We see a very good opportunity in electric vehicles, says Vinit Teredesai

The company is focussing on auto engineering and sees a good opportunity in electric vehicles going forward, says Vinit Teredesai, chief financial officer (CFO), KPIT Technologies. In an interview with Swati Khandelwal, he also said that slowdown in global companies has not directly impacted the company and is confident of meeting the guidance.

Edited Excerpts:

What are your plans for the listed automotive engineering segment?

Our company is currently focusing on auto engineering, but we term it as Mobility instead of auto. In fact, we are concentrating on areas that can take a person from one place to another. We have a focus on passenger cars at present, which also includes commercial vehicles, tractors and heavy equipment as well as shared mobility like Ola and Uber. We have a strategy to service in five areas like electric power train, autonomous driving, infotainment, software architecture (we term it as AUTOSAR) and diagnostic and security. Interestingly, 70% of original equipment manufacturers (OEMs) are our customer and we act as a tier-I supplier for the remaining 30% and work with them in the vertical. I think the mobility sector will see a significant change in the next 3-5 years. In the process, more electric vehicles will be joining the league and you may see autonomous driving features. I think this will act as a good opportunity for our company and we are focusing on the same.

How much margin do you enjoy currently in this segment and do you see any incremental upside in it?

Blackout period is still on and that is why I will not be able to talk more about it. But if you look at the auto industry in terms of information that we provided before the demerger in January, then we have grown by 30% in this area. Apart from this, our profits and Ebitda were a bit low but we are working on this. Similarly, we also provided guidance for the next year in January and said that we will grow by at least 20%, Ebitda will be around 15% and EPS will hover around 6-7%. So, we stand by the target for 2019-20 that was earlier projected. Besides, we will be able to provide clear guidance and area wise performance only after the quarter results are declared next month.

Has the demand slowdown in the auto sector impacted your order book and how are you looking at it in the near future? Also, update on the existing order book?

See, we are not in a business that is directly linked to vehicles that are on road, and we always work on a 3-4-year program. So, the downturn that is visible on the sales of global companies is not having any direct impact on our company. This is a period when leading global companies invest in R&D to make themselves ready with their products during the upturn. So, that is why we haven't seen any direct impact on our business. Our revenue is not directly linked with the sales and we work on an outlook of 3-4 years. So, we are not in a situation that can create problems while meeting our guidance.

Who are your esteemed clients and what percentage of your revenue comes from the domestic and international market?

We have a very low presence in the domestic market. We are mainly associated, almost 95%, with the international players but are trying to increase our footprints in India within the focused area. As far as the breakup is considered then passenger cars have a contribution of about 80% in our business. Apart from this, we are also linked with tier-1 suppliers who are engaged in supplying key components, which must be embedded with the software. But, we want to relate to 25 companies that talk about the growth, have an outlook and are working on advanced technology and contribute maximum in almost every part of their concept.

Please explain the amalgamation scheme and price (Rs 66.5/share) at which you are bringing out the open offer for 26% stake?

The amalgamation was announced in 2018 with a scheme under which Birlasoft, which was a privately held company, will be merged with KPIT Technology. Later, Auto Engineering company, that has been listed now, was separated from the merged companies of KPIT Technology. Under the process, some shares were issued to the two promoters and an agreement was reached that after some time, IT service company will be headed by the management of Birlasoft and they will have a shareholding in the company while auto engineering company will remain with the promoters of KPIT. The open offer has been issued to buy the shares that were issued to Birlasoft in the process of merger and demerger. These shares will be purchased by the promoters of KPIT.