KPIT Technologies Ltd Management Discussions.

Global outlook

The global economy entered 2022 in a weak position, still reeling under the effects of the COVID-19 pandemic. As the new Omicron variant spread, countries reimposed mobility restrictions. Rising energy prices and supply chain disruptions resulted in higher and more broad-based inflation than anticipated. Against this backdrop, the global economy is expected to moderate from 5.9% in 2021 to 4.4% in 2022.

The conflict between Russia and Ukraine has resulted in severe economic consequences. It has triggered not only a costly humanitarian crisis but also led to significant economic damage to global growth in 2022. A severe double-digit drop in Ukraines GDP and a large contraction in Russia is more than likely, along with worldwide spillovers through commodity markets, trade and financial channels. Energy and commodity prices, including wheat and other grains, have surged. The conflict is expected to significantly reduce growth and add to inflation. For 2022, inflation is projected at 5.7% in advanced economies and 8.7% in emerging market and developing economies. Fuel and food prices have increased rapidly and led to complicated trade-offs for central banks to contain price pressures and safeguard growth. Interest rates are expected to rise as central banks tighten policies, exerting pressure on emerging markets and developing economies. Moreover, many countries have limited fiscal policy space to cushion the impact of the war on their economies. Countries that have close economic links with Ukraine and Russia are at particular risk of scarcity and supply disruptions, while also having to deal with the rising inflow of refugees.

Debt levels have risen significantly. The war and the impending increase in global interest rates will further reduce fiscal space in many countries, especially oil and food-importing emerging markets and developing economies.

The US economy staged a strong recovery after the COVID-19 shock and is expected to grow at 3.9% in 2022, compared to 5% in the previous year. Supply chain disruptions continued into the fourth quarter, hindering global manufacturing. Additionally, clogged ports, land-side constraints and high demand for goods have led to broadening price pressures.

To mitigate the situation, the Federal Reserve decided to accelerate its taper of asset purchases and signalled that it will raise rates further in 2022 than previously expected. In 2023, reducing inflation and providing price stability will protect real incomes and help sustain growth over the medium term.

In Europe, a resurgence in COVID cases held back broader recovery. Fossil fuel prices have almost doubled in the past year, leading to rising energy costs and higher inflation. As Europe is a net energy importer, increased global prices constitute a negative terms-of-trade shock for most countries.

Growth is expected to contract from 5.2% in 2021 to 3.9% in 2022 and 2.5% in 2023. As monetary conditions tighten globally, the European Central Bank (ECB) announced it will end net asset purchases under the Pandemic Emergency Purchase Programme in March 2022, while it will temporarily increase net purchases by a modest amount under its longer- standing Asset Purchase Programme.

As net importers of oil, gas, and metals, Asias emerging and developing economies are vulnerable to rising global commodity prices. Consequently, a deterioration in their terms of trade — the ratio of export prices to import prices - will likely reduce growth, weaken currencies and worsen current- account balances. Inflationary pressures are also aggravated by high food and fuel prices, particularly in low-income nations, where they account for a significant portion of consumer spending.

Slower growth and rising prices, coupled with the challenges of war, infection and tightening financial conditions, will exacerbate the difficult policy trade-off between supporting recovery and containing inflation and debt. The combination of transmissible variations in China and the tight zero-COVID strategy has led to repeated mobility restrictions and localised lockdowns, which have weighed on private consumption.

Recent lockdowns in Shenzhen and Shanghai will likely worsen supply disruptions. In this scenario, Asias GDP is expected to expand by 4.9%. As per the April 2022 forecasts of the IMF, growth in Asia in 2022 will be led by India (8.2%) and the Philippines (6.5%).

[Source: International Monetary Fund (IMF)]

Industry Trends

In 2021, the automotive industry witnessed massive changes sparked by supply chain problems and the effects of the pandemic. On the one hand, supply chain issues were leading to one of the lowest vehicle inventories, yet on the other, there was record pricing and profits amid resilient consumer demand. Worldwide car sales grew to around 66.7 million units in 2021, up from around 63.8 million units in 2020. Electric vehicle (EV) sales around the world have doubled to 4.6 million units in 2021. Overall global car sales are expected to grow, but the annual growth rate is expected to drop from 3.6% over the last five years to around 2% by 2030 due to macroeconomic factors and the rise of new mobility services such as car-sharing and e-hailing.

In 2021, the industry also witnessed a rise in Connectivity, Autonomous, Shared mobility and Electrification (CASE) trends and a shift toward a centralised architecture. Automotive technology is gradually transitioning from electromechanical terminals to Software-Defined Vehicles (SDVs), making them intelligent, expandable, mobile electronic terminals capable of continuous upgrades.

Disruptions in the supply chain of these three crucial raw materials are forcing OEMs and Tier 1s to close production lines. It is also affecting the supply and production of semiconductor chips, EV batteries and catalytic converters. This, in turn, will result in production delays, longer waiting times and higher vehicle prices. In the case of EVs, higher costs could dampen sales and uptake levels.

The era of Software Defined Vehicles

This decade represents one of the most significant tech disruptions in the automotive industry through technologies such as CASE or ACES, and SDVs.

These developments are also a significant driver of the expected 7% CAGR in the automotive software (SW) and electrical and electronic components (E/E) market, i.e., from $ 238 billion to $ 469 billion, between 2020 and 2030. Software applications, operating systems, and middleware are growing at an even faster rate, at a CAGR of 11%. Overall, the vehicle software market is expected to nearly double by 2030, fuelled by the digital push among top OEMs and a dramatic increase in their investments.

(Source: ‘Automotive software and electronics 2030 by McKinsey & Company, S&P Global Mobility Report).

The software and electronics architecture in vehicles is expected to see a major evolution.

Sensors, harnesses, electronic control units (ECUs) and other hardware components are expected to become increasingly standardised and commoditised with the transition towards software-defined functions. ACES is contributing to growth in domains such as connectivity, the pursuit of AVs and electrification. Areas such as autonomous driving, connected services, energy, and infotainment will gain complexity, as well as become increasingly relevant for a broader share of vehicle platforms.

These changes are seen both in the passenger car and commercial vehicle segments.

The E/E architecture is also undergoing a major transformation to keep up with the evolving automotive industry. From a distributed architecture, it is now growing to a centralised architecture in which the control of the entire vehicle is centralised in one place. It is further categorised into a zone architecture, in which the vehicle is divided into several zones and controlled in a coordinated manner. Software is key for the new E/E architecture and hence the demand is also expected to increase significantly.

Leading OEMs and mobility companies have announced investments to the tune of billions of dollars in the new technologies which will enable the above transformation. With the mobility industry investing heavily in CASE and architectural changes to make SDVs a reality, more robust demand is expected for the next 3-5 years. OEMs and Tier 1s will be able to monetise the new features they launch and provide for their regular upgradation.

KPIT - Accelerating transformation towards software-defined vehicles

KPIT is focussed on automotive software. KPIT has been working on areas of embedded automotive software for over two decades and is at the forefront of the ongoing transformation in the segment while working closely with the automotive brands.

As the role of software and data grows, so does its complexity. Traditionally the core competencies of many automotive and commercial vehicle companies revolved around manufacturing prowess, branding, and some of the critical technologies. The automobile software being highly domain-specific intensifies this complexity. With the safety of people at stake, the consequence of a software issue in a vehicle is catastrophic, to say nothing of the high expenses involved. This makes automotive and mobility software an area that calls for not only programming skills but also domain expertise and significant experience. To adapt to this explosion of software within the vehicles, the industry now needs people with different types of skills and a partner with deep software competence.

KPIT is uniquely positioned to be a global partner to the automotive and mobility ecosystem for making software-defined vehicles a reality. We will have sharper focus on talent attraction, development and retention. In line with the industry, employee turnover was on the higher side in 2nd half of FY 2022, expected to stabilise in the current fiscal.

KPIT continues to invest in the right technologies and partnerships to help us deliver value to our clients, making them successful in their transformation through profound expertise in relevant practices and creating greater value to them through our PTAs (Platforms, Tools and Accelerators). The relationship with our key T25 clients continues to get deeper and more strategic. We are investing more in our employees in order for them to realise their true potential, making KPIT the Best Place to Grow.

Significant Deal Wins in FY 2022

KPIT won a multi-million-dollar strategic engagement from a leading European Car Manufacturer in the Electric Powertrain domain. The engagements pans over five years of software development, integration work and software maintenance. The total deal value is more than $ 50 million. In the journey towards software-defined vehicles, the value KPIT will deliver in these programmes become significant. KPIT has been selected as a next gen software development and integration partner for the control unit of a new e-powertrain component, function development and software testing of all power electronics components of next gen Invertor, On-board Charger and Battery Management Systems (BMS).

A leading European OEM selected KPIT as its key partner for next generation ECU Platforms Software. This multi-year engagement is across areas of Software Architecture, Software Development, Configuration and Integration, and Validation.

Financial performance


During this year, our revenue stood at $ 328.36 million, against $ 274.77 million in FY 2021. During the year, there was a considerable shift in the work from onsite to offshore and thus in terms of volumes the revenue growth was proportionately higher. In Rs terms, revenue for the year was reported at Rs 24,324 million as against Rs 20,357 million in FY 2021. The passenger cars vertical contributed around 73.8% of the total revenues in FY 2022 whereas the commercial vehicles segment contributed around 24.4% of the revenues whereas the balance was from other small segments.

In terms of geography, US contributed around 39%, Europe 40% and the balance 21% came from Asia.

All our strategic clients are global in nature and hence the geography break-up is increasingly becoming global. Our Strategic Accounts (T21) contributed around 83.8% of the overall revenues as compared to around 85.7% last year.


The EBITDA margin for FY 2022 stood at 18.0% as against 15.2% for FY 2021. The EBITDA for FY 2021 was Rs 4,385 million as against Rs 3,101 million for FY 2021. The Net Profit for FY 2022 stood at Rs 2,742 million. We have been improving our EBITDA margins consistently for the last 7 quarters. In the medium term, we want to focus on further improvement in operating profitability with emphasis on engineering productivity improvement, increase in offshore revenues, broadening of offshore employee pyramid, leveraging of fixed costs and scaling up in our strategic accounts.

Shareholders Funds

The Shareholders Funds as at March 31, 2022 stood at Rs 13,096 million.


The Cash Balance as at March 31, 2022 stood at Rs 10,380 million as against Rs 8,224 million as at March 31, 2021. The DSO were at 53 days as at March 31, 2022 as against 54 days as at March 31, 2021.

We have consistently focussed on faster cash conversion and as a result have been able to bring down the DSO substantially. We have been consistently increasing our net cash balance over last 12 quarters. As on March 31, 2022 our total debt stood was NIL as also in the previous year. Thus, the Net Cash Balance as at March 31, 2022 stood at Rs 10,380 million as against Rs 8,224 million as at March 31, 2021, a net increase of Rs 2,156 million.


The total headcount for the company stood at 8,245 as at the end of FY 2022. The same was 6,366 as at the end of FY 2021. The Development Headcount was 7,628 as against 5,848 last year. A detailed update on People is covered under the letter from the CEO and the Joint MD.

Cautionary Statement

Certain statements under ‘Management Discussion & Analysis describing the Companys objectives, projections, expectations may be forward looking statements within the applicable securities laws and regulations. Although the expectations are based on reasonable assumptions, the actual results could differ materially from those expressed or implied, since the Companys operations are influenced by external and internal factors beyond the Companys control. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, basis any subsequent developments, information or events.