarter of FY25.
However, on a sequential basis, the net profit fell marginally by 0.19% and revenues rose slower by 7.8% from the June quarter.
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Hardikar said that while KPIT has not lost any clients, the mobility industry, specifically the automotive sub vertical, has been under pressure to keep up with the changing regulations, increasing cost of vehicles and changing consumer preferences in the recent times.Importantly, its key geography Europe and UK, with over 40% revenue share, witnessed its first quarterly decline since Covid.
This pushed the firm to maintain its growth guidance between 18 and 22% for the full year ending March 2025.
“Also, Q3 generally is subdued and H2 as a whole will be softer because of seasonal budget cuts and clients are closing their books. But profitability will be higher because of the cost reduction and productivity increase,” Hardikar explained adding that the company will report revenue growth at the lower end of its guidance at around 18.5-19%.
The confidence in growth also came from expected growth from the Asian market and increase in share of fixed priced projects which help boost margins and profitability.
“We are very bullish about Asia. Japan and India are the markets that will grow for us. Some of the OEMs in Asia are struggling, and we see an opportunity for consolidation that will expedite their roadmap towards SDVs (software defined vehicles). That’s the same opportunity we also see in Europe going forward,” Hardikar further said.
Fixed price projects are purely outcome-based work that builds flexibility to work offshore and onsite improving productivity for the company.
Moreover, over the last more than a year, KPIT is also witnessing an increase in the deal sizes with its large deals crossing $200-275 million. Last year, KPIT won a major deal with Japanese automaker Honda Motor Company.
