Q2FY19 reported EBITDA at 13.6%, growth of 62.5% Y-o-Y, 19.3% Q-o-Q
Q2FY19 Constant Currency Revenue growth of 2.9% Q-o-Q,
Constant Currency Revenue growth of 9.8% in H1FY19 over H1FY18
Pune, October 24, 2018: KPIT (BSE: 532400; NSE: KPIT), a global technology company specializing in providing IT Consulting and Product Engineering solutions and services to Automotive, Manufacturing, Energy and Utilities companies, today reported its consolidated financial results for the second quarter and half year ended September 30, 2018.
Highlights for the quarter ended September 30, 2018
Rs. Revenues grow 6.4% Q-o-Q and 17.8% Y-o-Y
Net Profit for the quarter registers a Y-o-Y growth of 37.4%
Operational EBITDA for the quarter at 15.2%
Reassuring increase in Pipeline, led by large deals in Engineering
BMW today announced KPIT as a technology partner for Autonomous Driving
Management Comments
Commenting on the performance of Q2 FY19, Kishor Patil, Co-founder, CEO & MD, KPIT said, "The quarter gone by witnessed solid improvement in operating margins despite wage hikes, driven by operating efficiencies and better quality of revenues. We are on track to achieve our annual revenue guidance and exceed the annual operating margins guidance. The Merger Demerger process is progressing well, as per planned timelines."
Sachin Tikekar, President and Board Member, KPIT said, "Engineering and Digital revenues continue to grow at a much faster rate for us. We expect the trend to continue during the remainder of the year. We are progressing well on the business familiarization process with Birlasoft and are happy with the cultural and value similarities between the two organizations."
Quick Summary
The growth during the quarter was led by engineering, digital technologies and products & platforms.
We had a healthy operating margin improvement during the quarter led by operational efficiencies, change in business mix and aided by the rupee depreciation. The reported EBITDA margin for the quarter was 13.59% as against 12.11% last quarter. We incurred around Rs. 172 Million as expenses towards the Merger-Demerger transaction during the quarter as compared to Rs. 108 Million in last quarter. Majority of the Merger Demerger expenses have now been provided for and this number in Q3 will be substantially lower.
The operational EBITDA during the quarter, thus was as follows:
Details Unit Q2FY19 Q1FY19 FY18
Reported EBITDA Rs. Mn 1,466 1,228 3,785
Merger-Demerger Transaction Expenses Rs. Mn 172 108 169
Operational EBITDA Rs. Mn 1,638 1,336 3,954
Reported EBITDA Margin % 13.59% 12.11% 10.33%
Operational EBITDA Margin % 15.18% 13.18% 10.79%
The Profit for the quarter stood at Rs. 820.59 Million, registering a sequential growth of 6% and a year on year growth of 37.4%. The other income during the quarter was Rs. 70 Million as compared to Rs. 162 Million last quarter. There was also an increase in depreciation due to full capitalization of Phase III building in Pune.
We will continue with the profitability improvement measures to lead us to steady and sustainable improvement in the operating margins, during the remainder of the year.
Update on proposed merger-demerger:
On KPIT and Birlasoft merger/demerger front, the business familiarization process is progressing well with participation from focus teams from both the sides. The NCLT (National Company Law Tribunal) directed EGM for seeking shareholder approval for the Merger Demerger Scheme was scheduled on August 29, 2018. The shareholders overwhelmingly approved the scheme for the merger of KPIT with Birlasoft and the simultaneous demerger of KPIT Engineering business into a new company, to create two new public companies. The final petition is now filed with the NCLT for seeking final approval from NCLT which, as mentioned earlier, is expected in the next few months. Thus, so far, we are on course with respect to the originally planned legal timelines.
Business split post merger and demerger:
As we are progressing well on the legal timelines, it is important to understand the split of the businesses and the resultant businesses of the individual entities.
The Engineering Business (KPIT Technologies post demerger) will mainly focus on Automotive Vertical with embedded software, digital technologies, mobility solutions and application life cycle management as the primary practices. The Business IT Business (Birlasoft Ltd. post demerger) will mainly focus on the Manufacturing, BFSI and Media Verticals with ERP, digital technologies, product life cycle management, ADM and IMS as the primary practices.
The following diagram reflects the businesses as they would shape up post completion of merger and demerger.
kpit-birlasoft-merger-demerger
Services Update
Vertical Update
Technology Update
  • We have filed 1 patent during the quarter in automotive (ADAS) domain. With this the total number of patents filed as on Q2 FY19 end stood at 58, including 54 patents with complete specifications.
  • We were also granted 1 patent during this quarter taking the total count of granted patents to 45. The details of granted patent in Q2 FY19 are mentioned below:
Patent Number Patent Title Country Domain
10106066 Head Restraint System US Vehicle System
Customer Highlights
  • An American multinational corporation specializing in the Oil & Gas industry chose KPIT for an Oracle EBS AMS project.
  • A leading global marine and offshore engineering company, based out of the Asia-Pacific region chose KPIT for a PeopleSoft rollout project.
  • A Europe based company producing distilled beverages chose KPIT for a JD Edwards Upgrade project in the North American region.
  • A Fortune 500 company headquartered in North America, operating across a gamut of industrial segments chose KPIT for a PLM Consolidation to Windchill project.
  • The Europe arm of an Asia-Pacific headquartered company, specializing in wind energy solutions chose KPIT for PLM and ALM implementations.
  • One of the world’s largest manufacturers of doors and windows, based out of North America chose KPIT for an SAP Business Suite implementation project.
  • KPIT was chosen by a Global carmaker for its expertise within the Autonomous Driving space.
  • A leading multinational Automotive Tier 1 chose KPIT for its Adaptive AUTOSAR capabilities.
  • A large Automotive OEM chose KPIT for its Electric Powertrain capabilities.
  • KPIT was chosen by a major multinational Automaker as a strategic engagement partner in the Electro Mechanical Design Services (eMEDS) space.
Financial Update

Revenue Update

Our $ revenue for the quarter stood at $152.54 Million, a Q-o-Q growth of 1.3% and Y-o-Y growth of 7.6%. In Rs. terms, revenue grew by 6.4% Q-o-Q and 17.8% Y-o-Y to Rs. 10,788.69 Million.
Amongst SBUs, there was a significant 5.1% Q-o-Q growth in PES SBU while P&P SBU grew by 33.7% sequentially. DT SBU also registered Q-o-Q growth of 1.7%. However, IES and SAP SBU declined sequentially by 6% and 2.6% respectively.
Among geographies, Europe registered Q-o-Q growth of 15.5% while US & APAC declined by 1% and 6.8% respectively.
In terms of industry verticals, there was a sequential growth of 4.1% in Automotive vertical whereas Energy & Utilities vertical declined by 0.2% and Manufacturing vertical declined by 6.9% on a Q-o-Q basis.
The 20 top strategic accounts constituted 52.7% of the total revenues and grew by 1.8%. Similarly, the 40 top strategic accounts constituted 64.9% of the revenues and had a Q-o-Q growth of 1.1%.
*All the revenue growth numbers mentioned under revenue update are in equivalent $ terms.

Profitability

The realized rate for the quarter was Rs. 70.73/$ against Rs. 67.35/$ in Q1 FY19. The operating margins for the quarter were 15.18% as against the reported margins of 13.59%. During the quarter there was an impact of wage hikes to the tune of around 220 bps. The increase in operating margins from 13.2% last quarter to 15.2% this quarter was mainly because of operational efficiencies and better revenue mix which led to an increase of around 300 bps. The rupee depreciation this quarter as compared to last quarter on an average realized rate basis was around 5% which aided the margins by around 120 bps.
The other income was lower by Rs. 92 Million which is a cumulative effect of translation of foreign currency denominated assets and liabilities, the realized gain on debtors and the realized loss on forward contracts, among other factors. The depreciation was higher by Rs. 97 Million, mainly on account of full capitalization of new building at MIDC Phase III, in Pune.
Summarized Representative Cash Flow
Details Rs. Million
Cash Profit for Q2 FY19 1,188
Working Capital Adjustments (553)
Cash Generated from Operations 635
Fixed Assets (269)
Balance Cash Flow 366
Dividend Payment (554)
Debt Repayment (249)
Total Increase/(Decrease) in cash balance (438)
Total Net Cash balance as at Q1 FY19 end (3,303)
  • The Cash Balance as at September 30, 2018 stood at Rs. 6,096 Million (Rs. 6,533 Million as on June 30, 2018).
  • The DSO were at 77 days, at the quarter end.
  • As on September 30, 2018 our total debt stood at Rs. 2,793 Million (Rs. 3,035 Million as of June 30, 2018) comprising of Rs. 902 Million of Term Loan and Rs. 1,891 Million of Working Capital Loan.
  • Thus, the Net Cash Balance as at September 30, 2018 stood at Rs. 3,303 Million (Rs. 3,498 Million as on June 30, 2018).
Income Statements
Conference call details
Conference name
:
KPIT Q2 FY2019 Conference Call
Date
:
Oct 25, 2018
Time
:
1600 Hours (IST)
 
Conference call details
Primary number
:
+91 22 6280 1325/ +91 22 7115 8226
Local access Number
:
+91 70456 71221
Toll free Number
:
USA- 1 866 746 2133
UK- 0 808 101 1573
Singapore- 800 101 2045
Hongkong- 800 964 448
About KPIT Technologiess

KPIT (BSE:532400, NSE: KPIT) is a global technology company specializing in providing IT Consulting and Product Engineering solutions and services to Automotive, Manufacturing, Energy & Utilities and Life Sciencescompanies. Together with its customers and partners, it creates and delivers technologies to enable creating a cleaner, greener and more intelligent world that is sustainable and efficient.

Forward Looking Statements

Some of the statements in this update that are not historical facts are forward-looking statements. These forward-looking statements include our financial and growth projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our business and the markets in which we operate. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward-looking statements. These risks include, but are not limited to, the level of market demand for our services, the highly-competitive market for the types of services that we offer, market conditions that could cause our customers to reduce Their spending for our services, our ability to create, acquire and build new businesses and to grow our existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market conditions in India and elsewhere around the world, and other risks not specifically mentioned herein but those that are common to industry.

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