Ravi Pandit, co-founder, chairman and Group CEO, KPIT Technologies, speaks to Sumantra B Barooah about the growth strategy for the company after its rebirth with the re-listing in the stock exchange on April 22.
This listing virtually marks a new beginning for KPIT. What are the three key areas or key pillars on which the new KPIT Technologies is built and will grow from here on?
I will look at it in two to three perspectives. One is the overall strategy focus, then the technology focus and the customer focus. The overall strategy and focuses, as our vision says is 'Reimagining mobility with you'. So the focus is on the mobility industry, which includes passenger cars, commercial vehicles, and some mobility as a service provider. That is really the core focus.
From a strategy perspective, this is what we want to work on. One of the main reasons why we wanted to go for this restructuring, merger and demerger is to bring our focus and attention to this defined area, which is seeing very high growth. You would have noticed our growth in this area has been quite impressive in the last two to three years. We see that this will continue to grow.
The second part is the offerings part. Our offerings are around automotive engineering but within that, it is actually more on the software side than on the mechanical side. In our case, 90 percent is electronics and remaining 10 percent is actually electro-mechanical, nothing purely mechanical. What that means is that working on the powertrain, if it is conventional powertrain, then electronics controls in engines, a lot of work on new electric powertrains, ADAS and autonomous areas, connectivity, diagnostics, in-vehicle networking and underlying technologies like machine learning and artificial intelligence. That is really like the services focus.
The third part is the customer part. We want to focus on a few big customers in the world. Currently, if you see 10 out of the top 10 automotive passenger OEMs, they use either our services or software in their operations in Germany, UK, Japan, China and the USA. So, wherever there is a new automobile being created, that is our area of operation. We are looking at some top customers with whom we can have a strategic relationship, which means that they consider us to be strategic to them and we consider them to be strategic to us. I would say the three elements are strategy focus, practice focus and customer focus.
KPIT is now exclusively focusing on automotive software, which indicates that you are getting really very big on the large scale adoption of software by OEMs. To what level do you expect software penetration to grow in vehicles?
Currently the value of electronics in a car has already crossed 50 percent. If you look at all the new innovations that are happening inside cars, almost 90 percent of that is driven by software. I believe that a lot of new things in this domain are going to be software-driven. Whether it is connectivity between the vehicle and the environment, between one vehicle and another vehicle or between the driver and the vehicle, all of this is electronic. We see that this could be a very major area of growth.
At what rate do you expect the company to grow in terms of top-line and bottom-line?
We believe that a 20 percent growth plan should be doable. We believe that the bottom line of EBITDA of maybe 18 percent in under two years’ time; around 15 percent this year is very doable. I think we should see growth both in top-line as well as in margins. But you have to remember that we invest a lot of money in R&D (5-6 percent of total revenue), and in platforms.
When you talk about electrification, you had developed the Revolo hybrid solution but it didn't take off for various reasons. Would you relook at similar concepts or solutions like the Revolo?
Revolo is now being manufactured by an OEM and is now entering the market as a fully electric bus. We started as a hybrid. And, now interestingly enough, people also want to have it because people have realised the benefits of electric charging. The full solution is ready.
Prime Minister Narendra Modi takes a look at the Revolo-retrofitted electric bus at Parliament House, in New Delhi on December 21, 2015. Photo courtesy: Press Information Bureau
So if there are takers, then you are ready to supply?
Our full-electric bus has been in operation for almost one-and-a-half years and has delivered exceptionally good performance. This is focused not on the cars but also shared mobility and that is going quite well. We believe that there is more work to be done in some emerging areas. But we don't want to be hardware makers, we want to partner with those. For example, if you look at the bus, we don't make the bus or the batteries. However, what’s ours is the BMS, motor control, the ECU for charging, discharging and the software is ours. The ECU is somebody else's.
We want to be software-focussed and on hardware, we will work together with hardware makers to give a combined hardware-software solution. But don't expect us to make hardware. There are enough people who are doing that well.
Autonomous driving tech is also a key focus area for you. But it seems like full autonomous driving not be a reality as per the earlier goals stated by some industry experts. Many are maybe tweaking their vision for this technology. What is your view?
You know, the initial thought was that autonomous would come before 2025. Everybody recognises that it – Level 5 automation will not happen before maybe 2030. But I'm convinced that autonomous will happen, there is no doubt about it.
In India, it may not happen that fast. I believe in India you have to look at autonomous-like features. From a safety perspective, there is enough work in that and we are actually doing a fair amount of work in that area. How can you make driving safer? It should reduce the number of deaths on the road, both the drivers as well as the pedestrians, should be the focus.
So, it could mean more like inch control, which is where you are helping somebody to drive in a more relaxed manner in very dense traffic. He/she can read a magazine if he/she wants and the car will drive on its own, provided the speed is less than 20 kilometres per hour. And as soon as the traffic kind of eases out, he/she takes control. So engine control is possible, alerts are possible. And all of that will need a different kind of a platform, very relevant to India and very much based on the Indian road experience.
Now that you have realigned your focus to be a mobility software-only player who understands software better than any automotive player and automotive better than any software player, do you also see KPIT Technologies making any inorganic moves, maybe acquiring any niche players?
We will be very strategic in that. We will definitely look at it. But we don't want to look at just top- line growth. We will do it only when it brings us some critical new practice or critical new customer or enhance our footprint in a customer or in a practice when we look at it.
Also read: Ravi Pandit on 'Overcoming challenges to usher in a green automobile era'