Release Date: July 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Technologies Ltd (BOM:544028, Financial) saw a strong performance in its technology solutions business, which grew 7.3% quarter on quarter, driven by a recovery in the education vertical.
- The aerospace segment delivered a standout 13% sequential revenue increase, fueled by steady demand and consistent execution across various engagements.
- The company closed six large deals towards the end of the quarter, indicating improved client sentiment and long-term commitment to innovation.
- Tata Technologies Ltd (BOM:544028) has a stronger deal pipeline compared to the same time last year, providing increased visibility and confidence in improved conversion rates.
- The company has been recognized by Volvo Cars as a TOP10 strategic supplier, reinforcing its standing as a trusted engineering partner.
Negative Points
- Q1 FY26 performance came in below expectations, with revenue declining by 3.2% sequentially and EIA margin contracting by 210 basis points.
- The services business, representing 77% of total revenue, declined 5.9% quarter on quarter in INR terms, impacted by delays in ramp-ups of large deals.
- The company faced challenges due to delayed deal ramp-ups and macro-driven investment pauses, particularly among customers exposed to the North American market.
- There was a net reduction in total headcount by approximately 237 associates, reflecting a 2% decrease compared to the previous quarter.
- The company's profit before tax declined 10% sequentially, and profit after tax was down 9.8% quarter on quarter.
Q & A Highlights
Q: We expect a sequential growth recovery in Q2. Is this on the back of the 6 strategic deals that we have won, or do we see a pick-up in business beyond these 6 deals as well?
A: Warren Harris, CEO and MD: The recovery is informed by both the order book, including the 6 deals, and improved sentiment. While tariff and macroeconomic concerns have not fully dissipated, there is increased confidence that trade negotiations will create a conducive environment for decision-making.
Q: In our non-auto segment, the revenue declined on a similar basis as auto. Which segments are dragging here?
A: Warren Harris, CEO and MD: Aerospace demand continues to grow, and we are optimistic about its momentum. However, there was some softness in industrial heavy machinery due to a project that was short-closed in the fourth quarter.
Q: How do you see the demand within your anchor customers and outside of that? Is the sequential rebound largely led by anchor or external customers?
A: Warren Harris, CEO and MD: Demand from anchor customers like Tata Motors and JLR remains strong. However, the confidence in Q2 and the second half of the year is more about broad market sentiments, particularly in the automotive market, rather than just anchor customers.
Q: Can you quantify the current order book?
A: Warren Harris, CEO and MD: We don't provide specific details, but the order book at the end of the first quarter is better than at the same time last year, which drives our confidence for the rest of the year.
Q: How do you see the margin trajectory from here on, and any decision on wage hikes?
A: Savita Balachandran, CFO: The margin drop is largely due to fixed costs. Our goal is to move towards a 20% margin band as we scale operations. We will continue to optimize costs and improve productivity. Wage hike decisions will be discussed internally.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
