Release Date: July 10, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Elxsi Ltd (BOM:500408, Financial) reported an operating revenue of INR892.1 crores for Q1 FY26, with an EBITDA margin of 20.9% and PBT margin of 21.1%.
- The Transportation business, which represents over 50% of overall revenues, remained stable in constant currency terms despite industry challenges.
- Large deals in SDV vehicle engineering with Mercedes-Benz and Suzuki are ramping up, with a healthy pipeline of strategic deals in Japan, US, and Europe.
- The company is expanding its customer base in the Healthcare and Life Sciences segment, with key wins from a global pharma and biotech leader from Europe and a medtech leader from Japan.
- Tata Elxsi Ltd (BOM:500408) is investing in talent, planning to add over 400 fresh engineers, and expects improvement in bottom line and margins as major business segments return to growth.
Negative Points
- Geopolitical uncertainty and industry-specific issues have impacted R&D spend and deal closures across key regions.
- The Media and Communication business reported a decline of 5.5% QoQ in constant currency, affected by transition investments in consolidation deals.
- Healthcare and Life Sciences segment declined 6.7% quarter on quarter in constant currency, primarily due to tariff-related impacts on medical devices in the US.
- The Tier 1 supplier business in the automotive sector continues to face challenges, affecting overall growth.
- Margins have been under pressure due to limited revenue growth and the impact of large consolidation deals with lower initial commercial terms.
Q & A Highlights
Q: Can you comment on the demand pattern in the Auto vertical and the issues in the Healthcare segment?
A: (Manoj Raghavan, CEO) In the Auto sector, we see deals coming through in Europe and the APAC region, with ramp-ups accelerating. The US market remains slow, but other regions show better visibility. In Healthcare, two large US customers paused new projects due to uncertainties, but we expect these to restart soon. We are also expanding our customer base with new logos in Europe and Japan.
Q: What is the outlook for your top customer and margin trends?
A: (Manoj Raghavan, CEO) For our top customer, JLR, we expect to maintain current levels with some incremental growth. Regarding margins, the decline is due to revenue drops. We aim to gradually improve margins over the next three quarters, targeting a return to historical levels in the medium term.
Q: Can you provide an update on the government PLI scheme and the semiconductor factory in Gujarat?
A: (Manoj Raghavan, CEO) The semiconductor factory in Gujarat is a Tata Electronics project, not Tata Elxsi. However, Tata Electronics is a customer, and we support them in some projects.
Q: How are different segments within the Transportation business performing?
A: (Manoj Raghavan, CEO) Our Transportation business has shown growth in actual currencies, ending flat in constant currencies. About 72% to 75% of our revenues now come from OEMs, with Tier 1s reducing. We see deal closures in off-road and commercial vehicle segments, and we are building teams in aerospace and defense.
Q: What is the impact of AI and GenAI on your operations and headcount?
A: (Manoj Raghavan, CEO) While AI and GenAI are being integrated, their impact on headcount is not dramatic due to legal and liability issues. AI can optimize certain tasks, but it is not a universal solution for reducing manpower across all projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
