KPIT Technologies On Talent, EV Opportunity And Acquisitions

KPIT Technologies Ltd. surprised analysts with its dollar revenue growth in the quarter ended September, allowing the mid-sized software services provider to increase full-year guidance.

Q2 Highlights

• Dollar revenue rose 4.1% sequentially.

• Margin improved by 44 basis points despite wage hikes.

• The company revised its revenue growth guidance upwards to 18-20% for FY22 from mid-teens earlier.

• Upped the Ebitda margin guidance for FY22 to 17.5%+ against 16.5-17% earlier.

Co-Founder Kishor Patil, also the managing director and chief executive officer at the information technology firm, attributed the growth to fixed-price projects. These give KPIT a better rate realisation, allowing it to manage onsite-offshore mix and monetise assets as the company has been able to reuse a lot of products it has built, he said.

The other reason for growth is the pricing power in some orders, helping the company even when facing a challenge of human resource availability, he said, referring to a higher attrition rate amid industry-wide demand for talent.

Talent Challenge

The talent at KPIT is sought by both IT services companies as well as auto companies, which makes retention challenging, Patil said. To contain attrition that crossed 20% in the second quarter, the company gave “substantial increments and medium-term incentives” to employees during the quarter, he said.

Yet, Patil is confident profitability would rise too as “per-person realisation has gone up in recent times”, he said, without giving details. While the second half of the October-December quarter is usually weaker for the IT services industry, Patil said KPIT expects steady growth and that will allow the company to absorb employee costs.

The EV Opportunity

Electric vehicles are the biggest area of spend for original equipment makers and that will aid growth prospects of the company, which provides software solutions to automakers, he said.

Patil said the software services provider is engaging with auto companies at the platform level, and not for a project. That will give KPIT work for four to five years, instead of short-term contracts, he said.

Tie-Ups And Acquisitions

The technical architecture of cars that will be launched over FY24-26 will change significantly, according to Patil. Building that will require investment of billions of dollars and will also be time-consuming, he said.

So the company will seek specific collaborations and tie-ups to fill in the missing pieces, he said. KPIT tied up with ZF Group, a German car parts maker, in the quarter ended September.

Patil said KPIT also has a “sizeable war chest” but will only consider “niche, tuck-in acquisitions” at a reasonable valuation.

Watch the full interview with KPIT's Kishor Patil here.