Thank you very much. We'll now begin the question-and-answer session. The first question is from the line of Nitin Padmanabhan from Investec. Please go ahead.

Hi good evening. Congrats on the strong deal wins despite a tough quarter. I had a couple of questions. The first is by when do we think commercial vehicles will really come back to growth? If you could give some color on why we saw the weakness during this quarter there a nd because we have had

reasonable deal wins and client additions in the off-highway and commercial vehicles. So that's the first question. The second is from a Europe perspective. Europe, we seem to have at least in the presentation, a reasonable number of deal wins in Europe despite the weakness that you spoke about. And also, it looks like some of the OEMs have a reasonable number of model launches or updates by end of next year, which is a large number. So, in that context, do you believe that this weakness can be sort of temporary? These were the two questions. And I just have one last question on margins, which I will sort of ask after.

So, Nitin, as I mentioned, of course, don't think that these are the kind of permanent drops or anything. We enjoy a very healthy relationship with the clients, and we have also broadened our scope. And of course, many of them have to reinvent themselves. So they look at KPIT as a natural partner. So we are engaged with all the OEMs you are talking about. That's the reason our pipeline is also strong. What we are not sure in the case of the current part is when these deals will realize. We are not at all worried in the sense , whether we would get our share of the business. It is about the timing. And that's why at least in the short term, we have discounted that part, at least for a few quarters. And that's why we have said what we have. On the commercial vehicle, we will be on for growth next quarter. Actually, this quarter also, there was one specific thing what has happened was a quarter before we had one significant revenue in a particular place. So that's why this looks like this, but I think you will see a growth next quarter.

Sure. Perfect. And lastly, on the margins. During the Analyst Day, you spoke about an aspiration of achieving 22% to 24% by FY '29. That aspiration can still hold? Or would you worry about it at the moment?

I would say the medium-term outlook remains good for two, three reasons. I will not just make a statement. There are two, three things. As I said, we believe that our product revenues will grow and the solutions revenue will grow exponentially. I would say that we have had a reasonable success till date. It is not that we have not started. We have already seen the success in some areas. In solutions, there are many solutions we have identified. Some of them are in the initial stages. We believe in the next quarter or two, they will also be ready to be deployed. With this, we believe that our growth will be largely

driven by products and solutions, and this will be margin accretive. So, in the medium term, we do believe that -- because some of this, we have also looked at outcome-based kind of business model. So, over the medium term, we do believe that we will be in a position to get where we have mentioned.

Perfect. Thank you so much and all the very best.

The next question is from the line of Karan Uppal from PhillipCapital India.

Thanks for the opportunity. The first question is on the U.S. geography. It has done well this quarter. Can you unpack the growth between, let's say, OEMs and off-highway? And do you expect this momentum to sustain for the next few quarters? That's the first question.

Yes. So this is Chinmay. The growth in the geography is fairly well balanced across the entire portfolio. We have seen good growth on the commercial vehicle side and some of our long established relationships on the passenger car side as well. I think we have a fairly good visibility for the upcoming quarters to have it continue in the same line.

Okay. Second is on the Europe, actually, the revenues didn't fall off versus what we were expecting. So can we expect the impact in Q2? And also if you can quantify the revenue impact for European geographies?

So, I think, there are two things. First is absolutely, optically, that looks like that. But there were two reasons. One is there were certain revenues we were expecting which did not come there. And so some of this, you will see that it will have some im pact next quarter, as you will see. So I think we saw a reasonable impact in Europe, which was about 4% for the quarter, about 4% or so. But we also see, as you would look at this impact for the next quarter will not be at a company level. I'm telling you at a geography level. This will be made up by growth in U.S. as well as in SIMA. But this quarter, it looks like a drop in SIMA. And as you know, the revenues are less. So that's why that drop looks big. But we are seeing a significant growth in SIMA also. So I think with growth in U.S. and this, you will see, but the Europe impact, you will see in the next quarter.

Okay. Okay. And sir there were two SDV programs which were going to be ramped down. So are they in the base now? Or do you expect the impact to continue? If they are in the base, then should we expect the Japan, Korea and China geography to bottom out?

So one program from Europe is almost getting over now. We'll go to start of production, but that's been planned. The one in Japan that was actually cancelled at the last minute. So both these programs are coming to a natural kind of an end. So in terms of these specific programs, I think this is where we are.

And just to clarify, the program is the actual vehicle program that was cancelled.

Yes.

And that's the impact. So this is what has happened. But of course, we do have a pipeline from these clients. It is not that we don't have a pipeline from these clients. What we are not sure, again, in the current situation, specifically this being from the Europe and Japan is the timing of when we will be in a position to get further revenue.

Got it. Just last question on the margins. So the other expenses were up significantly this quarter. So surprising to see expenses being up in this kind of a quarter. So are there any one -timers there? And how should we expect the margin trajectory from here on for like the next three quarters?

So, in terms of other expenses, there has been a certain impact because of the foreign exchange rate. As you know, these are consolidated accounts. So, secondly, there have been some provision because of the acquisitions that we did and some subcontracting cost in European region that incurred for our clients. Nothing out of the way. These are operational.

So, going forward, the way we see is the margins will improve, but it will improve incrementally, not significantly until our revenues go back to growing ways. So revenue will be the major driver. We will be in a position to optimize cost but only incrementally. So that is point number one. The second is the Qorix loss, which we said, I think it will continue for at least next quarter or two that we believe that s how it will be. So mainly the driver will be the revenue coming back.

Okay. Thanks a lot and all the best.

Thank you.

Thank you. The next question is from the line of Chandramouli from Goldman Sachs. Please go ahead.

Hi good evening and thank you for taking my questions. My first question is just around one of the prepared remarks that Kishor you had made. So, over

the past 18 months, I think the European OEMs have found going a little harder in China because of the higher luxury taxes there. And also on the other side of the coin, the Chinese OEMs have been taking market share in Europe from European OEMs in a lot of the market. KPIT has, for the past 2.5 years, been trying to seed businesses in China and try to see how we can contribute to Chinese OEMs who are now making a bigger impact in the global EV market. Just want to understand over the past three to six months, has there been any developments there? Anything changing there, which might enable KPIT to participate more in this trend, which at this stage seems to be a little more structural?

So first thing is I have also said that we will be very patient with China, but we will continue to grow and invest in China. And so we have engaged with two Chinese OEMs. And at least one of that we are about to get to a meaningful engagement in that case. The third is that we do believe that we have found a reasonable traction for our products and solutions in China. So these all three things are working. The scale will happen because now, as you know, in China -- the big OEM’s volumes have gone down and there also the industry has taken a beating. So the impact is basically most of the companies are aware that they will be in a position to really grow meaningfully outside China profitably. And I think that is where they see KPIT as a very good partner, which has been in China as well as has a very strong both client relationships as well as ecosystem play outside China. So we do believe and we absolutely believe in our efforts and strategy for China. And apart from that, as I mentioned earlier, we want to be very broad-based. So multiple areas I talked about. The third thing I would say is China is a place where we want and we are also learning. But equally important is, as you know, many global OEMs are having / forming partnerships in China. We believe we can also leverage this significantly going forward.

Got it. That's helpful. Second question is just around, I think, in the past, at the start of the year, you have provided some colour on how you think the first half versus the second half can progress. And this year as well, I think you've given clarity t hat the first half, two quarters might be sort of similar. But I just want to understand the back half, I think you seem to have visibility that things will improve in the back half. Just want to understand what are the key drivers of that? And also relative to, I think at the Investor Day after 4Q results, the initial thought process was that there could be possibility for organic double -digit

growth Y-o-Y. Is that a run rate that you think is feasible for the back half of the year once the first half sort of headwinds are cycled?

So I think we have mentioned that, of course, I would think you would appreciate our clarity or if I would say, transparency and we share whatever happens at the earliest. So when we were of the opinion that in the first half because of some of the reduction of cancellation of SDV programs, our revenues would go down and it would impact the first half. We had this Investor Day after that and where we explained what would be the impact on KPIT and what we would be doing to. And we talked about the strategy. I have not told you anything much different than what we had said , and we stand by it. Now after that, there were major changes in the European ecosystem and many European OEMs had an impact on their results and the subsequent actions post that. Because of that, we had to come back and talk to you about that. And that created a lot of uncertainty because it takes time for people to figure it out and understand what they will do. And that is the impact. And frankly, because of that, we have been saying what we have been saying. And beyond this I mean, we have talked about two things. One is H2 will be better than H1. And by Q4, we will have a meaningful growth. That is what we have mentioned. And we also believe in our medium term and next year, year after growth strategy because of the multiple actions we have taken. And I must say that the impact we had is in a couple of clients, which is significant, but the growth has been more broad-based and across multiple clients. And we do believe that by the end of the year and the next year, these accounts will bring a meaningful growth.

Got it. That's helpful. Completely appreciate all the clarity and transparency. And just last question, I think over the past two to three quarters, becoming more and more visible that your fixed price contracting is increasing 600 to 700 basis points versus where we might have been last year. So I just want to understand from a margin standpoint in this kind of environment, how that needs to be consumed. You've also made the point around you had multiple months of working with many AI tools, the Beacon AI projects and so on and how that can also add productivity efficiency. So I just want to understand how to put these two points together to try to figure out what the range of profitability could be for the company in this sort of newly constituted business model in a steady state environment?

See, the first thing we felt that any change in the business model, the basic thing is move to the fixed price business model. Once we do that, then we

have multiple options. Number one, of course, the usage of AI. Again, I must tell you, it takes some time to move towards completely AI -based delivery because depending upon how the infrastructure is set up, how much they allow our tools to be used on their infrastructure versus our infrastructure, it takes some time, and there is some buy-in required at that process level. The second thing is also the solutions which we bring in as a part of the fixed price delivery, which have better margins. And the third is the products. So, for example, Beacon itself has two business models. One is as a product or a platform which is bas ically subscription based. And then the second, of course, we use for delivering to the client. With all these combinations, flexibility is available to us to drive with the clients to maximize. So that's what we are doing. To answer your questions, indirect questions probably, we believe it has two meanings. One is we are in a position to improve our margins for where we are signing the contracts. First is they are always meaningful. We typically continue to hold some premium against the competition that I always talk about. An d secondly, there, even in the geographies where it is very competitive in a certain amount of time, we can move towards a better reasonable margin. So I think this is how I would describe this.

Got it. That’s very helpful. Thank you very much and all the best.

Thank you. The next question is from the line of CA Garvit Goyal from Serene Alpha. Please go ahead.

Hello, am I audible?

Yes.

Good evening sir. Sir, my first question, like when we say Q4 will be stronger in the terms of growth I just wanted to understand how are you seeing European OEM in that particular quarter onwards? Are you seeing them start using KPIT solution to compete against the Chinese competition? Or do you think the current situation will be there for those quarters as well, but you will get from the other geographies? I'm asking this because in order to return to our earlier growth trajectory of 20%, 25% organic growth and the kind of margins that we did earlier, I think we need to have a decent contribution from existing European OEMs as well. So where we are on that sir?

Okay. Let me take that question, and thanks for setting the expectations as well from a growth perspective. No, I think let's talk about European OEMs.

What is happening to them, as Kishor talked about earlier, there are three forces at play. Their share in China, which used to be the highest, that has gone down and it continues to go down. Number two, in their own home turf territory, Chinese are gaining market share. And because of the tariffs, they are becoming not so competitive in the U.S. So they are under tremendous pressure. Having said that, they also realize that it means structural change. This is not something that gets over, right? So they are rethinking their strategies. That's the fact, and this is where all the European OEMs are. So now what does that mean to KPIT perspective? We still believe that all of these OEMs, they've been around and they're going to be around. They just have to figure out how they're going to be around and viable going forward. In their journey, given our relationship with them, the conversation has shifted towards how does KPIT help these OEMs reduce the cost of their product by at least 30% to 40%. And secondly, how do we help them reduce the cost of their production. If they are able to bring these price points down by 30% to 40%, they become competitive again. so our conversations have actually shifted towards these two topics for the European OEMs. This will take time as they are sort of re- baselining what does it mean to them and where they really want to spend money. But these conversations are already being initiated. And we believe that once we get over this hump over the next couple of quarters, some of these cost reduction initiatives will yield revenues to KPIT. This is point number one. Point number two, in our current business , more than 50% comes from Europe, absolutely. But the effort over the last six quarters has been to have a broader-based growth. That means how do we have balanced growth across Europe, Americas, SIMA, which we call Southeast Asia, India, Middle East and Africa. This is a new sort of region for us and JKC. So we need to have balanced growth, across the four geographies. Number two, within that, how do we get more business and wallet share from our existing clients in passenger cars. The clients that we never worked with, we have started engaging with them. An OEM in Korea, one OEM in Europe, one OEM in the U.S. and one in Japan. We have started doing this. This is step number one to have broad-based growth. Number two, we have opened seven different OEMs in off-highway segment. And we have started working with four different OEMs in trucks and bus

business. So the composition of our revenue is going to be broad -based as compared to what it has been over the last three or four years. And this is a transformation that we are also going through. And I think we are going through it as we speak. And once this transformation happens, I think we believe that we can go back to our growing ways. It's just that there are certain obstacles that come our way. So what we are trying to do is to sort of build a more resilient company that can withstand some of these shocks and still grow in spite of these shocks. So this is, in a nutshell, this is what our effort has been. And I think the learning from the recent challenges with Japan and Germany is, I think we just need to have a lot more intensity and we have to run faster. That's what it means. Yes. So a long answer to your question, but I do hope that it helps to understand what we have been doing and how this transformation is taking place in our company.

Understood. Basically, what I am understanding is from the timing perspective there are uncertainties but yes, OEMs are basically considering th ese solutions of our company..

Absolutely.

Okay. And secondly on the deep tech side, you mentioned in the slide. I just wanted to understand more on what are these areas because in the past also we were speaking about sodium -ion technologies and then hydrogen fuel technologies. But in the last few quarters we are not sharing anything on that. So I just want to understand what are we exactly thinking in this stage.

So, I think two, three things I would say that, so for example in that other parts, I think we continue to work on the hydrogen tech, but meaningful revenues will take some time though currently the government is pushing hydrogen specifically in view of mu ltiple controversies, they do believe that hydrogen may be a viable option. But for some of these things , we will be careful in terms of factoring into our growth. But I think the point we are looking at is some of the areas in which we are working in the practices, they are very adjacent to some other parts of the mobility, whether it is you are talking about drones or whether you are looking at a few other areas hu manoid or few other areas, whether it is on the production floor or otherwise, these are the prime ones. So I think these are some of the areas which we are exploring right now. Also some other areas where we are looking at and we see an opportunity. Again, these are some initial efforts, but we believe the opportunity there is

big. And we are not factoring any significant growth right now, but we believe these are good opportunities which we should be in a position to capture and we are in the process of putting together the overall plan. The second is the data center opportunity where some of our clients like Cummins or some other clients are engaged meaningfully. So we can probably take these offerings to many more clients in that sector. This is what we are doing. We are putting together our story, and we believe that we will be in a position to grow in these areas, which are again, the areas where we already have an experience, we already have the offerings, and we are already working with few clients. We have not yet taken the holistic view or made any organizational focus fully on that, which we are exploring and we would do that.

Okay, sir. And sir, about sodium -ion technologies, how is it going right now? Because I think it is more than two years now, right? So what are that based on that side?

I think we talked about it. We have taken certain revenue some time back last year. There was NRE. I think after that, there has been, see the battery technology takes about two to three years to really put the pilot production plant even if we look at the investments, I think it takes about more than $100 million of investment and it takes significant time. So after that it actually gets into production. And after getting into production, there are certain milestone after which we may get entitled to royalty. So it is not something which is immediate from the revenue perspective.

Mr. Garvit Goyal, I would request you to rejoin the queue for a follow up question. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.

Thank for the opportunity. Just one clarification question. If I look at the sheet, fact sheet, there has been a marginal growth in Europe as well as strategic customers has not declined materially lower than the company average decline. So is it fair to assume what we anticipated in the month of June in terms of a decline in the Europe -centric OEM revenue has not happened and may come in the second quarter? Or am I understanding wrongly?

I think we were expecting a higher growth there, which has not turned up. But at the same time, we have committed the cost and we were in the middle of engagement of the project et cetera. So first is the revenue has not come through. But as I mentioned, you will see that impact coming in the next

quarter. But it will be impact at a regional level. I have said that it will not be at a company level because we will see a broader growth in U.S.A. as well as SIMA.

Okay. And in margin uplift you are saying the major uplift where you have already guided Q -on-Q improvement, but the major uplift can happen with the growth turnaround, which we expect by Q4. And Q4 growth turnaround, we are talking on a Q-on-Q basis or on a Y-o-Y basis.

I mean, for sure, it will be quarter-on-quarter. I don't have a clear answer to this right now. But I guess it will be flattish. I think we would get back to a certain number by that time.

The next question is from the line of Bhavik Mehta from JPMorgan.

Again, first, couple of clarifications. During the quarter update in June, you had said 2Q revenues will be flattish and 4Q will be significant growth. So is it fair to assume that still holds that we see flat growth in 2Q and then some growth in 3Q and then significant growth in 4Q? And the related question has been on the margins when you say you expect to go back to normal levels of margins by 4Q, you indicating that 20% plus EBITDA? Obviously, it will depend on growth, but is that what the assumption you're working with right now?

Yes. I mean frankly, the large part is related to the growth and it really depends on that. But yes, fundamentally, if you look at the way the cost structure, and to tell you clearly, the European cost to take out takes much longer time than the other parts. So, I think considering that at the cost of some of those, time as well as the cost will be longer from that perspective. So yes, when we get to the revenue growth, I think that is where we will be in position to bring the margins back.

Okay. Got it. My second question is you did mention that pipeline in Europe remains quite strong, but it's difficult to put a time line in terms of when does that convert to deals. So is that also playing out in terms of deal to revenue conversion also because the deal wins have been quite strong over the last few quarters, but the revenues are not coming through. So what are the client conversations indicating in this environment, especially in Europe?

See, the point is actually in certain accounts, it is coming through. I think the point has impacted us is not the wins , wins we have got, we got the strong wins. And that's why what Sachin was also mentioning earlier is the drop has been pretty strong, pretty big in these two accounts, but we did not drop revenues as much because of the wins in the other markets. So conversion ,

it has been slow for sure, but it has not been like pending for or perpetually waiting. That has not been the case for project to start. What we feel is European wins even when currently, they will actually get started, they would look at doing more work out of India than Europe and many of those things. So for us that will happen. And so we do believe that those wins when they come, they w ill come. So it has nothing to do with earlier wins. Earlier wins, many of that has already started many of those projects. So right now two uncertain things. One is the revenue part, which I mentioned to you is specifically in European part when actually where we are, now the pipeline is there and where we have even some recent wins with some accounts when they will start now, not the earlier ones. And the second thing is about how much time it will take to cut the cost in Europe. I think these are the two points which we have.

And just lastly, are you seeing any vendor consolidation exercise being played out at the OEM level? And how are we faring in those exercises? Are we winning share?

So, absolutely, yes. The answer is absolutely yes. And we are doing pretty well there. But our belief is the client engagement model will change. Even though right now, people may look at the vendor consolidation in the traditional way people are talking about. We believe that over the period, the OEMs will go to the best of the solutions where they can compete with their competition. And I think that's why our focus is more on solution and products and AI.

The next question is from the line of Shailesh Jahagirdar from Invest Yadnya.

So I have one question that we got some contract from Tata Motors. So at business model level, what KPIT does differently as Tata has their own ER&D companies and all. So KPIT gets the contract from Tata Motors also. So how company does something differently that they got this contract.

I think it's a valid question. Well, Tata Motors is a large company that is growing. Like any other OEM in the world, they also have their ER&D. Other OEMs have their ER&D. At the same time, they work with partners like us. Tata Motors has the same kind of model. So we -- it's not just their own ER&D and KPIT, there are also other players that also support Tata Motors. and it's nothing new. Our business with JLR is significant, which is also a Tata company. And we have also been working with Tata Motors for many years.

The reason we mentioned this particular deal , it's our N -Dream in-vehicle gaming platform. This is the first time such platform has been launched in any vehicle in India. That's why it has shown unique significance. And that's why it's been highlighted. And we continue to look at Tata Motors, both t he passenger side as well as the commercial side as a viable client where we'll have growth with them.

And the business model here is per vehicle we charge. License model.

Yes, it's a license model per vehicle.

Okay. And my second question is around that you said the European OEMs are discussing about the cost structure to reduce their cost and how quickly your KPIT would help in that kind of sense. So is there a similar kind of discussion going around to product -- for the product development at lower cost to compete with the Chinese OEMs so that product differentiation at the same time, cost structure would improve for them?

Well, what we said was, in fact, in reference to the product itself, how do they make their product far more cost effective, offering attractive features in order to compete with the global competitors. So and that's precisely. And there are two parts to the cost reduction. One is how do we reduce the cost of product itself. So if a vehicle costs 100, how do we get them -- what kind of contribution KPIT can make to help them get to 60 or 70? And second is if their cost of production is 50, is there a way for us to take it down to 30 or 35? And what role KPIT can play in this journey? I think these are the discussions that we are having with the European OEMs because they are under the highest pressure. But we believe the same thing will also be taken to the competitors in the clients in Japan as well as in Korea and at some point in the U.S. as well, right? So this is just going to be a fact of life for everybody because the Chinese OEMs have created vehicles at that price point offering incredible features.

I want to add one part. It is not only cost, it is the speed. I think European OEMs are taking too long to bring a new model. And that's why in terms of features, in terms of competitiveness goes down by the time new vehicles come on the road. And that is one thing which we are focusing how we can reduce the time to market for the OEMs.

Mr. Shailesh, I would request you to rejoin the queue for a follow up question. The next question is from the line of Ankur Pant from IIFL.

Just wanted a clarification in terms of the segmental revenue. So there was a planned completion, there was a ramp down of SDV program, then we were

hit by European OEMs towards the end of the quarter. So one would have assumed that it's the PV segment, which would take the brunt of the revenue contraction. But the passenger vehicle segment revenues have just come down by 3.5 million in this quarter. CV segment which has fallen more. So just wanted to understand is the base is not incorporating a large part of the SDV ramp down? Or am I missing something here?

I think last quarter, we had one...

I answered this question earlier that.

Yes. So I think in the commercial vehicle, there was a onetime large license deal last quarter that is not there this quarter. That's why you see, on a smaller base of revenue, you see a significant impact. But that's the end of it. Going forward, you see CV growing for us. So when you look at our numbers in Q2, Q3, you will see growth coming back to CV because it's going to be broad-based. This is point number one. In pass enger car, as Mr. Patil mentioned, we are getting ready for growth, and that growth has not happened. And that's why that was the last-minute setback that we got towards the end of the last quarter.

But has the project completion and the ramp down, a large part of that is already there in the base or that is something which is still pending to?

Well, I think, yes, the Japanese part is getting over now as planned. And the one that we realized towards the end of next quarter will happen. The complete thing will happen in Q2. And we believe that both accounts will start to stabilize in Q3.

And the second question is on wage hikes. Are you thinking of wage hikes anytime soon? Or this is something that would depend on how growth comes back and something which would be deferred to 2H? How are you thinking about wage hikes?

Last many years, I think total tech industry, there have been many years when people have not given increments. In the last five years, I think three years, most of the companies were very soft. But they have not stopped the increments always. So this is the first time we have delayed. But we will do it in stages. And we will give it to the some of the younger grades soon. The senior people will get over the period.

And finally, your overall revenues in terms of sequential growth are down around 4.5% in USD terms. Whereas the strategic clients which are around 87% of you revenue are down to 1.3% which means that bulk of the decline is

from the nonstrategic clients which given the situation doesn't really reconcile. So just wanted some clarity on this.

I think our degrowth, I have not seen the numbers we will analyze and tell you, but it has been because of the top 2 clients. So these are, of course, our strategic clients.. I look at it as strategic clients. And as we mentioned, one of the clients, the degrowth is not factored completely actually. It will get next quarter, you will see the impact. But we have said it will be on only the region, at the company level, we will grow because of the growth in the other accounts.

I think what you are translating this, the numbers of 87% and 84%, don't look it in absolute. 87 percentage is a percentage of the current quarter revenue, how much are strategic clients and 84% revenues of that quarter revenue. So don't compare 84% to 87% . And there are quarter -on-quarter 1.3% decline, which is mentioned out here.

There were some other revenues which we talked about, license revenues last quarter.

Thank you. Ladies and gentlemen, in the interest of time, that was the last question. I would now like to hand the conference over to management for closing comments.

So, thank you, everyone, for your active participation, and I look forward to interacting with you in the near future. Thank you, and have a great evening.

On behalf of Dolat Capital Markets Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.