Global economic review
In the first half of the fiscal year FY 2022-23, the global economy grappled with
several headwinds including volatile food and commodity prices and elevated inflation. The
war between Russia and Ukraine, which caused supply chain disruptions worldwide, exacted a
heavy toll on the economy.
Supply chain constraints and market volatility have considerably dampened consumer
sentiment and lowered capital outflows. Several nations continue to grapple with
persistent demand-supply imbalances and decadal- high inflation rates. To tame inflation
and achieve price stability, central banks around the world have responded with
synchronised rate hikes and tightened monetary policies.
In H2 of FY23, the global economy appears poised for a gradual recovery from the waning
effects of the pandemic and geopolitical tensions. The global economic output is expected
to witness steady growth, driven by stabilising inflationary pressures, reviving consumer
sentiment and investor confidence. The employment scenario in the US and other advanced
economies has recovered from pandemic levels and rising disposable income is also likely
to support growth in the coming years, even though the instability in the banking system
in the US may have global ramifications. The rate hike cycle of central banks is peaking
as inflation is gradually stabilising.
The IMFs World Economic Outlook, April 2023, reports that global growth will register
a growth of 2.8% this year before climbing to 3.0% in 2024. In comparison, advanced
economies are projected to display a growth rate of 1.3% in CY23. Global inflation is
expected to gradually decline, although slower than initially anticipated, from 8.7% in
2022 to 7.0% this year and 4.9% in 2024.
Headline inflation in the G20 economies is expected to decline to 4.5% in CY2024 from
8.1% in CY2022. Core inflation in the G20 advanced economies is projected to average 4.0%
in CY2023 and 2.5% in CY20241.
Indian economic review
The Indian economy demonstrated resilient growth amid geopolitical tensions and high
inflation-induced global economic headwinds. India has emerged as one of the
fastest-growing major economies worldwide and, according to the second advance estimates
of the
National Statistical Office (NSO), the real GDP growth has been 7.2% in FY23.
India is further expected to grow at a much faster pace throughout the next fiscal
year. According to IMF, India and China are going to collectively contribute over 50% to
the global growth.
India, having the largest youth population in history, is witnessing a significant rise
in the availability of fresh and skilled talent, particularly in the field of technology.
This influx of talented individuals is poised to propel the country towards enhanced
performance and overall development, fostering a holistic growth trajectory.
Moreover, over the past few years, there has been a consistent rise in the capital
expenditure across almost all sectors in the Indian economy. The YoY increase in FY 202122
has been sharp following a steady growth in FY 2022-23. This will further expand new
opportunities and establish a stable and sustained economic growth in the country.
Industry trends
The automotive sector is gradually reviving from one of the most challenging periods.
The industry has faced a massive slowdown for the last couple of years due to the
pandemic. Now that the automotive industry is slowly getting back on its feet, it is
facing tougher situations primarily driven by chip shortages, global economic slowdowns,
price shocks, and so on. Despite the roadblocks, the sector is set to witness increased
adoption of EVs, the introduction of Internet of Things (IoT) features in automobiles and
so on.
In CY23, the automotive industry is set to face global headwinds such as the energy
crisis, slower global demand, and ongoing supply-chain issues. Despite these challenges,
global new-vehicle sales are projected to remain flat, with new-car sales increasing.
Global car sales will increase by 3.8% YoY (year on year) to 84.1 million vehicle units in
CY 20232.
Despite the challenges faced by the automotive industry, the consumer Electric Vehicle
(EV) market, including Plug-in Hybrid Electric Vehicles (PHEVs), has shown remarkable
performance. In CY2022, global EV sales witnessed a significant growth of 60.8%, reaching
10.7 million units. This growth trend is expected to continue in CY2023, albeit at a
slower pace, with an anticipated
year-on-year increase of 17.8%. By the end of CY2023, EV shipments are projected to
reach 12.7 million units, making the consumer EV market nearly four times larger than it
was in CY20 2 03.
The year saw a rise in trends like Connectivity, Autonomous, Shared mobility, and
Electrification (CASE) and a shift towards 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. Cars are growing smarter and more capable of being upgraded with
new software. However, difficulty in obtaining the components required to manufacture
automobiles, such as computer chips, electric vehicle batteries, and catalytic converters,
still act as roadblocks. As a result, getting an automobile may take longer, and the
pricing may be higher. This might reduce the appeal of electric vehicles among customers.
Indias automobile market holds the impressive position of being the third largest
globally in terms of sales, surpassing Germany and Japan. This sector plays a significant
role in the countrys economy, contributing 7.1% to its GDP. Over time, the Indian
automotive industry has undergone a remarkable transformation, with technology playing a
pivotal role in its evolution. As the government emphasizes a sustainable future, the
growth of Electric Vehicles (EV) has prompted major manufacturers to invest in high-end
technologies, optimising operations and enhancing the customer experience. Moreover, the
emergence of the Internet of Things (IoT) has spurred the development of connected cars,
empowering drivers with real-time information access and remote vehicle control.
In line with the increasing demand for safer vehicles among Indian consumers and the
governments efforts to enhance road safety, car manufacturers in India have begun
offering advanced driver assistance systems (ADAS) in their vehicles. This trend is driven
by various factors, including the affordability of ADAS technology and its potential to
reduce accidents and fatalities. By adopting ADAS technology, Indian car manufacturers are
actively contributing to the improvement of road safety and working towards reducing the
number of accidents on Indian roads.4
By 2035, the automotive industry is anticipated to witness a significant surge in the
adoption of electric vehicles (EVs) and the implementation of CASE (Connected, Autonomous,
Shared, and Electric) technologies. The demand for noninternal combustion engine (ICE)
vehicles is projected to be promising, with the United States expected to experience a
remarkable increase from the current 2% EV
adoption rate to a substantial 44% by 2035. Meanwhile, Europe is predicted to surpass
these figures by adopting EVs at an even faster pace. Despite these promising prospects,
the adoption of advanced automated vehicles, is estimated to reach around 16% of all new
light vehicle sales in the US by 2035. These conservative estimates assume that EVs will
achieve cost parity with ICE vehicles by 2025, considering the development forecasts for
EV charging infrastructure.5
Production of electric four-wheelers (E4Ws) in emerging Asia is expected to experience
rapid growth, with countries like Thailand and Indonesia emerging as major automotive
production hubs in the region. The production of E4Ws in these markets is projected to
increase significantly, growing at a combined rate of 45 percent. By 2030, it is estimated
that countries in emerging Asia could collectively manufacture over two million units of
E4Ws annually. The development of mature electric vehicle (EV) markets in the region is
supported by robust policy actions implemented on four fronts: official EV targets,
restrictions on internal combustion engine (ICE) production and sales, consumer
incentives, and the establishment of EV charging infrastructure (EVCI).
Across Asia, governments demonstrate varying levels of commitment towards
electrification. In emerging Asia, Thailand has introduced the 3030 EV Production Policy,
which aims to achieve a 30 percent share of domestic vehicle production from EVs by 2030.
Meanwhile, Indonesia has announced plans to prohibit the sales of fossil fuel motorcycles
by 2040 and fossil fuel cars by 2050.6
The era of software-defined vehicles
Automakers are strategically aiming to capitalise on substantial revenues generated
through software-enabled services. The emergence of electric vehicles (EVs) and autonomous
vehicles presents promising opportunities for original equipment manufacturers (OEMs) to
explore new avenues of earning. Automakers are strategically aiming to capitalise on
substantial revenues generated through software-enabled services. The emergence of
electric vehicles (EVs) and autonomous vehicles presents promising opportunities for
original equipment manufacturers (OEMs) to explore new avenues of earning.
By CY2030, the global automotive software and electrical and electronic components
(E/E) market is expected to reach USD 462 billion, growing at a rate of 5.5% annually.
During the same time period, however, the entire automotive market for passenger cars and
light commercial vehicles (LCVs) is expected to increase at a
slower pace of 1%. The automotive sensor market is set to double from CY2019 to CY2 0 3
07, driven by the rising demand for advanced driver-assistance systems (ADAS)
and autonomous driving (AD) sensors, particularly LiDAR, cameras, and radars. This growth
reflects the increasing focus on software and electronics in vehicles, with electronic
control units (ECUs), software development, power electronics and sensors leading the way.
OEMs are recognising the potential by inclusion of software content and additional
features. This shift allows them to capture more value from the software-driven
capabilities of their vehicles, ultimately improving profitability.
This decade has seen one of the most important technological disruptions in the
automobile industry with technologies like CASE, as well as SDVs. The automotive software
market is expected to double in size, propelled by ADAS, electronic control units (ECUs),
and autonomous driving software. Additionally, infotainment, connectivity, security and
connected services will experience substantial growth, becoming the second-largest
software market.
Automotive Industry Spend Forecast by 2030, Roland Berger Report, October 2022
(USD Billion)
connected services, energy systems, and infotainment, which are becoming more complex
and relevant across passenger cars and commercial vehicles.
The vehicles electrical/electronic (E/E) architecture is shifting from a distributed
to a centralised architecture. The demand for software in the new E/E architecture is
expected to increase significantly. The demand for body and energy software will also rise
due to stringent energy management requirements for electric vehicles (EVs) and the
integration of premium comfort features.
The automotive industry is embracing software- defined vehicles, enabling intelligent
and customisable automobiles that prioritise safety. Major car manufacturers are investing
billions of dollars in the technologies driving this transformation. These investments are
focused on CASE technologies and architectural changes necessary to make self-driving
vehicles (SDVs) a reality. As a result, there will be a significant increase in demand
over the next 5-7 years.
Major trends in mobility
Software-enabled features add value and help differentiate vehicle brands. Thus there
is a significant increase in R&D spend to gain a leadership on vehicle software
implementation.
Software services like CASE, Cloud and mobile connectivity are being provided along
with personalised digital experiences to the customers to generate new sources of revenue.
Software complexity is a new trend as a result of rapid transition to newer E/E
architectures, common middleware and shift towards SDV paradigm.
CASE technologies are propelling expansion in areas like connectivity, autonomous
vehicles, and electrification. This includes advancements in autonomous driving,
Roland Berger Report 2022
The industry has aligned its investment strategies based on certain automotive domains
which is being largely adopted by the OEMs to drive growth in the software- defined
vehicles. Based on this, the automotive software spending is expected to increase to 43
billion by 2030.
Company overview
KPIT Technologies is a global partner to the automotive and Mobility ecosystem for
making software-defined vehicles a reality. It is a leading independent software
development and integration partner helping mobility leapfrog towards a clean, smart, and
safe future. With 11000+ automobelievers across the globe specializing in embedded
software, AI, and digital solutions, KPIT accelerates its clients implementation of
next-generation technologies for the future mobility roadmap.
KPIT has a footprint worldwide with engineering centres in Europe, the USA, Japan,
China, Thailand and India n
The Company collaborates with industry leaders in automotive and mobility, actively
participating in the transformative ecosystem. It is a leading automotive software
provider with over two decades of experience in embedded automotive software. KPIT works
closely with automotive brands and is at the forefront of the ongoing transformation in
the industry. The Company, with the required domain expertise, is set to be a global
partner in making software-defined vehicles a reality.
The Company focuses on delivering value to its clients and supporting their successful
transformation through investments in technologies and partnerships. KPITs deep expertise
and innovative platforms, tools and accelerators contribute to creating greater value for
its clients. The Company prioritises building strong and strategic relationships with key
clients and nurturing an experienced and dedicated talent pool. The Company invests in its
employees to help them reach their full potential, making KPIT the best place to grow.
KPIT won two ET Ascent Business Leader of the Year Awards 99
Significant Engagements in FY 2022-23
During the fiscal year FY 2022-23, the Company continued to work and win strategic
engagements with its T25 clients. These engagements are broad based, multiyear and across
practice domains for both Passenger Vehicle and Commercial Vehicle OEMs.
During the year, Renault Group partnered with KPIT to ensure the seamless scalability
of their software for next- generation SDV programs. This
collaboration aims to drive Renault Groups global growth in the coming decades by
delivering unparalleled experiences to end consumers and enabling monetization throughout
the entire ownership duration of the vehicles. Honda has selected KPIT as its strategic
technology partner for their Software-Defined Mobility (SDM) initiative. KPIT is also
working with a leading American car manufacturer in middleware development and
integration, and in the
electric powertrain domain with a prominent European car manufacturer. KPIT and ZF have
joined forces to create an independent company focused on automotive middleware, with the
induction of more partners expected in the future.
Financial performance Revenue
In Q4FY23, KPIT Technologies experienced impressive growth, with constant currency
revenue increasing by 50% year-on-year. For the fiscal year 2022-2023, the Companys
revenue reached USD 418 million, reflecting a significant growth of 27.4% in reported USD
terms, compared to the previous year. This marks the eleventh consecutive quarter of
steady revenue growth for KPIT. Among the Companys verticals, the passenger cars
segment achieved revenue growth of 29.7%, while the commercial vehicles segment grew by
25.4%.
Geographically, the US market saw a growth of 17.2%, Europe witnessed a remarkable
growth of 48.1%, and the Asian market showed a growth of 6.2% year-on-year. KPITs
strategic clients are global in nature, resulting in an increasingly global geographical
distribution. The architecture and middleware consulting vertical experienced the highest
year-on-year growth at 74.1%. The Companys strategic accounts, known as T25, accounted
for 82.5% of the total revenues, slightly lower than the previous years 83.8%. The
Companys R&D expenditure for this year amounted to USD 9.6 million, reflecting a
6.67% increase compared to the previous year8.
In FY24, The Company anticipates strong growth with CC revenue expected to grow by 27%
to 30% over FY23. Its focus on profitability is reflected in the target EBITDA margin
range of 19% to 20%. To drive success, the Company is aligning practices towards
Software-Defined Vehicles (SDV) and making strategic technology investments. Delivery and
operations are optimised through a robust competency framework, agile methodologies and
automation.
Profitability
In FY 2022-2023, KPIT continued to improve its financial performance with an EBITDA
margin of 18.9%, up from 18% in the previous fiscal year. The Companys EBITDA also saw
significant growth, reaching H6,354 million compared to H4,385 million in FY 2021-2022. This
marks 11 consecutive quarters of improving EBITDA.
KPITs focus is on enhancing operating profitability through initiatives such as
engineering productivity improvement, increased offshore revenues, broadening the offshore
employee pyramid, optimising fixed costs, and scaling up strategic accounts. Additionally,
Profit after Tax (PAT) for FY 2022-2023 reached H3,810 million, a significant increase
from H2,742 million in FY 2021-2022.
The Company focuses on maintaining its commitment to profitability, targeting an EBITDA
margin range of 19% to 20% in FY 2022-2023. This aligns with its strategic direction of
focusing on Software-Defined Vehicles (SDV) and making strategic technology investments.
KPIT will optimise delivery and operations through a robust competency framework, agile
methodologies and automation9.
Shareholders funds
The Shareholders Funds as of March 31, 2023, stood at Rs. 16,515 million.
Liquidity
Liquidity The Cash Balance as at March 31, 2023 stood at Rs. 6,288 million as against
Rs. 10,380 million as at March 31, 2022. The DSO were at 54 days as at March 31, 2023 as
against 53 days as at March 31, 2022. We have consistently focussed on faster cash
conversion and as a result have been able to maintain a comfortable level of DSO over the
past 2 years. As on March 31, 2023, our total debt stood was Rs. 486 million which
reflects the debt outstanding in the acquired entities and shall be repaid over the next
financial year. Thus, the Net Cash Balance as of March 31, 2023 stood at Rs. 5,802 million
as against Rs. 10,380 million as at March 31, 2022. During the year the total outflow on
account of acquisition payouts stood at Rs. 5,806 million and the total dividend paid out
was Rs. 900 million. Thus, excluding the acquisition payouts, the increase in Net cash was
Rs. 1,228 million.
Employees
By the end of the fiscal year 2022-2023, the total number of employees in the company
rose to 11,013, which is a significant increase of 33.5% compared to the previous fiscal
years count of 8,245. The Enabling & Sales department witnessed a growth of 16%, with
a total of 716
employees. The development department experienced a substantial increase of 34.9%,
reaching a headcount of 10,297 by the end of the fiscal year 2022-2023, compared to 7,628
in the previous fiscal year. These numbers demonstrate substantial growth and expansion
within the company during the given period.
Risks and mitigation strategy:
Detailed information on the risks and mitigation strategy is shared in under the
Enterprise Risk Management section of this Annual report.
Opportunities
KPIT Technologies is well-positioned for growth despite financial challenges in the US
and Europe. The company remains optimistic about its long-term engagements. On the back of
a solid performance in FY23 and basis recent mega engagements and committed spend on
software by automotive OEMs, KPIT is witnessing robust demand and increased visibility for
the next 3-5 years. With a business model focused on future technologies, KPIT has a
strong order book and has signed multiple cross-domain, multiyear new engagements with its
strategic clients.
Cautionary statement
Some statements in the Management Discussion & Analysis section may contain
forward-looking statements in accordance with applicable securities laws and regulations.
While these statements are based on reasonable assumptions, the actual results may differ
significantly from those expressed or implied due to external and internal factors beyond
the Companys control. The Company does not undertake any obligation to publicly amend,
modify, or revise these forwardlooking statements based on subsequent developments,
information, or events.
+91-9892691696
