Management Participants

The call was led by key management personnel:

  • Mr. Krishna Bodanapu, Executive Vice-Chairman & Managing Director
  • Mr. Sukamal Banerjee, Executive Director & Chief Executive Officer
  • Mr. Shrinivas Kulkarni, Chief Financial Officer

Business Segment Performance

Semiconductor Business:

  • Revenue for Q2 FY27 was $19.3 million, up 8% quarter-on-quarter
  • Sixth consecutive quarter of sequential growth
  • Order intake for custom ASIC business up more than 50% compared to last quarter
  • EBIT loss reflects investment in product R&D; core business is EBIT positive excluding these investments
  • Healthy pipeline in excess of $100 million for custom ASIC business
  • High voltage product development ongoing with first customer samples expected by end of 2026 or early 2027
  • Industry facing supply constraints with foundries at full utilization

DLM Business:

  • Revenue grew more than 26% year-on-year in INR terms
  • Book-to-bill ratio in excess of 1.6 times
  • Order book reached record levels, highest ever
  • Strong first half with revenue more than 30% over first half of previous year

DET Business Performance (Primary Focus):

  • Revenue for Q2 was $174.2 million, up 7.5% quarter-over-quarter and 6.3% year-over-year in constant currency
  • Includes one month of revenues from TAO Digital acquisition ($9.6 million)
  • Organic revenue growth was 1.6% quarter-over-quarter and 0.4% year-over-year in constant currency
  • EBIT margin stood at 14.2%, up 107 basis points quarter-over-quarter and 206 basis points year-over-year
  • Highest ever Q2 order intake of $158.4 million, up nearly 21% year-over-year
  • Technology order intake stood at $10.3 million, up 39.7% year-over-year
  • Signed multi-year frame agreement with potential to execute up to €50 million annually

Market Segment Performance

Transportation and Mobility:

  • Grew 4.5% quarter-over-quarter and 16.5% year-over-year in constant currency terms
  • Sixth consecutive quarter of growth
  • Strong performance in automotive and mobility despite market challenges
  • Continued momentum in commercial aviation focusing on aftermarket services

Networks and Infrastructure:

  • Flattish with slight degrowth of 0.3% quarter-over-quarter in constant currency
  • 1% year-over-year growth

Strategic Markets:

  • De-grew 1.5% on constant currency basis quarter-over-quarter
  • Energy segment at bottom with growth expected ahead
  • Nuclear energy showing early ramp-up demand

Financial Metrics

DET Financials:

  • Revenue in rupee terms: ₹1,664 Crores, up 8.1% quarter-on-quarter and 15.7% year-on-year
  • EBIT: ₹237 Crores, up 16.8% sequentially and 35.3% year-on-year
  • PAT: ₹153 Crores, up 8.7% sequentially and 11.9% year-on-year
  • EPS: ₹14.59, up 14.2% sequentially and 17.4% year-on-year (helped by buyback)
  • Effective tax rate: 28.3%
  • Free cash flow: ₹214 Crores (140% conversion of PAT)

Group Financials:

  • Q2 revenue: $233.9 million, up 7.1% sequentially and 15.3% year-on-year in constant currency
  • Revenue in rupee terms: ₹2,235 Crores, up 7.7% quarter-on-quarter and 25.5% year-on-year
  • EBIT margin: 10.2%, up 52 basis points sequentially and 83 basis points year-on-year
  • PAT: ₹121 Crores
  • EPS: ₹11.54, up 11.8% sequentially
  • First half FY27 revenue: $452.9 million, up 12% year-on-year

Capital Allocation and Corporate Actions

  • Completed buyback of ₹720 Crores, covering 6.4 million shares
  • Board declared interim dividend of ₹12 per share for FY2027
  • TAO Digital acquisition financed through external commercial borrowing of $120 million
  • Semiconductor business raised $30 million ($20 million debt, $10 million equity)

Strategic Initiatives and Capability Development

  • Integration of TAO Digital adds platform software and data engineering capabilities
  • Establishment of Intelligent Engineering Solutions business unit
  • CYiNGINE agentic AI platform development
  • Creation of CTO office focusing on Horizon 2 and Horizon 3 technologies
  • Focus on defense, semiconductors, and AI as highest growth opportunities
  • Target of 70% annuity-based revenue mix (currently 20-30 percentage points away)

Forward-Looking Commentary

  • Confidence in second half performance based on strong order book and pipeline
  • Expectation to maintain current margin levels despite planned wage hikes in Q3 and Q4
  • Semiconductor business targeting breakeven in FY2028
  • Continued focus on cost optimization and margin expansion

Q&A Session Highlights

  • Management discussed sustainability of growth patterns across segments
  • Clarified TAO Digital revenue run rate expectations (~$100-110 million)
  • Explained framework agreement structure and ramp-up timeline (1-2 years to full potential)
  • Addressed client concentration changes and account rationalization strategy
  • Discussed hedging strategy (50% of net exposure hedged for next 12 months at average rate of 95.6)
  • Provided details on Semiconductor business mix and product development timeline