KPIT aims to broaden focus on off-highway segment as mining industry transforms

KPIT, a leading provider of software-related products for the automotive industry, plans to shift its attention to the off-highway segment, including sectors such as agriculture, mining, and construction equipment. While the company has primarily focused on trucks in the commercial vehicle (CV) segment, it now aims to bring a sharper focus to off-highway applications. 

KPIT's major business still comes from the passenger vehicle segment. 

Sachin Tikekar, Co-founder and Joint Managing Director of KPIT emphasised the mining sector as an interesting sub-vertical that the company aims to explore in the off-highway segment. KPIT has already had strategic involvement in mining through its collaboration with Cummins Ltd. over the years. Now, with the transformation of the mining industry, KPIT believes that some of its technologies can be applied effectively. The company is carefully studying the mining and agriculture sectors to understand their challenges and develop technology solutions that provide a compelling reason for strategic partnerships with clients, he added.

Positive growth outlook amidst geopolitical tensions
KPIT's management has revised its growth outlook for FY24 (constant currency) to 37 percent or more, up from the earlier projection of 27 percent –30 percent. The outlook for EBITDA (earnings before interest, taxes, depreciation, and amortisation) has also been revised upward to 20 percent or more, compared to the previous range of 19 percent –20 percent. The constant currency metric is used to evaluate a company's underlying financial performance, excluding the impact of exchange rate fluctuations. This is particularly relevant for multinational companies operating in different countries with varying currencies.

Tikekar highlighted that the increased growth outlook remains optimistic in the medium term, despite ongoing geopolitical uncertainties arising from conflicts such as the Russian-Ukraine and Israel-Palestine situations, which may impact demand. He also emphasised that monitoring microeconomic challenges will be crucial.

Strong financial performance and growing headcount
During Q2 FY24, KPIT reported a remarkable 68.7 percent year-on-year increase in net profit, amounting to Rs 1409 million compared to the same period last year. The company's revenues also surged to Rs 11991.57 million, representing a substantial 54.2 percent year-on-year growth over the corresponding period. KPIT said that this growth was due to a wide range of practises and verticals growing. These included strategic accounts, passenger car verticals, electric powertrains, autonomous driving, and digitally connected solutions practises. The total contract value (TCV) of new engagements during the quarter reached Rs 156 crore.

Furthermore, KPIT noted that its headcount has experienced significant growth, doubling over the past three years to align with revenue growth. Tikekar highlighted that attrition rates have decreased since the previous financial year and continue to decline, making resource management more manageable for the industry, including KPIT.