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 KPIT Technologies Limited Q4 FY '20 Earnings Conference Call hosted by Dolat Capital Markets Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you, and over to you, sir.
Thank you, Nirav. Good evening, everyone, on behalf of Dolat Capital. I would like to thank KPIT Technologies Limited for giving us the opportunity to host this call. And now I would like to hand the conference over to Mr. Sunil Phansalkar, who's AVP and Head IR at KPIT to do the management introductions. Over to you.
Thanks, Rahul. Good afternoon, everybody. A very warm welcome to all of you on the Q4 FY '20 and FY '20 earnings call of KPIT Technologies Limited. I sincerely hope all of you are taking due care of yourself and you near and dear ones. I wish all of you stay and stay healthy. On the call today, we have Mr. Ravi Pandit, Co-Founder and Chairman; Mr. Kishor Patil, Co-Founder, CEO and MD; Mr. Sachin Tikekar, President and Board Member; Vinit Teredesai, CFO. We also have Priya Hardikar on the call, who is Senior Vice President and Head of Finance; and [indiscernible] from IR. As always, we'll have the opening remarks about the quarter and the year gone by and the way we see the -- in the foreseeable future by Mr. Ravi Pandit, and then we'll have it open for questions. So thank you, once again, for joining the call. And I will now hand it over to Mr. Pandit.
Good evening, everyone, and welcome to our call. So in my initial remarks, I would like to cover how last year was and the last quarter was. I would then like to cover what are our goals or focus area in the face of COVID. Then I would like to talk about, how do we see the overall year, and this is what you probably maybe keen to understand about how do we look at revenues within the coming year. And maybe I'll make some remarks about what's happening in the industry that we are serving and our position in that industry. So as you would know that the year which ended on 31st of March was actually our first complete full year, as an automotive solutions provided focused company. And this was a good year. We had a revenue growth of over 14% on constant currency terms. It was an industry-leading growth. The EBITDA growth was much higher than revenue growth, which was at 35%. Our margin also increased from 11.5% to about 13.7%. And the PAT growth was also correspondingly quite good. As regards Q1, our revenue on quarter on over Q3. Growth was 1%, year-on-year was 11.5%. EBITDA Q3 over -- Q4 over Q3 was 2%, Y-o-Y was 17.5%. PAT, although Q3 or Q4 was negative, year-on-year, it was 23% growth. So you would notice that in all aspects, our profitability growth was higher than our revenue. At the beginning of the year, we talked about our focus in terms of customers, and we talked about the top 25 customers. Growth in Top 25 customers year-on-year was 20% against the overall revenue growth of 14%. So you would notice that our emphasis on our key customers has given results. During the year, our attrition also came down because of the multiple actions that we took on the people front throughout the year and which we have kept it on the staff. So the attrition came down from roughly 25% in the previous year to above 15%. Our higher profitability has also converted into higher cash. We ended the last year at INR 90 crores net cash balance, and we ended '19/'20 at INR 328 crores cash balance. So our profits have duly been converted into cash. Our DSO has come down from 87 days to 66 days. The fee practices about which we have been talking to you, mainly powertrain and autonomous contributed to almost 60% of our revenues. I wanted to talk about that in particular, because these are the drivers of growth. We think that could happen in the years to come as well. On the back of such year, we were looking for a similar growth during the current year when COVID happened. So naturally, in the light of this, we had to reorient ourselves, reset our goals. And the 3 goals that we have kept for ourselves and in the face of COVID are as follows. First is, keep and improve our service to the customers in such a way that we get their maximum wallet share.And we are doing that with maintenance of delivery excellence, a maintenance of quality of the work that we do and the time on which we deliver the year. You would be happy to note that 98% of our people are already on full systems from their work from home to take care of customer requirements. We were keen that we should never drop the ball as far as service to customers are concerned. Our second focus area has been the well-being of our people. And we have focused more on continuity of jobs over management of their -- continuation of their current level of remuneration. So almost all our people have a VPI component, and this is the part that they may probably have to forego a part of that during the year, which could possibly mean a reduction in their overall payment. We have also been spending this time on training for them and improving the business to our work from home. As I mentioned, a large number of our people are working for home and that contributes -- we believe to their well-being, while at the same time, taking care of our customers' requirements. We are focused on our top talent and on retention of that top talent. Our third goal for the year in the case of COVID has been improving and keeping a good cash on hand. Because it is likely that the customers may also not pay in time. So we have now ensured that we have a good check of cash, to ensure that our cash on hand position remains stable through the next year. Now coming to the question of the revenue, how do we look at the revenues for this year? The world is in such a phase of turmoil that nobody really knows how things are going to pan out. And -- but I made make some conjecture about this year. This is no guidance, much less a commitment. And as I said, this is not our core focus during the current year. There has been obviously a drop in Q1 revenues over Q4. But after the initial kind of panic in the market, we have seen the customer inside stabilizing and going up a little bit. So we expect that Q1 will see possibly about a 15% drop over Q4, but H2 will be better than H1, and we believe that over a period, we should be seeing some uptick. But again, as I said, this is no guidance because we don't really know how the whole thing about COVID will pan out. However, we noticed more conversations with our customers. Those customers -- those conversations are strategic in nature, and as our investor update shows, we have been getting into some really nice, good long-term big deals. So on the whole, we feel optimistic about the overall future. See, finally, the -- our future is tied with the future of the industry. And we believe that the industry -- the automotive industry, or mobility in a broader sense, will be an important growth engine for the world. It will continue to grow. Potentially, as a result of COVID, there would be more demand for personal vehicles rather than public transformation. Potentially, there will be more demand for people who are looking at self-driven cars or fully autonomous cars again other than public transportation. And we continue to maintain our position as leaders in these technologies. We have invested in these technologies through building expertise in this area and will continue to do so. So we believe that our focus on this industry, our focus on a fewer number of customers, our focus on good people and our focus on good client service should yield a good results over a period to come. So these are my initial remarks. Should we have any questions, we shall be more happy to take them. Thank you.
[Operator Instructions] The first question is from the line of Mohit Jain from Anand Rathi.
First is on the 15% drop that you're anticipating in Q1. So this will be largely volume-driven drop? Or do you think there is a substantial part, which will come from price reductions for the year?
This is largely volume-driven part of the -- so specifically in U.S. and U.K., we have seen the customers have reacted very quickly. And this has been certain quickly stopping certain kind of programs, which -- or projects, which, I guess, most of them, we work on are in terms of our platform or production program. So at some point of time, they will come back, but we don't know. So right now, what we have seen is largely the volume best -- bottom best…
And second, sir, I missed your initial remark on the cost containment measures. So you were talking about take home will be less. What will be the quantum of that and for what duration is it effective?
What we have done basically, there are 2, 3 things we have done. One is we see that in the first part -- we are -- we have that means -- basically we are looking at consolidating the facilities which we have. As work from home, as we -- as Mr. Pandit mentioned, 98%, that basically has worked very well. We have watched our productivity well, and we believe, we can improve that going forward. So overall, we believe that work from home will become more normal. So we have started consolidating more facilities. So in India, we already are -- have taken steps to reduce at least 3 facilities. And in Germany, we have taken steps to reduce 2 facilities. So that is first kind of a thing. The second, of course, is due to the discretionary spend. That is the second thing. And the third is on the compensation part. What we have done is, we have converted some part of the salary. It is more at a lower grade, going high at the high rate into a variable component. And what we have told is we will take a call on this VDI payment. Generally, we do twice a year. Instead of that, so first the component of the VPI has increased. And the second, we have said that we'll take a view at the end of the year, depending upon the yearly performance rather than a half yearly performance. So that is basically the step we have taken.
So the payout will be at the end of 12 months, but you will provide for industrial on a quarterly basis?
Yes, in line with the performance of the quarter.
All right. So what is this percentage sir, variable versus total? Like how it was in…
Roughly, we have increased 10%, 15% addition to what it was earlier. So that's how it is.
So of the total composition, around 15% is the variable?
No, no. I won't go into detail. I mentioned that we have increased by about 10%, 15% overall, about what the VDI percentage was earlier.
Okay. Sir, lastly, on this for [ pledge ] thing that you have, so if you could help us understand what is just primarily, call it [ 12 ] and what is the plan to repay because it's currently a 100% roughly I would say. So how should we look at it?
So I think the basic point of -- it was a short point we are trying to make, and we will not go into details, because actually it is not very normal to talk about this in case of a company, but still, the 2 short points we wanted to make is, our main promoter company, which is Proficient, where all our promoters are part, including myself, who are a part of that, our main promoter company. It's free of any pledge, which is owning more than 33%. So that is the first short point we wanted to make. The second point we wanted to make was the second one, which -- and the second point we wanted to make is all this has happened because we have bought in additional shares. That is the second part we wanted to convey. And there is no other reasons why we have purchased that. And the third thing, even in the personal case, the way we have -- this is not against loan against shares. So this is collateral against shares. I think this is what we wanted to make a statement. I don't think we can go beyond that.
So as per the current setup, you do not foresee any situation wherein…
That's exactly the point we wanted to say.
Next question is from the line of [ HR Bala ] from Finvest Advisors.
Thank you for these good results, and your initial remarks are also very encouraging. I just wanted to know that over a period of longer time, maybe 4, 5 years, will we still remain in the auto vertical, or do we have plans to get into some other verticals also? That is my first question. Second question is, if you can just throw light on some of the deals which you have mentioned, you have just quantified one deal, $50 million, 5-year from a European automaker syndicate taken programs. But there are still some more. So what kind of revenue visibility do they provide till FY '21, subject to, of course, all these development and next few years.
So basically, when we are looking at automotive and mobility as a vertical overall business, I think there are many factors to it. I mean most of our business has been in the passenger car born so many years. Now we have brought in a focused on commercial vehicle. And as you can see that during last year, actually, we grew reasonably well into the commercial vehicle part. And we believe while there is a good enough headroom for passenger car itself, plus now the commercial vehicle is something which we want to really brought in more focus. And as you might have heard that autonomous and some of these technologies will become more relevant into movement of goods. So I think that sector even though -- even for some time during this year will be, if I were say will show lesser growth over the period, that will invest into the technologies because they have a stronger business cap actually as compared pass car. And the third is the new mobility, as we call, and there are many areas into new mobility. So we believe that all these 3 areas give us a significant area for growth. Apart from that, there are many other areas which are coming. So the way we are looking at is, how we can improve the pie of what we do today. So while we believe that there is a significant headroom in terms of our current strategy, which is to focus on T25 because all of these customers spent hundreds of millions of dollars, if not a few billion in terms of technology, depending upon the customer. I think we may want to expand a little bit beyond T25, and we are exploring which customers, and specifically in the area of new verticals -- new sub verticals we are talking about, like commercial and others we can add. That is one part of the business we are looking at -- the growth area. The second we are looking at is in terms of really, what we see is many of these customers had a tendency in the past to really -- they have grown many of these -- in these areas very traditionally. And I feel that -- so we feel during what we have done in last few years and specifically, after bringing a very sharp focus into our positioning because probably one of the very few companies which is focused on software integration, we believe that our ability to really go back and reflect the traditional model is significant. It will take some time, but that's kind of an opportunity exists for us. The third thing we believe is, there are areas in terms of some other companies like, in semiconductors and in telecom, who have connected with the automotive industry, and they are trying to play certain services, specifically in case of connected as well as in autonomous. So in these areas, we can work with some of these customers in that part. And last but not the least, I think, we can build a significant partnership with many new generation companies who are again trying to play in this game, which includes something like Microsoft or you can say, Amazon, those kind of companies. So we believe that overall, the pie is much more. We believe our positioning in exchange has come. So we should be in a position to really work with these opportunities in the year.
Globally, also, this COVID-19 has been -- I mean -- COVID disaster. So do you think our major customers, the programs, as you said in your initial remarks, that some of the programs, et cetera, might be deferred or something like that. So can that affect over a period of 1 or 2 years?
So what we mentioned is basically this impact has been -- while, of course, that COVID impact is globally. And as we said that we do not know how it will pan out over the period. But in the initial time, this impact we have seen -- which impact we have seen is in U.S. and U.K. And now we are not saying that it will remain limited there. We are not making any statement like that. But we believe that even there are -- actually we believe that our some of our value proposition may be more relevant, though, it may take a little bit more time to go back to customers. That's how we feel. Now last, but not the least, you asked about the large deals. So I think, as Mr. Pandit mentioned, I think major area remains electrification, where we see a significant growth. We see growth in autonomous, and we see growth in connected. In these 3 areas, we see deals, which are new deals which are coming up. And that's where we see opportunity going forward.
So overall, what kind of revenue visibility do you see like, 50 million is one you said 5 years, now it might get extended because of several factors, in all these new deals which you have got put together should give you what kind of revenue visibility. So maybe around developed in 3, 4 years?
Actually, I won't go into that number. But I must say that most of these deals are of a similar size and going across multiple years. So that basically is the change which we have achieved, and there are many such conversations which are going on.
Okay. Last question from my side. Why is the U.K. Europe profitability is so low as compared to U.S., whereas the revenue level is almost same.
Sorry, I -- Europe, profitability.
Europe profitability. Yes.
So you can see the change over the period, but I think, we basically thought that, while we are trying to establish ourselves as the leading player in this area, apart from India, we developed this, we established a center in Germany. I think I've been saying that. Actually, we have a campus, which has come up there. And we believe that, that allows us to really build a very key space and domain knowledge, which is difficult to build otherwise. And that investment, along with some of the core technical knowledge in the new upcoming areas, both electrification and autonomous, that is the investment we've made in the Europe. That's why that profitability looks less, but it is something which you will see a difference going forward.
Okay. And just a last question for my side, if you can just permit me. As far as our geographic presence is concerned, which geographies do you think will show higher growth in years to come?
This is Sachin Tikekar. As you can see the trend, Europe is -- especially Germany is the country that drives the future of automotive and mobility. And that's where we're actually expanding our presence and that too we've been making investments for the last few years. And we will continue to see growth coming from Europe over the years. We also believe that there is going to be growth from Asia, whether in Japan, and some of the other developing countries within Asia. That's where the growth will be. And as U.S., I think U.S. is our sort of very dependable geography, very steady and profitable. So the combination of the 3 geographies from the long run perspective will pan out really well for us. It will sort of give us a good balance. That must actually see growth back going forward for years now. Does that answer your question?
Yes. That answers my question. And I think when you look at the EBITDA margin higher than 15%, 16% because of work from home, you will be saving on lot of overheads and plus other cost containment measures which you have taken. So how do you see the EBITDA picture?
We will not be in the position to right now say this Basically, we'll have to see how things change. Of course, I already mentioned about consolidation of facility and other things that made. I would also request some other questions actually coming. I think you're already taken 5 question.
[Operator Instructions] Next question is from the line of Nitin Padmanabhan from Investec.
And congrats on the last deal. May be [indiscernible] 2 things. One is, if you look at the conversations that are happening with clients, are you seeing any shifts or reprioritization of things, maybe if you could give some color from a geography perspective, would be helpful. Or do you think that post -- once we come out maybe 3, 6 months down the line, you could actually see some shifts or if we haven't seen it yet.
Okay. This is Sachin Tikekar, again. Obviously, the entire automotive industry and mobility has been impacted. It's been only 2 months before clients can actually assess the overall impact of this situation. They are trying to prioritize as Mr. Pandit said earlier on and Mr. Patil reiterated, the areas that are getting prioritized over the others at this point, electrification, EV and Mr. Patil spoke about Connected led by Digital Cockpit, right? So these are the 3 areas being prioritized as automotive companies, OEMs respond to this situation. They are definitely being prioritized over all, the other programs and other strengths. That's the immediate response that we see from them in the last 2 months. We have reasons to believe but that may continue in future. There is no reason for us not to believe that going forward. In Europe, obviously, electrification, there is a commitment and it's been reiterated. We'll see more and more of that. I think AD ADAS part, again, Europe is the leader. U.S., Asia has picked up. And Connected, I think, is going to be across all 3 levers. Again, we are taking a longer-term view. We are not talking 1 or 2 quarters here. You asked about the general question, I'm giving you a general answer over a period of time. Difficult to speculate what's going to happen today and tomorrow. Things are, as you know, what the world is going through. So things are fairly dynamic, but these -- some of the trends over a period of time will remain the same. Does that answer your question?
Yes. The second one I want to ask was, until now, we haven't seen any impact from a pricing perspective which has largely been on the volumes. But do you think that our portfolio is relatively more resilient to any pricing drop, considering the shortage? Or do you think that could be a potential risk, as we go through the year as the automakers see some sort of headwind. Is that even a risk that you all would even worry about?
Okay, we all of us need to understand what automotive mobility and some of the other industries are going through, something that nobody has actually seen. There is a tremendous amount of deep pain. If our responsibility to demonstrate empathy while we are going through this very difficult process, correct? So we are working with them to make sure that our long-term value proposition doesn't get diluted. But in the meantime, if you have to support them, get through the difficult period, we'll make those adjustments. But we'll ensure that our long-term value proposition "pricing" in some case, doesn't get, diluted, right? I think that's really -- that's how we are engaging with our clients, and that's what they actually appreciate about the deal.
Just to add to what Mr. Tikekar mentioned. I think one thing we see that, clear opportunity to do more offshore than in the past. And basically because the remote working has -- even though, it looks very intuitive, but now the realization has struck that, given people who were on site were working remotely. And that has given a different dimension. So people are more open -- one, in case of a critical program. So we do not want to rush immediately because our first priority is to make sure that we deliver well and -- but we certainly see an opportunity to move more towards offshore.
Sure. So I'll just sort of press a bit on this is [ classic ] conversations see some trouble and now, let's say someone does ask for some kind of a cut. Now 1 -- 2 ways -- the way to think about it is to try and push them to say that, we could potentially do this offshore. So let's just convert this offshore. Or would you see clients really pushing for onetime discounts of that sort? Or that's not something that's really happening at this point?
Right now, I think the focus is on doing more with less. And I think our ability to do things for them globally. There is enough on the table that can be delivered through our global centers, that can create more value for them, for the money that they're already spending. And that's how -- those are the consistent conversations that we are having with the clients. Given our positioning in some of these areas, we really don't want to get into the pricing conversation right now. So we are trying to -- and I think -- by engaging in the sense, we are able to find the middle ground.
Great. Just one last one from me. In terms of the deal pipeline that we have, how large is the pipe today and versus what could have been earlier -- we just converted one, just your thoughts on the deal pipeline, how it looks and…
So overall, to be honest with you, Mr. Pandit said that at the beginning of the year, the pipelines of grade, Mr. Patil said, we are actually getting ready for a -- a similar year to last year in terms of our growth both in top line and bottom line. And -- so the pipeline per se relate to the [ defense ]. It's just that COVID has put everybody into a dilemma in terms of prioritization, that's what our clients are doing. We have not heard of any of our large deals being completely taken off the table. What we are seeing is, we are postponing and prioritizing some of these deals. So the pipeline is not going away anywhere. It is remaining, I think it's going to take little bit longer. And at this time, it's hard to speculate how much longer, right, as you would understand, is the case, not just in this state, many other industry.
[Operator Instructions] Next question is from the line of from Ashish Aggarwal from Principal Mutual Funds.
Yes. So just wanted to understand on the margin front. How should we look at your profitability in FY '21, given the steps you have taken? And secondly, just pressing some points on the pricing side. It's almost 2 months into the quarter. Do you have your clients asked about the pricing that which could have an impact on your growth going into first half?
Okay. Mr. Pandit laid down our priorities for the year. #1, he made very easy with our clients. We have more value for them and deliver excellence. That is our #1 goal for the year. Take care of our employees, make sure our top -- key employees remain committed and remain very, very liquid, not only for the short run, but in the long run. That's our focus. So that's the answer to the question about the margins. We will not say anything more than that on the margin side. What was your second question?
My question was on the pricing side. Has the clients asked for it till now? Or do you believe they will…
I thought we are handling questions right here. I think if I understood your question about creating more value, doing more with less. We are not entertaining any discount or pricing conversations at this point in time.
Okay. And lastly, on the -- one thing which we mentioned was that there might be a higher credit period in as for the clients and everything. We have done a good work, reducing our better days to 63 days. How much increase that would happen going into first half, because of client, I assume would take…
See. Again, it's all going to be depending upon the revenue that we get blocked. As you know, the DSO is dependent on the revenues -- revenue and the cash benefit that happened. At this point of time, putting a number is not correct. We will, as Mr. Pandit and Mr. Patil mentioned, as we see a little bit of a drop in revenue, the first half would see a certain amount of our DSO going up, not because of the cash machinery not working, but because of the base becoming a little bit lower. But we anticipate that, as of today, with all our clientele puzzle, elections have been pretty much in line. Even as we have passed into the last 2 months, was the completion of the financial year. We are not seeing any places whereby our collections have been delayed. The clients have been pretty much committed to making the payment for all our invoices that have happened.
Yes. I may add that in a couple of customers, we have extended credit period onetime for next couple of quarters, but that is not a very significant part. But I just wanted to bring it out. As Mr. Tikekar mentioned that we had to support during that same period. So in a very exceptional situation, we have extended that. It's not something which is very significant.
Next question is from the line of from Karan Uppal from PhillipCapital.
Yes. Just one question on your T25, Top 25 accounts. The concentration remains pretty high at 80% plus. So any stress do you foresee at the moment in FY '21 because of this T25?
A very good question. And this is something that we are monitoring at least twice a week. We -- again, we are committed to our T25, they are committed to us. That's why we call them T25. However, given the magnitude of what's happening in the world, there are obviously some risks in terms of some of the OEMs and some of the Tier 1s. So we need to be very mindful about that and be proactive about it. Yes. Mr. Patil actually mentioned that we are actually are in conversations with some Tier 1s and some of the other OEMs that are not part of the T25s as a potential backup to 2 or 3 that may be addressed. So we are continuously monitoring our relationship and index with the T25. And we are just trying to be prudent. There are going to be some risk with 3 or 4 of them. We hope that they come out of this successfully. But just in case they struggle, we are creating a pipeline of a few others who can potentially replace them.
But just to add, I must say that, it is more of a strength for us. T25 strategy is more of a strength because most of our key customers are doing well. We have established ourselves very well with them. So we see actually more opportunity, and in case of a consolidation, more business coming to us from these customers. So while we are looking at a situation where, if some of them struggle, largely in most of the other customers, like 80%, 90% of the customers, we see this as a threat, which we have.
Okay. Sir, just one thing on the 3 to 4 customers, which you mentioned, could you just throw some light on how much revenue they contribute? Any average would be…
I think -- we wanted to present a macro picture of the automotive industry in such light? Anything of this magnitude, there will be a turmoil for 10%, 15%. We don't have any specific -- we just have to be mindful. If something happens, we need to have a backup. That was -- that was the intent behind it, rather than having specific clients in mind.
[Operator Instructions] Next question is from the line of Dipesh Mehta from SBICAP Securities.
Sir, a couple of questions. First, about top clients, whether we have seen any -- their strategic program on electrification or, let's say, [indiscernible]. Seeing some kind of deferment or considering where crude oil price is, and difference from medium term, not very short-term from quarter or two, but from their overall thinking perspective, medium-term challenges in terms of how they want to spend, where they want to spend? Second question is about connected vehicles. Connected vehicles which we reported as separate segments, showing weakness throughout the year. So if you can provide and that is one of the focus areas, so what is driving weakness there, even through COVID times. So if you can provide some perspective? And the last question is revenue launch. We have indicated around 1.5 percentage revenue growth in Q4 because of COVID. So how much it was towards supply and how much was demand, if you can show at that perspective?
So sorry, my apologies, we'll have to take one question at a time. I can't remember all 3 questions. Can you just ask one question, we'll go one by one. Can you ask the first question first, please?
Sure. So just on the top…
24/7, so it's affecting our memory. Please just give us one question at a time. Thank you.
No issues. Just on the first thing about the top client overall strategic program, whether you expect their strategic program to have some medium-term implication, not for a quarter or 2 kind of thing because where crude oil prices and changing overall crude priorities. So electrification, autonomous, if you can provide some -- whether you can have implication on medium-term priorities?
If you take the medium term, the answer is, we really don't see net of impact, especially on electrification, everybody is actually committed. And many of our key clients are actually demonstrated their commitment in the case of COVID. So we believe that, that will continue to grow. The ADAS part, there is more focus on ADAS production programs. So we have not seen any kind of changes on the ADAS production programs, especially for the next 2 or 3. So the medium-term trend regarding electrification, AV, ADAS and Connected, driven by e-cockpit. We really don't see -- we think that most of our clients will continue to -- we don't see much of a shift there.
Your question was about the top customer. I think absolutely we see actually a significant traction. We will not go into details, the customer specific. But in the public domain, there is enough information of key OEMs really committing to this. So we see actually, certainly, more emphasis on electrification, specifically in Connected. In autonomous, as Mr. Tikekar mentions, ADAS is what they're focusing on. Some of the AD programs are a little bit paced out. That is the only thing, in case of our key customers.
Understood. The second question was about Connected Vehicles. Connected Vehicle, is the segment which we report is showing weakness throughout FY '20, even pre-COVID. So if you can provide some perspective, what is driving weakness there?
No, I think it's a fair point. Year-on-year, yes. You have to remember that we probably had the highest growth according to previous year to last year in Connected. There were 2 really large programs that were onetime programs that talk over. We believe that there is also a shift from traditional infotainment and cluster to e-cockpit. And those programs are getting rolled out now. We are engaging very deeply with our key OEM clients as well as Tier 1s to drive. We believe that we'll see growth coming back over a period of time, driven by e-cockpit, or basically cockpit, right? So it was one time. And if it was not for COVID, we are getting -- we were actually getting very progressed. So again, mid to long term, we are putting our bets on Connected.
The other thing I may just mention is, these are also very large program and long-term program. It takes some time to -- for the closure. So it may take some time. But absolutely, this is area of focus and this will get prioritized by our customers.
So whether the -- in Connected Vehicle, it is a few clients, which is where we are working on their program or it is fairly diversified. So if you can help us understand how to, let's say, Top 25 key focus areas, what will be the presence across our identified areas? Electric ways, and how many clients we might have already penetrated? So if you can throw a debt perspective, it would be helpful for us to understand better?
So we'll tell you what our goal is. We have a simple metric. We have 25 clients, and there are 3 large service areas. Some of them are green for each. The point is over the next 3 to 5 years, all of them needs to become green. That's what strategic relationship is all about. And I would say that, a majority of them, I'm using the word majority, we work with T25 across the 3 areas and some more, obviously.
Yes, okay. And the last question was about revenue loss of 1.5 percentage in Q4, which we indicated. How much was supply? And how much was demand led factor?
If I understand your question correctly, see, when abruptly across countries, across continents there were lockdowns announced. There is a disruption. And this loss of [ flood release ] only because of the disruptions that happened because of the sudden closure of geographies gone better. Even though we have competitively small presence in China, China was in complete lockdown for the entire quarter. And for 15 days, most of the world, actually that is relevant to us, when during the lockdown. It was due to that. Does that answer your question?
So broadly, you're indicating it is largely supply. Demand is likely to play out from Q1 onwards?
Yes. See in my initial comment, I talked about 15% drop in revenue that could happen over the year.
[Operator Instructions] Next question is from the line of Ashish Kacholia from Lucky Investment Managers.
My question is basically pertaining to our EBITDA margins, which we were envisaging before this COVID thinking along. Could you give us any sense on what was the EBITDA margin that you would have thought, we could have done in 2, 3 years, before this COVID thing came along?
Yes. So I think we had mentioned that before the COVID, we had talked about somewhere between 16% to 18% in 3 years. This is what gained our attention. And we would have won the bet.
Okay. So any changes in the pricing, et cetera, currently, which can -- I mean, 1-year we may get obstructed by a lower capacity utilization, but the next year and the year after that can become…
I don't say [indiscernible] otherwise, no fundamentals are changed. But this year's disruption, we cannot really air.
Sure. Assuming that this COVID thing passes away and things get back to normal, we can hope to get back to our that kind of a margin trajectory.
Yes.
[Operator Instructions] Next question is from the line of Rahul Jain from Dolat Capital.
So my first question is, what are the key changes in industry trend that you may see post COVID, kind of environment? Do you have current conversation with them? And also from your experience from previous cycle, such as, maybe, industry consolidation risk, and pain in the shared mobility trends probably or more investment in the autonomous, do we see some major changes or just affects under this [ stair ] case?
I think Mr. Pandit covered some of this in his initial remarks. So one is -- and again, early days, but we believe that electrification across will be key because it's good for the environment. People have made commitments to it. I think it will continue. Autonomous, I think may get accelerated little bit more, because people would want individual mobility rather than shared mobility in the immediate future, especially against the public transportation. So we'll see that. We'll see -- we believe that there'll be more small cars. Maybe the -- in developing countries, the 2-wheelers they may go up, especially electric 2-wheelers and so forth. These trends are very obvious. And from Connected perspective, whether it's connectivity inside the car or inside the vehicle or outside the vehicle, e-cockpit and all the other Connected services, that trend, again, is not going to get reversed. So as things come back, I think these 3 trends will continue to be there in a different form because of what we are going through at this point in time.
One small addition, if I may do. But in the short term, we may see reverse trend from shared mobility, that may get impacted for some time.
Yes. And shared mobility has 2 aspects. It's the mobility of people, which Mr. Patil is referring to, where there could be a little bit of fear, right? But when it comes to shared mobility, where movement of goods is concerned, we believe that, that's going to pick up. So from our commercial vehicles perspective and so forth, we'll see a major demand. Here you've already seen the stock of e-commerce companies actually doing really well, and they depend heavily on [ communication ]. So that's another trend that we'll see.
Right. And on the consolidation part. So maybe from the previous cycle reference also, where we have seen some consolidation of share development kind of a program, which quite a companies are following. What are the risk or what are the opportunities you would like to highlight? Do that meaning, your business is some of these T25 customers collaborate better, more pivoted positive, negative or difficult to quantify?
I think we look at it as an opportunity. I think this may happen specifically in the area where there are little bit more uncertainty, and there is a lesser standardization as of now, like in autonomous. And there are already 3, 4 such platforms, which have been developed. In other cases, it is -- actually, most of the OEMs wants to own software, so that, in that sense, the sharing will happen at component level more on the manufacturing side, hardware side, lesser on the software side than most of the other domains, other than autonomous. So marginally, we see either of the way, we see a bigger role to play for us because we are playing closely with the ecosystem, both with the OEMs and the Tier 1s. So we see as a good opportunity because they are already part of certain platform development. As you are aware, we have many -- few announcements in the past. As well as in other cases, wherever the standardization is happening, again, we have been playing a good role for last 10 years. So we see these as a more as an opportunity. Because even in case where the platforms are developed, there is a huge amount of work which is done in terms of integration for individual company. And I think that gives us benefit when we are a part of a platform development.
Okay. Lastly, any quantification we could do on total cost savings through various program, [ com ] facilities and so on. Any color you would like to give on the total picture, what kind of savings we could have?
I think very difficult to quantify right now. I think, we have given more color and information than most of the others I think. This is what we are comfortable.
Next question is from the line of Ashish Kacholia from Lucky Investments.
My questions are then -- basically, sir, how satisfied are we with our traction in the American market?
Sorry, can you say it again?
How satisfied are we with the traction that we can see in the American market?
Ashish, this is Sachin Tikekar. What we described earlier on Americas for us is a solid sort of steady, high profitability and can they sell the largest? I think what we were thinking pre-COVID is, we need to look little bit more. There are opportunities that are taking place. There has been some consolidation with the OEMs and Tier 1s across geographies between U.S. and Europe. Given that and the leadership that the Europeans have taken, we were actually thinking about engaging more with additional clients from the U.S., especially, in those commercial vehicles, whether it's on-highway or off-highway. That's what we are planning, and that's exactly what we're going to continue to do. So to your question, as compared to Europe and Asia, the growth over the last 3 years was on the lower side, and we were responding to that because we didn't want our largest geography to slow down. We have taking certain steps, but now we are going through, but we believe that we'll make sure that we see more opportunities, not only on the passenger car side, but I think on the commercial vehicle side on-highway and off-highway as far as the U.S. is concerned.
Also some of the partnerships I mentioned in my earlier comments, the new generation tiers in automotive, many of them have a good presence in U.S., and we believe that, that we can leverage much better.
My other question is basically with this commercial vehicle market in the U.S. Is it a big chunk of our sales at the current point of time?
If you look at the commercial vehicles is about 23%, 24% overall, but it's obviously, since it's less than passenger car, we expect -- we were expecting higher -- I mean, just like the case last year, the growth was slightly higher in commercial vehicles as compared to passenger car. Given its size, I think the growth will be -- growth rate will be higher potentially.
Okay. So this 23% can go up over a period of time as a mix of our sales?
It has to. Because it's still in nascent stages. We have had focus on it only from the last 2 year. So we believe that there is the headroom is not more in commercial vehicle. But at the same time, we are aware that this year, it will be a bit slow. Commercial will be slower than the pass car during the current year.
Right. And my last question is basically, from whatever we can understand, Tesla seem to have a higher market cap than many of the other companies put together. So how are you -- given the fact that we are not probably Tesla does lot of their work in-house. Then over a period of time, do we see that the rest of the industry is in a position to respond to the technological challenge from Tesla because you guys are kind of working at the front lines. So since we are going now to be able to work with Tesla, they have their philosophy at working in-house. So how are you seeing the preparedness of the rest of the industry to kind of completely driven, actual follow up and delivery terms?
Tesla is a mystery to many, right? But it is what it is. I think they have taken the lead, they've taken some bold steps, and the market has responded really well. They do work most of the work in-house. As we believe that as in case of any large OEM, as we become truly global and large, you need to seek partnerships outside. It's not a scalable model what they have. So we believe that they'll open up. There are -- we have 1 or 2 -- we have 2, actually Tier 1s, who are our clients and who happen to work very closely with strategic manner with Tesla. So we believe that there may be opportunities in future for us to work directly or indirectly for Tesla, point #1. Point #2, all the OMEs, the Europeans and U.S. and some of the Japanese ones, obviously, they are responding very well to where Tesla is going. And for their programs, whether it's electrification or Connected, where they have a little bit of a head start over some of the other OEMS, those are the programs that we are actually working on as far as the other OEMs are concerned. And we believe that there are 2 things, some of the existing OMEs will respond really well and do compete very well with Tesla. And secondly, there are some disruptors that Mr. Patil talked about, correct? Some of the companies in Silicon Valley, all of that, they may not have their roots in other [indiscernible] but they are very strong on software connecting internet throughput. We can also make some general disruption and give Tesla a run for its money.
Next question is from the line of from Prakash Chellam from Marathon Edge.
Traditionally, capitalized a lot of your -- investor lot in your R&D expenditure. Just a question, going ahead, are you looking any changes in terms of looking at billability of your R&D team for availability of the entire sort of investments that you do in practices and so on with customers.
So Prakash, let me understand the question. You're saying that, we made lot of investments in R&D, and there are people engaging in R&D, Are we going to move those people from R&D into billables projects. Is that the question?
Yes. Kind of, but also in terms of whether you're going to look at, given and assuming they're doing good R&D work, I mean sometimes it's good to kind of engage with the customers and test it by seeing it through billable, by Jointly co-engaging in R&D with those customers. So are you looking at any billability metrics for R&D team and so on going ahead? That's the question.
And so I think one of the reasons why we are -- we have established ourselves as a -- with so strongly, it's basically our ability both in terms of domain knowledge as well as in terms of what we have been ahead in the curve in terms of when the customer wanted a new thing to be introduced. We were ready with that. So that approach is not going to change in this. But of course, there are 2, 3 things which are happening. Number one, we have invested very -- reasonably over last 3 years in autonomous, I think -- and where I think we see now many more projects and many of those people engaged as well as we have which we have the fix which we have developed. Similarly, is the electrification, where we have, again, made a significant investment. So there is a prioritization, wherein some new areas we will invest. So overall, there may be some few changes in terms of mix and the areas of work. But overall, as a philosophy, we will continue to do it. And we will see whether we can do something which we have done in the past, is some of the larger programs, whether we can do something along with some customers. But nevertheless, we will continue to do investments into -- I would say, work in terms of new areas.
Okay. And the last -- congratulations on that. Could you give us some color on how much of that you will see an impact in this year, if $60 million are in? Could you give us some sense of the ramp-up and so on? That's my last question.
Prakash again, the question is the win that we talked about of $60 million, you are saying how much of that will lead to revenues during the current year. Is that the question?
That's correct. And how it peaked that out over the next few years?
So I think we will start the transition in a month or so. I think -- so we will see some revenue in the H2 part.
Next question is from the line of Ankit Agrawal from Yellostone.
My question pertains to CapEx plans. Are you -- I think you mentioned earlier in your earlier conference call that your CapEx guidance is about 2%, 3% of sales. Is there any change to that? And if you could reiterate what areas are we planning to spend CapEx amount?
Yes. So as Mr. Patil mentioned in the initial comments, we have deferred view of our office program that we have planned for. And this year our CapEx estimation is it will be somewhere in the range of around 1% to 1.25% of the overall revenue for the commitment that we have. And it will be mostly into the areas of consolidating our operations, in certain geographies. And then certain, a lot of IT upgrade -- IT security upgrade that will be helpful.
As there are no further questions, I will now hand the conference over to the management for closing comments.
Thank you all for participating in the call. And if you have any further questions, please feel free to write to me, and I'll be happy to get back to you. So take care and stay safe. Bye.
Thank you.
Thank you. Thank you very much. On behalf of Dolat Capital Market Private Limited, that concludes the conference. Thank you for joining us. You may now disconnect your lines. Thank you.