Vinit Teredesai, Chief Financial Officer (CFO), KPIT Technologies, speaks about automotive engineering segment, margins of the company, the impact of the slowdown in the auto industry among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts: 

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Q: What are your plans for the listed automotive engineering segment? 
A: 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. This is our complete span, as it is changing. We have a strategy to service in five areas and they are electric power train, autonomous driving, infotainment, software architecture (we term it as AUTOSAR) and diagnostic and security.

Interestingly, 70 per cent of original equipment manufacturers (OEMs) are our customer and we act as a tier-I supplier for the remaining 30 per cent and we work with them in the vertical. I think that 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. 

Q: How much margin do you enjoy currently in this segment and do you see some incremental upside in it? 
A: Blackout period is still on and that is why I will not be able to talk more about it. But would like to say that if you have a look on the auto industry in accordance to the information that we provided before the demerger in January that we have grown by 30 per cent in this area. Apart from this, our profits and EBITDA were a bit low but we are working on this. Similarly, we also provided our guidance for the next year in January and said that we will grow by at least 20 per cent, EBITDA will stand around 15 per cent and EPS will revolve around 6-7 per cent. So, we stand by the target for the financial year 2020 that was earlier declared. Besides, we will be able to provide clear guidance and area wise performance only after the quarter results are declared next month. 

Q: Has the demand slowdown in the automotive sector has any impact on your order book and how you are looking it in recent future? Also, update on the existing order book of the company?
A: See, we are not in a business that is directly linked to the 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 global leading companies invest in R&D to make themselves ready with their products for 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 3-4years. So, we don’t have any situation that can create problems while meeting our guidance. 

Q: Who are your esteemed clients and what percentage of your revenue comes from the domestic and international market?  
A: We have a very low presence in the domestic market. We are mainly associated, almost 95 per cent, 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 per cent in our business. Take the name of any global company and you will find that we have some engagement with them. In fact, we have advanced level engagement with a couple of big companies. Apart from this, we are also linked with their 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 talks about the growth, have an outlook and are working on advanced technology and contribute maximum in almost every part of their concept. 

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Q: Please explain the amalgamation scheme and price (Rs66.5/share) at which you are bringing out the open offer for 26% stake?

A: 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.