Tech Mahindra made a surprise move in semiconductor engineering services. The company is to acquire Cerium Systems, a Bangalore-based semiconductor design and embedded systems specialist. Cerium has a headcount of 840 and revenues of ~USD 15m in FY19 (ending
LLTS’ revenue growth in Q3 FY20 decelerated from 11.9% at CC in Q2 to +7.5% in Q3. The company was hit by a deteriorating situation in its Telecom & High-Tech (-26%), which was impacted by the ramp-down of two clients in its Semiconductor sub-vertical that represents (we estimate) 40% of its Telecom & High-Tech sector. LTTS, also, had flat growth (+2%) in its Industrial Products, with large accounts reducing their spend.
Wipro announced a mild growth in the revenues of its Industrial and Engineering (I&E) business unit in Q3 FY20: I&E revenues were up by 3.1% only (to USD 151m). Revenues included a small contribution from the recent ITI acquisition and were impacted by the market conditions in the semiconductor industry and softness in 5G adoption.
Automotive engineering pure-play KPIT continued on its growth momentum in Q2 FY20 (+15.2% yoy), enjoying a satisfactory EBITDA margin of 13.4%. KPIT’s financial performance was, however, a notch below that of Q1 both in terms of revenue growth (Q1: +19.3%) and margin (14.6%).
HCL Tech’s ERS accelerated its yoy growth in Q2 FY20 to +15.0% at CC, from +13.3%. Its EBIT margin also increased from 16.0% in Q1 to 21.4% in Q2. The financial improvement results from mostly a catch-up effect: ERS recognized revenues in Q2 that it could not in Q1.
During its Q2 FY20 earnings call, Wipro provided some light about the performance of its Industrial & Engineering Services (E&IS) unit.
It is not so long ago that Wipro was corporate India’s strongest name for ER&D services, mostly servicing clients in the network equipment provider industry and also semiconductor manufacturers.
KPIT published its Q1 FY20, its second quarterly earnings since it became an automotive ER&D pure-play, since the sale of its IT service business to Birlasoft, last year.
We missed an important acquisition that QuEST Global announced at the end of June. QuEST has acquired Dakota Moon Enterprises (DME).
HCL Tech has closed the acquisition of several IBM products. The company has now ownership of AppScan, BigFix, Commerce, Connections, Digital Experience (Portal and Content Manager), Notes Domino, and Unica. We assume the price of the transaction has not changed and still is USD 1.8bn.
Cognizant has been making more headlines in ER&D services, recently. Last month, we had mentioned its software product engineering services (PES) contract with PLM vendor AVEVA. This week, we are looking into Cognizant’s planned acquisition of Zenith Technologies. Zenith
We had to look back into our database to identify when Wipro had, for the last time, acquired an ER&D service vendor. In 2005-2006, Wipro acquired three ER&D services (Saraware, NewLogic, and Quantec) around semi-conductors and PLM services. And then, nothing for the following thirteen years.
HCL Tech’s ERS unit posted an excellent growth of +12.1% yoy at CC. The growth positioned ERS as the second fastest ER&D services vendor (among top ten vendors) behind Alten, ahead of Altran. ERS’s growth is, however, slowing from its peak of +47.7% at CC in Q3 FY18.
KPIT published its first results since its IPO, as India’s third-largest ER&D services pure-play. Growth slowed down significantly in Q4 FY19, revenues up 13.4% yoy to USD 71m. The company’s EBITDA margin was 12.8%.
LTTS continued to be impressive in FY19: the company grew revenues completed by 26.5% at CC (almost purely organic) to USD 723m. LLTS has now taken over Cyient as India’s largest listed ER&D pure-play.
Last week, KPIT Technologies, returned to India’s BSE and NSE. The company now has a market cap of approximately USD 410m with its share was introduced at a price of INR 99 and traded in the past few days between INR 103 and INR 115. KPIT has succeeded in its IPO and is now an ER&D service pure-play having sold its IT services business to Birlasoft.
We are now entering the season for Q1 earnings, and as always we will look into changes in major trends. The state of the automotive industry will be an area we will be closely monitoring.
The revenue growth of HCL Tech’s ERS unit continued to be high in Q3 FY19 to 17.4% yoy at CC. Revenues well above the half-billion threshold, to USD 562m, comforting HCL Tech as the third largest ER&D service vendor globally.
KPIT quietly finalized its merger with the privately-owned Birlasoft. The new company is now called Birlasoft and will be an IT service pure-play. Birlasoft has carved out its automotive engineering business that will be called KPIT.