KPIT’s first results since its IPO

/ May 18, 2019/ Financials, India, KPIT

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%.

The good news is that KPIT’s full-year FY19 earnings were outstanding: revenues were up by 28% to USD 271m, and its EBITDA margin reached 11.5%. Europe was particularly buoyant, with a 39.4% growth. KPIT now has a headcount of 6,613 and its cash balance at the end of the financial year was INR 900m (USD 13m).

KPIT’s guidance for FY20 implies a significant slowdown in revenue growth (16% to 18%) and a significant EBITDA margin improvement of 14% to 15%. We are still getting acquainted with KPIT but we suspect the slowdown in revenue growth and the margin improvement will result from large contracts being relocated from onshore, and in particular Germay, to India.

KPIT has bold financial objectives. It wants to reach revenues of USD 500m in the next three to four years and targets an operating margin of 16%-18% in the next three years. To achieve these goals, KPIT has several strategic levers:

  • A commercial focus on its top 25 accounts (~76% of revenues), targeting passenger cars, commercial and off-highway vehicles, and new mobility services
  • Investments onshore, especially in Germany
  • A service portfolio push on new offerings, i.e., autonomous, electric and mobility. KPIT wants to complete its exit of the hardware business, something the company has progressed, with the January sale of its telematics hardware business to Minda Industries in India.
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