Financial Performance Summary

Revenue Performance:

  • Reported 6.5% year-on-year growth and 1% quarter-on-quarter growth in rupee terms
  • Constant currency growth of 0.5% QoQ and 0.2% YoY
  • Services revenue remained flattish while Products revenue grew 5% QoQ and 25% YoY

Segment Performance:

  • Off-highway and Commercial vehicles segment grew 27% YoY and 17.6% QoQ
  • Passenger car segment declined 8% YoY and 4% sequentially
  • Two top accounts experienced 13% revenue decline due to program cancellations and expense cuts

Profitability Metrics:

  • EBITDA margin expanded from 17.2% to 17.8% (60 basis points improvement)
  • Margin improvement attributed to favorable business mix with higher products contribution

Cash Position:

  • Net cash stood at ₹6.2 billion
  • Cash reduction due to dividend payment of ₹1.4 billion and initial acquisition payment for Cymotive of approximately ₹1 billion
  • DSO increased from 51 days to 53 days

Operational Highlights

AI Transformation Progress:

  • More than 9,000 users on AI platform
  • Over 5 million transactions processed during the quarter
  • 12,000 engineering agents built
  • 9% of revenues from AI-first projects
  • Fixed price projects increased to 70% of mix

Business Wins & Pipeline:

  • 89% of wins from target accounts
  • Healthy active pipeline with focus on Autonomy, Connected, and IDART
  • Beacon product well received in market

Geographic Performance:

  • Americas: Growth in both QoQ and YoY terms
  • Europe: Impacted by one major client decline
  • Asia: JKC (Japan, Korea, China) impacted by client decline, while SIMA (Southeast Asia, India, Middle East) showed growth
  • India: Broad-based robust growth across passenger cars, trucks, and off-highway

Strategic Initiatives

Adjacency Expansion:

  • Energytech: Targeting 15-20 clients beyond existing engagements (e.g., Cummins)
  • Deep Tech: Creating specific offerings in emerging technology areas
  • Expected early successes in 2-3 quarters, meaningful impact over time

International Expansion:

  • Vietnam: Establishing hub for Southeast Asia with Chinese Tier 1 partnership
  • China: Working with one China OEM and two China Tier 1s, selling Technica products
  • Korea: Growth from one passenger car OEM and off-highway opportunities
  • Japan: Broad-based growth beyond current large client

Product Strategy:

  • Products revenue showing strong growth trajectory
  • Detailed product reporting planned for next year
  • QORIX product facing timeline shifts with Gen 4 programs moving to 2029-2030

Management Guidance

Near-term Outlook:

  • H2 FY27 expected to be better than H1
  • Growth anticipated in Q4 FY27
  • Two declining clients expected to bottom out in next couple of quarters
  • Confidence in broad-based growth strategy offsetting client-specific declines

Margin Outlook:

  • Margins expected to improve gradually each quarter
  • Target of 20-21% EBITDA margin by early next year

Market Trends:

  • European passenger car OEMs undergoing cost optimization and vendor consolidation
  • Consolidation process expected to conclude by Q1 next year
  • Off-highway and trucks segments undergoing SDV transformation similar to passenger cars 4 years ago

Regional Strategies

Europe:

  • Focus on disrupting existing economics through AI transformation
  • Opportunity to increase wallet share despite declining overall spend
  • Supplier consolidation creating opportunities

Americas:

  • Protected passenger car market showing resilience
  • Broad-based growth across all three verticals

Asia:

  • Vietnam becoming Southeast Asia hub
  • China strategy focused on domestic market, global expansion, and technology learning
  • Korea and Japan showing diversified growth opportunities

Operational Metrics

Attrition:

  • Mid-teens attrition in Q2 FY27
  • Expected to decline substantially in next quarter
  • Increment process completed for grades A-E, remaining increments planned for current and last quarter

R&D Investment:

  • Increased by couple of million dollars during the quarter
  • Continued technology investments despite market headwinds

Risk Factors

  • European automotive market facing prolonged recovery
  • Two major clients continuing to decline for next couple of quarters
  • QORIX product facing program delays until 2029-2030