KPIT Tech Q2 Net Profit Declines 29 PC to Rs 121 Cr

New Delhi: KPIT Technologies reported a nearly 29 per cent decline in consolidated net profit to Rs 121 crore in the second quarter ended September, mainly on account of pressure on the automobile market from Chinese vehicle makers slowing down deals.

The company had posted net profit of Rs 169 crore in the same period a year ago.

KPIT expects losses to come down from the third quarter onwards.

“Two of our largest clients are where you have seen a large decline. One is in Europe, one is in Japan. We do believe that both these accounts will bottom out over the next couple of quarters. Two or three quarters at the most is what we are looking at. However, for some of our existing OEMs’ clients in passenger cars, trucks and off-highway, we will see growth come bit by bit,” KPIT Technologies co-founder and joint managing director Sachin Tikekar said during the company’s earnings call.

KPIT Technologies posted a 6.5 per cent increase in consolidated revenue from operations to Rs 1,691 crore in the quarter under review, compared to Rs 1, 588 crore in the corresponding year-ago period.

The company’s revenue from the passenger car segment dropped 7.8 per cent year-on-year to USD 132.36 million (around Rs 1,260 crore). However, the revenue from the commercial vehicle segment increased 27.3 per cent to USD 39.98 million (nearly Rs 375 crore).

Tikekar said the pipeline for the company looks healthier.

He said that there is a lot of nervousness among European passenger car makers and decision-making is somewhat slow.

“Even though we are winning a lot of business, the pipeline is greater. The decision-making is slightly slower. However, things are heading in the right direction. In some ways it’s testing our patience, but we do believe that we have the right strategy and now we also have the data points to see that the strategies are actually working out quite well,” Tikekar said.

He said there is tremendous pressure on European passenger car makers in terms of their sales, which continue to slide.

“There is tremendous pressure on their margins. They continue to go through sort of cost-cutting initiatives. We believe that this will continue through a few more quarters to come. This is primarily due to the competition that they are facing in China, as well as the competition from China in the rest of the world, primarily in Europe and Southeast Asia, the Middle East and so forth,” Tikekar said. ​ The company reported a total contract value of USD 213 million ( about Rs 2,026 crore) during the quarter under review.

Tikekar said American OEMs are somewhat protected because the bulk of their revenues come from the Americas.

“They continued to be all right compared to the Europeans. And that’s the story with the Japanese as well because again, America and Japan are the two largest markets for the Japanese OEMs. If you see year-on-year decline, it is the highest for the European OEMs. Of course there is some decline for the Japanese as well as Korean and American, but it’s nothing compared to what the Europeans have experienced,” Tikekar said.

He said that the story in India for passenger cars is very different, which is the fastest-growing market now.

“This is the fastest growing market and the OEMs that are not only ones from India, but some select ones from abroad are also seeing momentum as well. Largely, you see growth from Maruti Suzuki, Mahindra, Tata Motors, Hyundai and Kia, and in electric vehicles you are also seeing Chinese and Vietnamese making a dent,” Tikekar said.

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