KPIT - CASE (connected, autonomous, shared, electric) - Focused Automotive Play

Stock Opportunities Untested - but worth a good look
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Today I received reply from company general counsel on SCORES as below
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Date June 27, 2025 Dear Shareholder, Subject - SEBI Complaint Redress System SCORES Online Complaint Registration Ref - SEBIEMH25PUNE0249381 This is with respect to your recent communication concerning a share transaction by a designated person and the Company’s mid-quarter update submitted to stock exchanges on June 23, 2025. We wish to clarify that the transaction in question was undertaken by Designated person following due process aligned with the SEBI Prohibition of Insider Trading Regulations, 2015 and non-possession of any Unpublished Price Sensitive Information UPSI. Accordingly, the transaction was duly reported to the stock exchanges. Please note that, the Mid Quarter Update – June 2025 contains Update on Caresoft acquisition that was already in the public domain and will not be considered as UPSI. The Board’s approval of the acquisition of Caresoft’s Engineering Business is disclosed to exchange on May 6, 2025. Further said announcement also contains Other Updates outlining the company’s business uncertainty in business environment, rising geopolitical concerns and ambiguity around the overall tariff scenario and will not be considered as UPSI. Additionally, the Company has given the Employee Stock Options ESOP to employees for their contribution to the company’s growth after achieving performance criteria which forms part of their compensation. These ESOP Schemes are approved by shareholders of the Company. Employees Designated Persons within the framework of applicable statutory laws, exercise the options, trade in shares as per their needs requirement of funds, when not in possession of UPSI. We reaffirm our commitment to upholding the highest standards of corporate governance and regulatory compliance. The Company ensures the timely disclosure of relevant information in the best interests of stakeholders. For KPIT Technologies Limited Ashish Malhotra General Counsel Company Secretary
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As you can see, company is arguing that their mid quarter update can not be treated as UnPublished Sensitive Information (UPSI) under SEBIs Insider trading regulations. I have replied back and sent it for first level review by SEBI. Lets hope SEBI will look into the matter and reprimand/penalise company so that minority investors are not subjected to this unfair treatment

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Thanks @Marathondreams for taking pain to write and informing us. Found useful. Do let us know if you get updates from sebi.

KPIT is my core PF and tracking it since April 2020. In KPIT there are 3 main promoter cum management are Patil, Pandit and Tikekar. Mr Bhagwat seems silent promoter (who sold part recently). Small selling in KPIT happened since long, this mainly involved esop. I will be worried if 3 main promoter or their family member sells.

Regarding mid quater updates, primafacia, seems company is right, it doesn’t seems like UPSI.

Just my biased thoughts. Disc: Invested as mentioned.

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Going by the letter of the law, mid quarter update strictly may not be a UPSI. But from what I know about the company (for last 20 +years) and its promoters(Pandit and Patil) , they are simple, humble and highly ethical people. Hence I expected company to follow spirit of the law, which they did not. Going by the share sale data, it leaves no doubt in my mind that all of the designated persons have sold their shares due to upcoming announcement ( they did not sell when price recently crossed 1400), which further precipitated share price drop. (or at least curtailed possibility of share price bounce back as disclosures started coming in from 25th onwards). Now my case is allocated to person in BSE so lets see what happens. I am hoping, with this investor pushback , company will circulate internal memo to its designated persons to avoid such actions in the future (even if they may not agree openly)

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The ₹1 lakh crore RDI scheme is a strong long-term tailwind for KPIT Technologies. With its focus on deep-tech areas like EVs, autonomous driving, and vehicle software, KPIT aligns well with the scheme’s priority sectors. Access to low or zero-interest funding could significantly reduce R&D costs for its capital-intensive projects. KPIT’s high R&D spend and innovation-driven approach make it a strong contender for such support. Additionally, OEM clients benefiting from the scheme may increase outsourcing, boosting KPIT’s deal flow. While timelines are still unfolding, this move positions KPIT to gain from India’s push toward tech-led innovation.

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Response from BSE person.
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Necessary clarification has been provided by the Company. SCORES shall only be a facilitative platform for complainants to get redressal of their grievances from the concerned entity. Information given to SEBI regarding violation of any of the provisions of the securities laws are in nature of Market Intelligence. The information provided on such matters will be treated as confidential market intelligence and not as a complaint on SCORES. This information will be analysed and if found necessary, further action will be taken. The status of information cannot be disclosed as SEBI conducts the examinations confidentially in a holistic manner. SEBI will neither confirm nor deny the existence of any examinations as the same may be a price sensitive information. Complainant may approach MI Portal of SEBI SCORES.
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Hoping that SEBI will carry out its own investigation and reprimand (at least) the company for clear violation of investor trust

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The growth during the quarter was driven by powertrain, connected & autonomous vehicles. On a sequential basis, revenue from operations increased by 0.7%, while net profit was lower by 29.8%. The company had one-time income in Q4 FY25 and Q1 FY25. Adjusting for the one-time, net profit would have been higher by 0.3% YoY, while lower by 17.2% QoQ. The company intends to maintain EBITDA margins at 21% for the coming quarters, given no significant forex headwinds and would provide further margin guidance in the coming time.

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I have prepared a tabular list of business headwinds faced by KPIT and management commentry on them. All the data have been taken from Q1FY26 concall and investor presentataion:

Risk/Headwind Brief Description (What’s the issue?) Management Commentary (Q1FY26) Key Monitorables (Quarterly)
Tariff/Trade Uncertainty (US–EU–Japan; NAFTA adjacencies Mexico/Canada) Unclear tariff regime delaying OEM budget releases and program scale-ups; incremental costs but higher certainty can unlock spend Expect clarity within a quarter; H1 remains unstable; H2 growth expected as certainty improves. Mexico/Canada clarity still pending Track TCV-to-revenue conversion (execution speed), H2 QoQ growth, client ramp commentary; any tariff announcements impacting US/EU/Japan, Mexico/Canada
OEM Reprioritization (EV pushouts, Hybrids up, ICE for Trucks/Off-highway) Many OEMs pushing out EV timelines (ex-China), shifting near-term budgets to hybrids, validation, cockpit & ADAS L2+ Shift positive for KPIT: cockpit, cybersecurity, validation, L2/L3 features prioritized; electric powertrain spend pushed, hybrids/ICE (truck/off-highway) rising Mix of revenue by domains: Cockpit/ADAS/Validation vs e-Powertrain; order intake and ramp schedules by domain
Ramp Delays vs Strong TCV TTM deal wins strong, but conversion slower due to reprioritization and budget constraints; some cannibalization from solutions Visibility improving; reprioritization dampened growth; solutioning/accelerators demanded to speed programs; H2 to see fewer dampeners Quarterly revenue growth vs. TCV; Avg. ramp time from win to revenue; book-to-bill trend
Cannibalization from AI/Tools/Accelerators AI-driven validation/accelerators replace some traditional effort-based work; faster but may cut hours elsewhere Winning solution-led, fixed-price projects; cannibalization may impact other tasks; net impact should reduce in H2 Fixed-price % of revenue, AI/accelerator-enabled revenue share, realization/margins vs time & material
Shift to Fixed-Price Engagements To deliver cheaper, better, faster, programs moved to fixed price—revenue can compress, execution risk shifts to vendor First step to apply tools/AI; may impact revenue, not margins; margins protected via productivity Fixed-price mix %, project gross margin, delivery productivity metrics, revenue per program
Geographic Mix & Segmental Margin Volatility Concern that ROW or currency could compress margins; segmental margin swings reported QoQ Mgmt rejects structural margin disadvantage by geography; FX translation and model shift (fixed price) drive variance Segmental margins by region, FX impact line item (₹ mn), pricing mix by geography
FX and One-offs Prior quarter had one-time gain (Qualcomm investment in QORiX); Q1 had ₹272 mn net negative FX impact Variance vs last quarter explained by one-time QORiX gain earlier and ₹272 mn net negative FX this quarter Other income one-offs, FX gain/loss (₹ mn), constant-currency growth
Japan Slowdown (Client Concentration) Heavy reliance on a single OEM led to visible YoY softness in JPY terms 3 new potential clients in advanced talks—broader base by year-end; near-term could see 1–2 quarters of softness Japan revenue in cc, # of active Japanese OEMs, deal ramps and TCV from Japan
Europe Slow Ramps (but strongest pipeline) Europe leads pipeline; some ramps slower than expected Europe to lead growth next several quarters; multiple deals in progress; ramps underway but slower Europe revenue QoQ/YoY, # of programs in ramp, milestones hit vs plan
US/Asia Near-term Fragility US and parts of Asia impacted by tariff and budget uncertainty US growth expected from off-highway & trucks; India & China to contribute meaningfully in ~6 months; initial India/China wins to scale over 3 years US off-highway/truck revenue, India & China revenue, new client adds in Asia, ramp cadence
Next-gen SDV Architecture Delays Many OEMs pushing next-gen (post-2028) SDV architectures by 1–2 years; lowers near-term large-scale dev cycles Near-term spend will be on current programs, validation, and feature additions; next-gen SDV delayed Architecture-linked program starts, validation revenues, feature dev spend
Headcount vs Revenue Decoupling Topline growth without headcount addition; risk of execution with lean bench if ramps accelerate Mgmt deliberately decoupling headcount from revenue (AI-first productivity, fixed price); selective hiring in lower-cost geos Utilization, revenue per employee, attrition, freshers intake, time-to-staff for new ramps
QORiX Ramp/Revenue Timing JV middleware (w/ ZF; Qualcomm minority) — ramp timing and license flow uncertain near term On track; one significant OEM live; advanced with 1 EU OEM & a third partner QORiX client count, middleware license/service revenue, deferred revenue/backlog
Optionality: Sodium-ion Battery Royalty (Trentar) Commercialization risk; royalty/license 2–3 years away; pilots ongoing, not mass production Trentar hiring & investments underway; KPIT expects royalties after factory stabilization Milestone updates from Trentar, pilot-to-mass production transition, royalty/ license receipts timeline
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Any specific event or news to make such a single day fall? are we missing something here.

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Nothing has come out so far , not clear info

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Interaction with media. It’s informative, hence sharing

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There is no X factor or interesting development with KPIT as per the concall. More than product, are they working more like a services company now? Am asking this, as in few concalls people have asked about headcount regularly which is a metric for pure IT services company.

Management is not open to name the projects and customers. So, it is not convincing for me what is cooking up.

EBITDA and PAT are remaining constant for few quarters now. Have to see how much can they pull up EBIDTA and PAT in H2 FY26 and FY27 which they claim is looking promising.

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present headwinds faced by KPIT:

Risk / Headwind What it means (Layman Explanation) Management Commentary / Guidance Structural or Cyclical? Judicious Investment View
Delayed conversion of deal wins to revenue KPIT is winning deals, but clients are delaying project start or scaling, so revenue is not flowing immediately Management clearly stated that wins are not converting due to client reprioritization and budget uncertainty Cyclical Key near-term growth drag. Watch revenue ramp in H2FY26 closely.
Cannibalization due to solution-led delivery KPIT replaces man-power billing with AI / solution bundles → lowers near-term billing Management admitted ~$20m revenue cannibalization, with benefits expected later Structural (transitional) Margin-positive long term, but topline growth suppressed short term.
OEM reprioritization away from new architectures OEMs postpone future vehicle platforms to fix current programs Management said architecture & middleware programs pushed out by 1–2 years Cyclical Impacts QORiX & middleware visibility; risk persists until macro stabilizes.
Europe growth driven by distress, not demand Growth came from OEMs facing execution/supply-chain problems, not fresh capex Explicitly stated Europe growth came from clients “in trouble” needing urgent help Cyclical (event-driven) Not repeatable every quarter; Q2 Europe strength may not sustain.
Asia growth still early-stage India/China revenues are still small and ramp slowly Management guided small revenues from China in Q4, scale over years Structural (build-up) Long-term positive, but no near-term topline kicker.
QORiX revenue volatility Middleware JV revenue is lumpy and startup-like Management said revenues are intermittent and delayed Structural (startup nature) Valuation should not price QORiX earnings yet.
Sodium-ion & hydrogen monetization delay Technology licensed, but royalty cash flows are far away Management guided 2–3 years before meaningful royalties Structural (long gestation) Optionality only; zero FY26–FY27 earnings relevance.
High associate losses (QORiX + N-Dream) Share of losses spiked due to deferred revenues & write-offs One-time loss ~₹6 Cr; revenues postponed Cyclical + Accounting Should normalize, but adds quarterly earnings volatility.
Tariff & geopolitical uncertainty OEMs unsure where to invest (US, Canada, Mexico, Asia) Management expects clarity only after a few quarters Cyclical (macro) Directly affects deal ramp speed, not pipeline strength.
EV slowdown at global OEMs EV programs deferred, impairments taken by OEMs KPIT said some EV-linked revenue dropped, but alternates emerging Cyclical (industry reset) Neutral overall due to KPIT’s diversified tech stack.
Soft constant currency growth FX masks weak underlying growth Q2 organic CC growth was negative Cyclical Watch organic CC growth excluding acquisitions.
Fixed-price execution risk More fixed-price work increases delivery risk Management confident due to AI & accelerators Structural Margin-positive if executed well; execution discipline critical.
Q2 earnings impacted by non-operational items Depreciation, finance cost, associate losses hurt PAT Management clarified these were non-core / timing-related Non-recurring Do not extrapolate Q2 PAT weakness blindly.
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With many cyclicals, do you think they are having moat in this segment? It is becoming bit unclear with time where are the strong growth levers of the company?

They are acquiring companies and i feel that will contribute to sustain the topline and bottom line rather than bringing in structural shift?

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structural shift is already visibile in their non liner behaviour/reduction in headounnt and implementation of pyramid structure hirearchy

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TOI News Item
TOI News Item1600×1200 309 KB

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Persistent Systems-Potential Multibagger
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The Q3 results show a lower profit compared to the previous quarter, primarily due to the impact of India’s New Labour Code, amounting to ₹59.71 crore. This appears to be largely a provisioning adjustment rather than an immediate cash outflow. Excluding this one-time impact, the underlying performance does not seem weak enough to justify the sharp decline in the share price. Are there any other factors of concern?

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No. The problem is significant growth slowdown. While the stock corrected, it surely has not fallen enough for all the risks it carry…that’s because it has proven its capabilities. But if the prolonged slowdown continues, it is not going to sustain these valuations. The same played out with TATA ELXSI as well…..

With KPIT, in a down cycle, it has all the characteristics to reject the company, Single industry exposure, high client concentration (30% of revenue in FY25 came from single customer in Asia), client industries disrupted by Chinese competition…..EVs, capabilities in descretionary side of investments….

Have to consider all these before getting in. I beleive,in the long run, once the cycle turns and investments in digital and SDV starts, KPIT will benefit the most, but that’s too far….

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Concall Summary through AI
KPIT Technologies Ltd Q3 FY2025-26 Earnings Conference Call

This video presents KPIT Technologies’ Q3 FY2025-26 earnings conference call, hosted by Dollar Capital. The call begins with introductions from Rahul Jane of Dalith Capital and Sunil Sanska, VP of CFNG and Head of Investor Relations at KPIT, who also introduces the management team.

Key highlights from the call include:

  • Financial Performance (2:32-3:50): KPIT Technologies reported a year-on-year growth of 9.4% in INR and 3% in USD, with Q3 CC growth at 1.5%. EBITDA growth stood at 6.8% after absorbing partial increments. Net profit, excluding a one-time labor code impact, was 1.53 billion. The company also paid an interim dividend.

  • Business Growth Drivers (3:00-3:15): Growth was primarily contributed by Europe and the off-highway commercial business.

  • Cash Position (3:50-4:04): Cash reserves were approximately 9 billion after significant payouts for Carsoft and Endream acquisitions.

  • TCP Value (4:07-4:25): The TCP value during the quarter was 202 million, spread across geographies, with Europe being the highest, followed by the USA and China.

  • Shift to Solution-Based Transformation (4:48-5:05): KPIT is proactively moving towards a solution-based transformation to address changing OEM challenges and industry shifts.

  • Strategic Investments & Partnerships (5:24-7:06): The company continues to invest in AI (more than 3.8 million during the quarter, excluding prior acquisitions like Technica, Endream, and Carrier), and has secured AI-related projects. They announced partnerships with Microsoft (recognizing KPIT as a frontier technology partner) and a leading CRM company for agentic solutions. A partnership with Hero Group’s HNC Hive for micromobility was also announced.

  • Geographical Traction (7:24-7:50): Positive discussions and traction are observed in the USA, Europe, India, China, the Middle East, Southeast Asia, Japan, and Korea.

  • Leadership Additions (7:50-9:10): Anup Sable has been designated as Chief Operating Officer. The company has added multiple technology leaders in AI and various domains, promoted internal talent, and hired senior industry professionals for practice and go-to-market teams to support complex sales in AI and solutions.

  • Demystifying “Solution” (9:21-11:12): Anup Sable clarifies that a “solution” differs from a “product” (like an iPhone, which is largely shrink-wrapped). A solution has a large pre-built component but requires significant customization and integration for each customer’s specific needs, involving software development and validation.

  • Examples of Solutions (11:12-18:46):

    • Phone as a Key (11:17-14:31): A pre-AI solution enabling phone usage as a car key, involving complex system integration (Bluetooth, UWB, Wi-Fi, 5G) and multi-platform compatibility (Apple, Android). KPIT provides a test platform and test cases for certification, reducing development time, improving quality, and lowering costs for OEMs.

    • AI-Based Triage Solution (14:34-18:46): A fully AI-based solution for software development, specifically addressing bug triaging in large, complex systems like a digital cockpit. This AI engine identifies the origin of defects among multiple software contributors, significantly reducing bottleneck time, improving quality, and ensuring timely vehicle launches.

  • Future Outlook (18:48-19:33): KPIT believes the shift to solutions will take 12-18 months for a large part of their business, with high-potential AI solutions starting in the next 3-4 months. They expect improved growth in Q4 FY26 and higher growth in FY227 compared to FY26, along with stable and eventually improved margins despite ongoing investments.

Why shift to solutions?

KPIT Technologies is shifting to a solution-based approach to address several evolving industry and client needs (4:48):

  • Changing OEM Challenges (4:30): OEMs are facing new challenges that require a different approach to technology and development.

  • Industry Transformation (4:42): The overall automotive industry is undergoing significant changes, necessitating a proactive business model adaptation.

  • Client Demand for Proactive Solutions (18:50): Clients increasingly prefer ready-made solutions that can be quickly deployed to their customers in a shorter duration, with full ownership taken by the provider to avoid delays and overheads.

  • Time and Cost Efficiency for OEMs (14:01, 14:18, 22:21): Solutions significantly reduce the time required for development and integration, offer cost savings, and improve quality because a large part of the work is already prepared and optimized from previous instances.

  • Increased Wallet Share and Margins for KPIT (22:50, 23:08, 23:30, 38:04, 38:58, 51:00): By offering comprehensive solutions, KPIT aims to cannibalize competitors’ business, gain a larger share of the client’s spending, and achieve better profitability.

  • Addressing OEM Delays and Quality Issues (24:37, 24:58): Particularly in the USA, OEMs are experiencing significant delays in vehicle programs and higher warranty costs, making solutions that reduce time to production and improve quality crucial.

  • Learning from Past Experiences (34:31): Unlike in 2019, when OEMs had the time and money to build software from the ground up, current market conditions demand faster, cheaper, and better solutions based on accumulated learning.

The immediate growth drivers highlighted in the video are:

  • Europe and Off-Highway Commercial Business: During Q3 FY26, Europe and the off-highway commercial sector were the primary contributors to business growth (3:00-3:15). KPIT expects to continue seeing traction in the commercial and off-highway segment, partly due to the Kerosoft acquisition (7:11-7:20).

  • AI and High-Potential Solutions: The company anticipates that specific AI-based solutions and other high-potential solutions will begin contributing significantly to growth within the next three to four months (19:23-19:29).

  • Q4 FY26 Performance: KPIT projects that their Q4 FY26 will be the highest growth quarter of the fiscal year, with improved profitability despite ongoing investments (28:07-28:31).

China is an important market for KPIT Technologies for several reasons:

  • Positive Discussions and Growth Potential: There are positive discussions in China, indicating potential for business growth in the region (7:36-7:46).

  • Success in Winning Chinese OEMs: KPIT is proud of having won a second Chinese OEM this year, highlighting that it’s not easy to win business from these companies (4:23-4:25, 41:28-41:43).

  • Learning from Chinese Companies: The speaker notes that Chinese companies have been successful because they understand consumers very well and rapidly create solutions and features for cars. KPIT continues to learn from this approach and from the technology aspects prevalent in China (41:00-41:26).

  • Pioneering Technology Adoption: In China, features like navigation on autopilot have become a default for electric vehicles, and this trend is expanding to the US and Europe (36:08-36:20). This indicates China as a leading market for advanced automotive technologies that KPIT focuses on.

How will growth improve next year?

KPIT Technologies anticipates that its growth will be higher in FY2027 than in FY2026 (28:47-28:50). This projected improvement is primarily attributed to the company’s strategic pivot towards solution-based offerings (30:06-30:07, 33:56-33:59, 44:33-44:36).

The shift to solutions is expected to drive high-quality growth for KPIT in the midterm (33:59-34:04) by:

  • Increasing Market Share: The company believes it can increase its market share in the medium term (37:53-37:55, 39:19-39:20) by providing more comprehensive solutions that are cheaper, better, and faster for clients (21:47-21:49).

  • Leveraging AI and Other Solutions: Both AI-based solutions and other normal solutions are expected to contribute to better returns (38:06-38:09).

  • Growth in Adjacencies: New areas like commercial off-highway and micromobility are anticipated to bring in more revenues (38:14-38:27).

While the exact numbers for this transition are still being finalized, the company expresses confidence that this strategic direction, which has historically yielded positive results, will lead to better growth in the future (28:57-29:12, 44:40-45:13).

How do acquisitions align with strategy?

KPIT Technologies’ acquisitions align with its strategy by enhancing its capabilities and expanding into key growth areas:

  • Kerosoft Acquisition:

    • This acquisition strengthens KPIT’s offerings and contributes to the traction seen in the commercial and off-highway sectors (7:17-7:20).

    • It also positions KPIT to help OEMs with vehicle cost reduction across mechanical, electrical, electronics, and software aspects (36:46-36:52).

    • The integration of Kerosoft is progressing well, with the expectation that the combined capabilities will yield results where “1 + 1 is more than three,” signifying significant synergistic potential (46:40-47:00).

  • Endream Acquisition:

    • Although a relatively smaller acquisition, Endream holds high potential for both growth and profitability (47:15-47:28).

    • KPIT aims to leverage Endream’s platform to add more services, as it is already deployed in 2 million vehicles and is expected to reach 3 million next year (47:42-47:50).

  • Technica and Other Acquisitions:

    • The company has made investments in earlier acquisitions like Technica, indicating a sustained strategy of acquiring capabilities to support its business (5:44-5:47).

These acquisitions support KPIT’s overall solution-based transformation by providing specialized knowledge, platforms, and market access that complement their evolving business model (5:03-5:05).

How does KPIT’s strategy mitigate geopolitical risks?

KPIT Technologies addresses geopolitical risks by observing and adapting to how OEMs react to the changing environment, such as new tariffs and trade deals. The company notes the following:

  • Prioritization of Spending: OEMs are reprioritizing their spending towards critical areas where KPIT has strength, including:

    • Digital cockpit across all geographies (35:29-35:32).

    • Cyber security due to connected vehicles and OTA (35:38-35:44).

    • Multiple powertrain investments (ICE, electric) to offer consumer options (35:50-36:05).

    • Navigation on autopilot (36:08-36:15).

    • Vehicle cost reduction (mechanical, electrical, electronics, and software) (36:36-36:52).

  • OEM Adaptation to Continued Uncertainty: The macro environment has been uncertain for the past year, and OEMs have “figured out ways to this is this may continue for a while,” implying they are adapting rather than pausing (25:42-25:55).

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