KPIT Technologies Ltd
NSE:KPITTECH
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 290.2
1 868.7
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
KPIT Technologies Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the KPIT Technologies Q1 FY '24 Conference Call hosted by Dolat Capital. [Operator Instructions] I now hand the conference over to Rahul from Dolat Capital. Thank you, and over to you, sir.
Thank you, Silvan. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technology Limited for giving us the opportunity to host this call. And now I would like to hand the conference over to Sunil Phansalkar, with head IR at KPIT to do the management introductions. Thank you. Over to you.
Thank you, Rahul. A warm welcome to everybody for the Q1 FY '24 Post Earnings Conference Call of KPIT Technologies Limited. On the call today, we have Mr. Kishor Patil, Co-Founder, CEO and MD; Mr. Sachin Tikekar, President and Joint MD; Mr. Priya Hardikar, CFO; and Sunil from Investor Relations. As we always do, we'll have -- we'll start the call with opening remarks by Mr. Patil on the performance and the way forward, and then we'll have it open for your questions. So once again, a very warm welcome to all of you, and I hand this over to Mr. Patil.
Good afternoon, and I'm very happy to take you through our quarterly results. We started the year on a very positive note in the quarter 1. The revenue growth has been 51.7% in constant currency year-on-year. On the constant currency quarterly growth is 7.1% and a 28.2% reported in case of profit, the profit grew 56.9% year-on-year. The net profit for the quarter grew by 20.1%, but it has something onetime. If you take out the onetime adjustment and the net profit grew quarter-on-quarter by 8%. EBITDA is at first time after exceeding 20%. EBITDA has grown 65.2% year-on-year 13.3% quarter-on-quarter. So overall it is -- the performance has been a little ahead of our expectations. The pipeline during the year, we had 190 million wins. Generally, it is again across the geography. DSO is at 50 days. So last 12 executive quarters, we continue to grow both in revenues as well as in profits. On the people side, we have 550 people net addition during the quarter. We are doing our business and recruitment in the normal course of business. While we do not give exact numbers, the campus recruitment is going full-fledged to one of the higher numbers we are going for. Also the increments, they are going ahead, the increments also in the normal course of business. They are for across the organization, and they will be effective as always from the 1st July. So otherwise, the business is normal on the people side. On the attrition side, the attrition is in low teens. On the key parameters like what we call key staff and basically top blockers, the attrition has come in single digit. Overall, we believe that this is a great opportunity for us to improve the quality of talent and having.On the technology side, the one update is the QORIX which we -- the entity was spun off from KPIT to the joint venture with ZF. There is a good development. The team is on place. We have had a CEO. We have hired a CTO from outside. We have moved the teams from our -- from KPIT, we have identified. We'll be moving it in due course. Currently, we are going through the compliance of merger control in different parts of Europe. The overall other -- so that's on the QORIX side. And not only that, but we have got a very positive response from the market. Almost we are very close to sourcing on OEM sourcing this -- the first product for the platform for QORIX and very good discussions otherwise. Overall, otherwise, on the KPIT side, we have increased our investments into R&D. We believe there are multiple areas in which we need to invest. So naturally, the all these results are cost increases in R&D. We -- the areas in which we are investing includes generative AI, where we are taking together to understand the productivity inside as well as what we can do for the clients. Otherwise, other key areas we have identified, which are beyond what we are developing, which will create many more opportunities for us in future with our existing clients. On the T25 side, we continue to go deep and wide. All our engagements are going as we had planned. Actually, in a couple of major engagements we talked about in the past, Honda and Renault. We are actually accelerating at a faster rate. The pipeline is pretty strong. As in most of our clients, we are seeing new horizons of opportunity, which hopefully once we -- the new offerings we form, we will get a better opportunity to actually go into these areas. In terms of next year, we continue with our guidance of constant currency growth of 27% to 30%, EBITDA 19% to 20%. As you know, we -- anyway, we give the guidance, which we reflecting for the year. We don't give quarterly guidance. So it is our policy that once we give at the beginning of the year, we make any changes to the guidance at all at the end of quarter 3. Then the overall in case of next quarter, next quarter, as I mentioned, there will be increments. And it would have an impact -- gross impact of 2.5. But with the growth coming in, we will offset a large part of this impact on the profitability. In terms of sustainability, we have created -- and this is an area of focus for us. As you know, we look at cleaner smarter, safer world for reimagining mobility. So sustainability is something which we have taken up very strongly in the organization. We continue to engage with our clients on the initiative. We continue to engage with our employees on this, how it can be -- sustainability can become a key part of our lives and also on the infrastructure. We are very excited with the -- we are excited where we are. As I said, the key -- key trends in the mobility industry continue to grow, key clients continue to invest in those. We are in a full position we feel very positive, and we are excited about the different opportunity in front of us. Thank you. We can now have the a group of questions, please.
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Hi, good evening and thank you for my taking questions. My first question is on the margin that you've delivered this quarter, 20%. It seems to be 90 basis points higher Q-o-Q. So just trying to understand some of the key factors that contributed here. Any color maybe on how much employee utilization rate improvement might have helped here. I think the mix of business that you've done more middleware revenue this quarter than the previous quarter, that's the monitorable factor as well. And also, if you could share just to what extent the technical integration costs have that sort of fallen away? I think there was commentary on that over the past couple of quarters so just the factors that have helped in the 90 basis points Q-on-Q margin expansion? Any color there would be helpful.
I think 2 things post naturally, our growth has been a little ahead of our estimate. That is one point, which allowed us to really leverage for it. The second thing is we could deliver a bit better utilization. So that is the second part in terms of overall utilization has gone up. So that is the second part. And the third part, if I may say, there are certain platforms and accelerators kind of a deal, we have products. So I think a little bit of a change in the mix of that. So with all these 3 things, we have been in a position to improve our margin. The cost of integrations have largely been taken care of. There will be, of course, some part because we have external consultants for about a year, which we are doing that. But most of the major part of the integration costs have already.
Got it. That's helpful. The second question is on the demand side, specific to the middleware deals. I think late last year, we had announced that there were 10 large global OEMs looking at doing more work on the architecture consulting middleware side and we were on 7 of those RFPs. So we've announced on Renault and Honda. So just trying to understand on the remaining sort of 5 RFP opportunities. Could you share with us any key monitorables for you, maybe how client appetite is shaping up on these opportunities?
Very positive. I think when we started, I think our experience is naturally, we have matured into that. The second important part is we have now created an integrated offering, not only what KPIT has but also what Technica has and from other entities have. So we have integrated that well. Of course, in addition to that, I think we have created certain upfront offerings, I mean, front-end offerings in architecture validations and before that, blueprinting and consulting. So I guess -- I mean, overall you putting together what it allows plans to do is be substantially reduce their risk or at least get an idea about risk in that program upfront. So that is very well received. The engagements are continuing to grow as in most of the places, what we talked about all the continue to grow in this area, actually, in all the areas, wherever we have engaged all these areas, it continues to grow. And as I always said, middleware is not buy -- I mean -- that's one area of the -- which is one area which is important. But as soon as we get into that area, it creates opportunities for us in the other areas also.
Got it. That's helpful. And just my last question, just looking at news flow over the past 2 to 3 months, there's been a lot of action on the Asian OEM side, companies like Toyota now we have a new CEO who is accelerating the shift towards EVs there. I think the Korean names also because of the IRA, the East Asian companies, Japan and Korea-based companies seem to have an advantage in terms of some of the CapEx that's going into electrification in Europe and in the U.S. as well. So just trying to understand what sort of commentary you are hearing from some of your aviation plans? And if you could give any color around that would be very helpful.
We actually, I agree with you, I think Asia is a good market. And as a company, that's a market which we are very bullish about the -- in future, whether it is India, whether it is China, it is Asia, all these markets, we believe will be good markets for us in years to come. And we do see -- they are a bit behind, and that's exactly where we think we can bring value to them through our experience of working with other was.
Got it. Thank you very much and all the best.
Thank you.
The next question comes from the line of Karan Uppal from Phillip Capital India, please go ahead.
Thanks for the opportunity and congrats on a very strong set of numbers. The first question is on the guidance. So with a very strong start, the guidance now requires a very soft tax rate for the next 3 quarters. So are you looking at moderation in growth going ahead? Or are you baking in some conservative in looking at the macro environment?
I think I mentioned in my earlier comments, is we don't give quarterly guidance. We don't revise the guidance quarterly. We gave it at the beginning of the year. And if at all, it really demands if there is a bigger acquisition or they only be revised. Otherwise, we relook it at it only at the quarter 3. So that's what we have been following for last many years, and we feel very comparable with business.
Okay. But from a demand perspective, nothing to worry at this point of time, all your deal wins and the pipeline looks strong, right?
The demand part continues to be robust for us. And all our client engagements, we continue to go deep and wide with the existing clients. So it's -- for us, the foreseeable future is city solid. And we just have to keep at it.
Okay, then. Thanks for that clarification. Second question is on the other expenses. If you look at the other expenses line item, that is now at 15% of revenue, which used to be around 17% 1 year back. And if you look at FY 2021, at that time, it used to be 19%, 20%. So have you optimized it to the maximum level? Or do you think that still there is some bit of optimization, which is still left? And what is the nature of spend being optimized? Is it more on the D&A side or also on the S&M side as well?
So if you look at it, it is -- I mean, this is a clear reflection of leveraging of some of the fixed costs that we have with the good revenue growth that we have had, it is reversing these costs which are there. Most of these costs would be the SG&A the G&A pipe. On the sales side, we are investing in some areas. But as you know, our strategy is to focus on select set of clients and go deeper into these plants, which means that as we grow more and more in individual plans, as a percentage of that revenue generated, the part will also keep reducing.
Okay. Thank -- thank you and all the best for taking [indiscernible].
Thank you.
Thank you. The next question comes from the line of Nitin Padmanabhan from Investec, please go ahead.
Hi, good evening, and congrats on the solid numbers. Just wanted your thoughts on how should one think about the flow-through revenue that comes through once you sell middleware. So you mentioned an OEM is looking to source products. So how does that typically flow through in terms of incremental opportunity on the services side? And the second is, typically, when we think of these products, what is the kind of margins that typically accrue for these? Just 2 things overall?
Hi, Nitin, this is Sachin Tikekar. Just a clarification. The middle-ware product is going to be part of QORIX, just so you know and KPIT will continue to be the software integrated. Just off the bat, clarification. Secondly, the way it works is when we get involved in middleware which is somewhat of a heart of the new architecture, it gives us larger visibility into the left side of the way as well as the right side of the way. That is, we can actually work on the core architecture we can work on the blueprint on the -- prior to the requirement side, it gives us a better handle on that. And on the other side, we can also do more of verification and validation. And there is everything in between. So in between, there are applications and features to be added which are typically in the areas of infotainment or e-cockpit or autonomous driving body, and so forth. So what happens is when you get involved in the middleware, you see other areas where we can continue to provide software integration services to the same OEMs. So it's a beachhead of sorts for us to get in there, that we really understand what is it that the client is trying to do. And what could be the possibilities in terms of providing solutions to sort of meet their objectives?
And the OEMs that you spoke about where you are seeing possibly initial sort of interest, are these OEMs where currently you have a lower share and can possibly sort of help you sort of accelerate your share gains within that or are they large ones where you already have very good sort of relationships and scale?
It's first of all, all of them are existing OEMs. With some, you're right, I think there is a very deep engagement to start with, and some of the announcements that you've heard over the last few quarters. And then there are other existing OEMs where they worked on middleware to some extent. And now they want us -- now they want to learn from our experience to take the journey forward. So it's both ways, Nitin. It's with the existing clients with whom we have announced sort of larger engagements in middleware and related areas, leading to SDV and then exists some of the other existing ones who want our involvement going forward.
Sure, Patil. This is very helpful. Thank you so much, Sachin. All the very best.
Thank you, Nitin. Thank you.
Thank you. The next question comes from the line of Mohit Jain from Anand Rathi, please go ahead.
Yes. Sir, first of all, for third quarter, so not much to ask where everything is like perfect revenue margin tie. My question I had was more from a medium-term standpoint, any assessment that you can share on your wallet share in key accounts, meaning strategic 40? And at what stage do you think you may need to expand on the client base to sustain your growth rate on the time base? That was my...
Okay. Understood. So let's take one question. The first question was a medium-term view. So our medium-term view continues to be fairly robust. Our conversations with existing clients are getting richer and more engaging as we get involved deeper into their core architecture towards SDV. So we see -- and we really think that based on that, we really think that there is quite a bit of headroom to cover within the existing clients in the short to midterm. Having said that, I think it's a very interesting question that you ask is when do we -- essentially, when do we need to go beyond our T25 OEM. It's a continuous sense and can process for us because it's a dynamic environment. And you know there are new players that are coming in, then there are some old players who get revised friendly. So we have to keep a close eye on that. And every year, we make sure that there are at least a couple of OEMs that get added to our kitty so that we don't put all our eggs in few baskets. We like the focus and it's paid rich dividends to us. At the same time, we want to make sure that we are not there is no serious concentration with just a handful.
And first around wallet share, like where in your sense, like when we see their R&D projects, how much should be ballpark addressable for us? And where are we in that journey in terms of space penetration instead of where you measure it?
So there is -- as I mentioned, there is tremendous headroom to grow across all the clients with some -- with whom we have long-term engagement, obviously, they have given us the visibility. So the headroom is somewhat limited, but not really because as we get deeper, we see a lot more. In some of the others, I think there is a lot more to do. We have to understand that this work towards software-defined vehicle that will enable the case is a tremendous amount of work, and it requires many shifts in iterations along the way. So to get there, I think most OEMs are taking at least 2 or a 3-step approach. So first is step-on towards the 2026, '27 program, Step 2 is towards 2029, ‘30 programs, and so forth. So it's hard to define wallet share because they have to continue to save money on one hand. And sort of spend more money on towards software-defined vehicle, correct? So I think in some areas, I think with some of our clients, we -- in some specific areas, we have very large wallet share and some of the others will continue to increase our volume share.
So let me take this opportunity to address some current and future discussions we may have on this call. See, initially, when we started, we thought the OEM opportunity is about $50 million for us. I'm sure you remember that. We thought our project size will be $10 million, $20 million. Now it has gone $20 million to $50 million, $100 million. Similarly, we believe our client engagement. There are a few clients who are coming to $100 million this year, right? And going forward, we believe that's where many of our Diamond clients would be there. We believe now the opportunity is actually $150 million, it's not $200 million. So fundamentally, as we have gone ahead, we have built our expertise. We understand what is the spend. We know which areas we are very differentiated, where we can add value. And we continue to do that. And they are very well entrenched, not only from just an engagement perspective. But actually, how do we get more into architecture, some of our platforms, some of our deeper knowledge, different type of engagement. So that's how we are engaged with that. Now the spend of the client is pretty big actually. So it's not this. So I think during this quarter, I mean, I don't want to go into it, I guess you all know because we did not get that question. But naturally, there is a lot of spend -- if we had to break the spend of OEM, OEM will spend certain money, which will be in-sourced. So if you take an example, suppose they have to spend out of $100 million, depending upon the client, some of them in-source 30% or 50%, that's what they want to do. Then they will outsource. And then there are different business models which are coming, which will be on the part of the revenue equation, they will not be part of the engineering spend. And these are all areas as what we are tapping into. Now going back to the first part. When the client is trying to do their in-source, that again is an opportunity for him many times because they cannot really find a talent or this, again, to engage with the company, such as KPIT, but they can also work with some other clients because basically, they are trying to get services from different players. Now the other part of that is many of them also -- I mean I want to address it upfront because there are the captive centers, et cetera, they will certainly set up the captive centers because this part, 30%, 40% is big. And they cannot find this 3,000, 4,000, 5,000 people of this expertise outside. Not only that, they have to do it also largely also on the IT side because that's where they can also reduce their costs. So in future, we see -- we have had the discussions also in many cases, where they want to set up their centers, they want to do this part where we may participate or we may not participate, depending upon how we feel. Now many of them are also looking for a partner in India for doing IT plus engineering or as a center or doing even a joint venture with them, which ultimately, of course, they will acquire in a certain time of frame. We want to remain focused on what we do. We want to focus at the higher end of the business, where we can take the full ownership of the business. We want to be ahead of the thought leadership. That's how we want to drive. We want to be on a place where we can add value into their monetization part. So from that perspective, this is what is happening. Now any news coming in, it doesn't mean that is at the cost of KPIT. We are very, very confident. We are in a very confident role. We are very comfortable those. But I just thought I will address this point because this small things could keep on coming. So that's why I wanted to address.
Thank you very much, sir. And just to be sure, you're saying are you can get $200 million also from one client from them.
Absolutely.
That clears a lot, sir. Thank you.
Thank you. The next question comes from the line of Dipesh Mehta from Emkay Global, please go ahead.
Thanks for the opportunity. Just continuing on the -- I think, on prior question answer. I just want to understand how global auto measures are choosing their partner. And what kind of the constraint they are facing because the overall demand remained very strong, whether the talent sourcing is the big challenge for them, and that's why they prefer to work with multiple partners or capability-wise, they are finding differences and that's why there are multiple partner kind of strategy? And do you think, let's say, 2 years, 3 years down the line, there would be some consolidation may happen? So if you can provide some understanding about how overall ecosystem is currently evolving? And how KPIT is trying to benefit from the emerging trend? Second question is about the data-related question. If I look...
Can we do one by one I think it just makes it -- so in this case, I think this is what actually I answered to a large extent. But just to tell you, right now, for the next 7, 8 years, SBC, OEM is in an area where they are trying to do what they don't know necessarily. They are trying to catch up with some of the other -- in some technology areas, but in some areas, they are very advanced in some areas, they are not, and they have to catch up with multiple things. There are a lot of unknowns for them and for everyone else in the industry. That's where they are trying to engage with somebody who has experience working with multiple companies. They understand their problems, they have ability to solve it and they have solved it in some way. So that's where actually KPIT is playing. KPIT is playing that's why when we -- I mean, the really people use this SDV very loudly. But we are talking about the platform, which they build for the future and the new architecture. That's where they need a very, very solid partner. And I think when we explained some of our deals in the past, including Reno, right, that point of time, we were -- we were not even engaged with the clients. But we got engaged with the clients because they thought they need a different kind of engagement. So KPIT is engaging on these areas and the new areas based on a different level of expertise, end-to-end expertise. And if you ask me, this KPIT is actually partner with the highest scale with very solid competence. And the -- in terms of range of expertise, the test of expertise and problems following kind of expertise, that's where KPIT stands out. And that's what KPIT is basically dealing. So the other part where they are trying to build their own renters and the that they can engage with the people because they're looking at certain specific skills or specific projects. As I said, we work on more platform side here, they're working projects or programs. That's where they engage with multiple clients on project basis or a specific engagement basis. That's what they are trying to do.
Understood, understood. And other question, which was about, if I data-related thing about if I look revenue by vertical, which we report -- the other segment, which we stop sometime back [indiscernible], it seems to have increased substantially after, let's say, if I adjust for the 2 segments, which we report, passenger and commercial vehicle, others seem to almost 300 million to 4 million addition quarter-on-quarter. So if you can provide what led to that SAP increase, almost 35% of incremental revenue came in others this quarter? And second question is about margin. Now we are at closer to 20%. How one should look margin trajectory? Have we have given guidance for current year, but from a medium-term perspective, whether this is the optimal range or do you think there is an upside to margin? Thanks.
Now on the first question, if you look at others, I think this is the first quarter where we have consolidated FMS revenues, the majority of that portion has gone there. So you'll see some split happening from the next quarter onwards. So there is nothing which is substantially changed in that segment apart from this. Otherwise, there would be a set normal growth that has happened in that segment. On the second part, on the margins, -- so we are at 20%, as Kishore said in his opening comments, we'll have wage hikes next quarter, and there would be some impact on the operating margins next quarter. And obviously, we have guided for a 19% to 20% margin for the whole year, and we are confident of being in that range. If we take a medium-term view, obviously, as we have said earlier, there are opportunities where the margins can go up. But of course, we will also look at whether we need to accelerate some of our investments in order to look at growth going forward and balance out that to the margin. So that is how we look at it. From an operations point of view, there is definitely scope for improvement in margins even beyond 20%.
Understand. Thank you.
Thank you.
Thank you. The next question comes from the line of Ankit Agrawal from Yellowstone Equity, please go ahead.
Yeah. Hello, thank you for taking the questions. My first question is on QORIX. It seems like a high potential like our product company, which tend to have large on investments and long gestation periods. So I just want to a sense of like what kind of investments would be required and before the company entered revenues and what kind of gestation we looking here?
So as we have said earlier, when we announced QORIX, this is a company which will work on the product side for the middleware platform. From the KPIT point of view, we will invest about $5 million upfront and then in another $5 million over -- after about 18 months. That's what the investment from KPIT side would be. And of course, the other partners are would also invest into the joint venture post receiving approvals from our -- all the regulatory approvals from merger control processes. That's what it is.
So just to remind you, KPIT has invested has moved a lot of IPs it had built in this area. So that is valued differently. And of course, just to corollary of that, ZF will invest more cash in the time source.
And the third aspect is about the gestation period. Since we are actually putting our own IPs in it, our time to market will be much faster than, let's say, a startup.
Okay. Understood. And so -- but still like some idea like 2, 3 years, 5 years?
What gestation part?
2, 3 is the...
I think I mean, that's what we have planned actually for 3, 4 years, but I think looking at traction we see, I think it may be ahead of time.
Okay. That's very helpful. Thank you. And then more of a bookkeeping question, what kind of effective tax rate we should bake in on a steady-state basis?
About 25% for the year.
Okay, 25%. Okay. Great that's all I had.
Thank you. The next question comes from the line of Sandeep from Equirus Securities, please go ahead.
Yeah. And thanks for the opportunity and congrats on being a great set of numbers. Most of the questions being answered. Just looking at FY '23 being a solid year in terms of closure of large deals megadeals. And that clearly shows that our win ratios are going up, and we are becoming a preferred vendor in eyes of the year. So is it fair to say these opportunities increasing our offering gap is also reducing a book-to-bill ratio between 1.5x to 2x can be maintainable beyond FY '23 in which year we have shown a book-to-bill of 2.4x as a whole.
Sandeep, we are not sure whether we are able to -- we didn't hear you properly. Can you break -- can you repeat your question maybe in smaller pieces.
Yes, yes. What I'm trying to say is FY '23 being a great year in terms of closure of mega deals and the large deals and which has resulted in a book-to-bill of 2.4x. It clearly indicates that our wallet share is increasing. We are becoming a preferred vendor in the space. So looking at the opportunity and the offerings which we have versus peers, is it fair to believe that 1.5x to 2x book-to-bill is quite maintainable?
So I think it is difficult to look at and say about the guidance for the book-to-bill ratio. But what we believe is if you look at the closures that we have done, of course, last year, there were some mega engagements, which we have closed, which has improved that. But definitely, I think going forward also, looking at the current pipeline and our positioning, it is fair to assume that it will be quite steady.
And Sandeep, what I would like to add is just to -- just for clarification is, yes, we announced 2 sort of long-term engagement. We continue to have meaningful engagement with all the other clients that we don't necessarily announce for various reasons. So of course, there are 2 big ones where the business is growing. But if you look at the pipeline that we have announced for this -- for the last quarter, it was on the back of our existing clients, which are not these 2 clients. I just want to say that is sort a little more broad-based amongst our top 25 OEMs and not just dependent on 2.
Okay. Helpful. And just a follow-up. Is there a mega deals pipeline continuation in robots and anything in the advanced stage versus what we have done with Renault, Honda similar size of deals are in the pipeline? And anything in the near term can be closer?
Sandeep, I think as Mr. Patil mentioned, as we go deep and wide with these clients, we just see much more than meet BI. And not all of them will be sort of packaged together as what you will call mega engagement. However, over a period of time, looking back, they'll all seem like mega engagement. You know what I mean? So essentially, the point is going deep and wide, and some we possibly announce, but mostly there'll just be work that we'll continue to do and add to our existing T25 [indiscernible] clients.
Okay, okay. Thanks and all the best.
Thank you. The next question comes from the line of Akshay Ramnani from Axis Capital, please go ahead.
Hey, thanks for taking my questions and congratulations on a great quarter. So I have a few questions and go one by one. First one is on the -- your comment on OEM revenues becoming $100 million or $150 million plus. So does that in any way affect your or limit your ability to scale up another OEM to a similar size since you're already working with their competitors. So just trying to understand that does this type of scale with a particular OEM means that your business remains structurally remains a high concentration of business and client selection, thereby becomes very key?
Actually, that's a fair question. And for us, I think as we go deep and wide, I think these will -- some of them will move into that $100 million, 150 million to 200 million category. However, one has to understand that OEMs used to work with Tier 1 that used to serve their competitors. So they are used to working with key partners that work with their direct or indirect competitors across the globe. And to that has been the case with KPIT -- that will continue to be the case in case of KPIT as we become the software integrated to many of them. We don't see that as a hurdle for us to continue to go deep and wide. As long as we are there to solve their meaningful problems. They are more than happy to engage with us, knowing really well that what we do with them remains only with KPIT, right? That's something that we have to do very judiciously and we'll continue to do so.
And they're not looking at it as a concentration because we are looking to scale this for multiple of plants. So overall, I don't think any big change than what we have or probably it will be more balanced in the future.
You got that. Second one was in the presentation, there is a mention of focus on improving the rate realization. So if you can please elaborate on that, how is the pricing environment? What kind of price increases are we talking about? And when do they kick in?
No, I think we continue to do this as and when our contracts allow us to do. We haven't faced any issues right now. I mean in increasing the rates. And then maybe we have to be also mindful about what we ask for. But we have been in a portion to slowly steadily increase our realization. One is the rate, but the second is also when we are moving towards the fixed price projects, how we engage and get a premium at how we can improve the productivity. These are the areas are continuing to do, but that will also help us in improving the realization.
Got it. Another one was similar to the pricing model. So since we are now heavily investing in IP up, would you look to price them towards more outcome-based or license-based services or would we just continue to be tools and accelerators and enabling you to become a larger software integrator? So how should we look at that strategy?
We would like to be as a software integrator, -- and actually, we have accelerators, platforms which we have some licensing, et cetera. But it's some part of the business. We believe, overall, if you look at it, there are different models which are evolving. And we are not in a hurry to change -- make any change to our business model. This is what plant be comparable, we are comfortable with. But in certain specific areas, we naturally are experimenting different models. As this is more comfortable and the plans still more comfortable and they see better value, we will do that. But for some time, at least, we will continue to go with our current one.
Great. Last question from my side was, if you can also touch upon the offshoring trend, are we going to see any increased offshoring in second half of this year as some of the large things mature? Or there is really no shift at H1 versus H2?
I mean that depends upon the stage of the project, as we have said. We can -- we are also creating a nearshore facilities. We have been doing offshore facilities. For sure, there are 2 parts. One is whether we have that kind of a competence and where we have that competence and how we can leverage that. And of course, it should be economically viable and cost-efficient for the client. We don't have to be lowest, but we had to be moderate on the cost side. So that's a balance. There is, of course, opportunity to increase more as these projects stabilize in the next couple of years.
You got. Those are my questions. Thanks for answering them.
Thank you. The next question comes from the line of Anika Mittal from Invest Advisory LLP.
Good evening, Sir. Sir, my first question is in the last quarter, what was there a value share of Technica? Are we seeing the same growing say 20% in Technica going ahead?
I'm sorry, we don't hear you clearly. Could you just repeat the question, please?
Sure, Sir. Am I audible now?
Better. It does.
Okay. Sir, my question is in the last quarter, what was the revenue share of Technica? Are we seeing the same growth, say, 20% in Technica going ahead?
See, now, I mean, we have already said that we are completely integrated now, and it is really difficult even for us to know what is the Technica growth, what is KPIT growth. It is all integrated together and it is KPIT plus Technica together growth. So it's difficult to segregate that out.
Okay. Sir, my next question is, how Honda recently done an agreement with SCSK regarding the software development? Are you seeing any downside in the venues due to the diversification in vendors via client?
I think that is probably a couple of times addressed already in the call where we have said that, that has got a new impact, and we are actually ahead of our engagements with our clients, as of our plan, and we believe that we can add to a little better or more than what we had earlier anticipated. So that has got no impact.
Sir, my last question is any update on the hydrogen technology on which we were working on the progress which you can share?
As a strategy, we'll continue to invest in future and hydrogen being one, we've been working on it for several years now. Now the only change is some of the production programs have actually started to take place, and we are very happy to hear that there is a large hydrogen truck integration program on which we are going to be a key partner. So the good news is what we have been talking about as the future is becoming reality in some profits. Thank you, Sir, it's a lot of so much. Thank you.
Thank you, Anika.
Thank you. The next question comes from the line of Karan Uppal from PhillipCapital India, please go ahead.
Yes. Thanks for the follow up. Just one slightly long-term question. In terms of the overall SDV development where the entire software architecture is changing. So where are OEMs in that journey, when can they derive the meaningful revenue from after-sales services, which are the areas which are looking promising in terms of monetization? Happy to hear your thoughts are.
I think most of the programs are led by about a year in the first year. So -- and we believe that many of them have compromised in some way for multiple reasons in the best possible architecture. Of course, they will also learn from the 6 begins. So really in new sense, I guess they will be ready by about 30 in some, let's say 32 by something which is very solid. But on the services side, I guess, in some specific area, the monetization will start and will start maybe in the next couple of years, and it will keep on increasing. But the real opportunity is when the SDV structure is fully integrated.
And any areas where monetization you think is looking promising where customer adoption will be quicker?
Any areas where demonetization will start early in...
Yes. I mean, one simple thing is the maintenance or whatever the dealers are doing, right, at what basically Tesla did, right? So they basically eliminated leaders to a large extent and kept them only for set services. So for the new generation of cars, that's what people are trying to do. So that will be one area upscale of certain new features of software that will be the other monetization part. I think certain areas in terms of entertainment and gaming will be a third area where it could happen. Payments, maybe the core areas it could happen. So these are some of the areas which may happen. I can't predict exactly when and how.
Also, what some of the OEMs that are -- what they are doing is some of the things that were available as part of the vehicle, as soon as it gets moved through a software, they're actually offering that as on demand. So some of it that came bundled up as a vehicle has been separated out and also offered as a service. So again, that's one area which will continue to grow, which has started to happen in some bits and pieces will continue to grow.
Okay, sir. Thanks a lot for the detail also. Thank you so much.
Thank you. The next question comes from the line of Rahul Jain from Dolat Capital. Please go ahead, Sir.
Thanks for the opportunity. In the Microsoft call earlier in the day, you mentioned that Mercedes is bringing ChatGPT via as we are to more than 9 lakh vehicle in the United States. So making for this car voice assistant more intuitive. So are we going to see that as a good incremental opportunity or this is just a small extension would not be much significant?
This is in line with what Mr. Patil just said. Some of these things now you can call it ChatGPT or Emirates AI. Essentially, these are some of the services that are getting extended through the vehicle. And that's their way of creating the service model. So it's an interesting one that they have announced, and we'll see variations of it going forward.
Right, right. And also with many this global OEM planning, increased production exposure in India, does that make your proposition any better or do not make much difference as these may be orderly deeply engaged already with us?
How does that?
Yes. I mean there are always some local projects specific to geographies. And I'm sure we can play a more meaningful role there. Right now, most of the people are doing largely what they are doing globally, but I can see now that things standing and there are specific to India, some features being added, some programs being taken on. I'm sure we can add value.
Sure. That's it from my side. Thank you.
Thank you. The next question comes from the line of Pankaj Kumar and Individual Investor, please go ahead.
Are you able to hear me?
Yes, Pankaj.
Yes. First of all, constellations for an excellent [indiscernible]. In the last conference call, you said that Q3 and Q4, the second half is not going to be as good as the first half, but still you believe it will be like that only?
Yes, I think we have said that the acceleration will happen in H1 better than H2. H3 is traditionally a recoup quarter Q3, Q3 traditionally a weaker quarter. And we wanted to accelerate looking at to be safer, we wanted to accelerate in the first part of the year. And that's what we are trying to do on the existing programs and projects we have. In that context, we have said, market and the opportunities look right. Otherwise, the environment looks good. So if at all, they have to revisit, we'll regain quickly.
Right. And the second thing is you said that there will be 250 bps of gross margin impact due to wage hike, but you would be able to manage that. And finally, there will not be any impact in the next quarter. Is that understanding, correct?
We have said that the gross impact is about 250 bps on the margins, and we will be substantially able to absorb that with operational efficiencies and revenue growth, but there would be some impact on the margin.
Okay, thank you. That's it from me.
Thank you. As this was the last question for the day. I would now like to hand the conference over to the management for closing comments.
So thank you, everyone, for being a part of this call. And if you have any further questions, please write to me. My e-mail address is mentioned in our investor update. Thank you so much, and have a great evening.
Thank you, everyone.
Thanks.
On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.