KPIT Technologies Ltd Management Discussions.


The Global economy has been severely impacted over the last one year. The pandemic has had its impact on all spheres of the economy, driving unemployment rates in double digits resulting in contraction of world output by 3.3%. The silver lining however is vaccines are now developed in record time with promising efficacy rates. A sustainable economic recovery with a limited handholding by fiscal and monetary policies is certainly seen on the horizon. The IMF latest forecasts have projected the global economy to grow by 6.0% in 2021 and the growth rate is expected to moderate to 4.4% in 2022. stimulus With various governments rapidly implementing inoculation programs, covering large sets of the populations, future risks of any economic stoppages have been reduced to a considerable extent. The economic damage due to the pandemic was also addressed by Fiscal and Monetary Stimulus, led by the developed world economies. The IMF in its latest world economic report highlighted that without the extraordinary policy support, the contraction could have been three times as large. Markets too have navigated the black swan event, as economic prospects kept improving through 2020. Equity markets reached all-time highs, driven by accommodative monetary policies, ample liquidity, a weaker dollar and reflation trade expectations, driven by pent up demand. With the reflation trade gathering steam, long term yields of government bonds have risen on growth expectation. With most of the world either through or in the second wave, future sustainable economic recovery is strongly dependent on y and nature of the efficac pace of vaccination, vaccine COvId-19 virus mutation and strains. Policies of most economies promise to remain supportive to growth.

The US economy contracted by 4.7% in 2020. The IMF forecasts US economy shall grow by 5.1% in 2021 and 3.6% in 2022. The US unemployment that peaked at 14.2% in April of 2020 has strongly recovered at 6% in March 2021. US is expected to be at full employment in 2023. Monetary policy promises to continue to remain accommodative with the federal reserve FOMC members not expected to raise rates at least until end of 2022. Policy decisions would be highly dependent on how the pandemic evolves. The fiscal stimulus in the US was driven through multiple legislations such as the CARES Act, Paycheck protection program, the Fed driven Mainstreet lending program as well as the latest USd 1.9 trillion American Rescue plan act that have played a major role in priming demand and bringing down unemployment levels. Latest has been the USD 2 trillion spending plan to overhaul and upgrade the infrastructure. All these bode well for a strong growth of the US economy, as inflation continues to remain low and the country has also been leading the inoculation drive globally. The Euro zone contracted by 6.6% in 2020. As per the IMF, the Euro zone is expected to grow 4.4% in 2021 and 3.8% in 2022. Interest rates continue to remain in negative territory for a substantial period, with the ECB continuing with its bond buying program. The Eurozonegovernments’ supported the economy. The Euro zone has been lagging on the vaccination numbers and a surge in cases towards the end of 2020 resulted in further lockdowns and containment measures. But the renewed decline in private consumption was much smaller than expected. As per the ECB (European Central Bank), private consumption is expected to recover sharply in 2021 and shall be the key driver of the recovery. Investment is expected to recover substantially in 2021 and 2022 and is expected to return to pre-crisis level in early 2022.

The Asian economy contracted by 1.0% in 2020. The IMF expects growth to rebound to 8% in 2021 and grow 6% in 2022. 2021 is expected to be very positive for Asia and again vaccination numbers shall be a key factor in determining pace of growth. Sharper economic recovery would be driven by vaccinations, stronger global recovery and easy financial conditions. As per the latest IMF forecasts, Growth in 2021 will be led by India (12.5%) and China (8.4%), with ASEAN countries (4.9%) contributing modestly.


The Automotive Industry saw a severe contraction of sales in H1 of FY20 followed by a steady recovery where growth is now expected to be in double digits in 2021. Auto-sales growth as per IHS Markit is expected to be positive for the next 3 years with as much as 9% growth in 2021. Forecasts Indicate that globally new passenger car sales will rise by 15% and commercial vehicles sales by 16%, in 2021. Global EV sales in 2021 are predicted to be at 3.4 Mn units from 2.5 Mn units in 2020, supported by government incentives.

In 2021 Europe is expected to lead sales growth (10.8%) after 2 years of weak sales. The narrative of renewed enthusiasm of driving and owning a car, at least till the virus remains a threat, will help keep demand steady.

The coming decade promises to be one of the largest in terms of Investments for Automakers. Megatrends driven by Connectivity, Autonomous, Shared mobility and Electrification (CASE) continue their secular adoption, as they persist to disrupt the industry. The coming years will also see investments getting prioritized by Automakers in areas of digital and customer experience. A recently published (April 21) report by IHS Markit on ‘Automotive R&d Investments Growth Rates in 2021’ states the top three key domain areas leading the automotive R&D budgets to be software & software related feature development, electrical architecture and related hardware.

R&D spending on software & software related feature development is leading at OEMs as well as Tier-1s with 41% & 50% R&D spending expected, respectively. E-mobility has emerged as the main feature of investment according to the 2021 R&D survey results, namely around battery technology and management systems, e-motors and power electronics. Other key feature areas are Autonomy, Infotainment & Digital Cockpit and Connected Car. OEMs are defining their R&D strategy toward the development of features/requirements to comply with upcoming regulations (in terms of e-mobility, connectivity, and autonomy). All car companies have an ambitious plan to deliver BEVs (Battery Electric Vehicles) that have to comply with all upcoming regulations from Europe, Greater China, North America, and other regions.

Electronics cost per car as a percentage of the total car cost has steadily increased from 27 per cent in 2010 to 40 per cent in 2020 and is expected to reach 45-50 per cent by 2030. The following illustration tries to depict the number of features in a car powered by software and electronics.

A car is thus now appropriately being called as ‘software on wheels’.

KPIT Positioning

KPIT is positioned as an independent, scalable and dependable partner to build and integrate software features (Software Integration Partner) to accelerate the journey through prototype to production. We are focused only on the automotive and mobility industry with strategic client relationships in the passenger cars, commercial vehicles and new mobility verticals.

Significant Deal Wins in FY20-21

KPIT won a multi-million USD strategic deal for a European Automaker’s electrification program. The engagement pans in excess of 5 years and deal value is estimated at USD 50+ million. KPIT will set up a dedicated software competence center in Munich and India. This strategic software program spans across development, integration and software maintenance post start of production.

A leading Automotive Tier I and system supplier for Autonomous driving and AdAS and a market leader in automotive safety electronics products has selected KPIT as their strategic software partner. This Strategic partnership will leverage cutting edge software technology from KPIT for various vehicle programs globally for Autonomous Driving, ADAS and AUTOSAR domains. The engagement pans for 5 years and the deal value is estimated at USd 60+ million. The partnership involves KPIT to collaborate seamlessly with them across multiple countries in Europe, US and Asia for various production programs.


REVENUE: during this year, our $ revenue stood at $ 274.77 Million, against $ 303.81 Million in FY20. During the second half of the year, there was a considerable shift in the work from onsite to offshore and thus in terms of volumes the revenue decline during the year was limited. In terms, revenue for the year was reported at 20,357 Million as against 21,562 Million in FY20.

The passenger cars vertical contributed around 77% of the total revenues in FY21 whereas the commercial vehicles segment contributed around 22% of the revenues. New Mobility is a new vertical of focus and contributed just around 1% of the revenues whereas the balance was from other small segments.

In terms of geography, US contributed around 42%, Europe 41% and the balance 17% came from Asia. All our strategic clients are global in nature and hence the geography break-up is increasingly becoming global. Our Strategic Accounts (T25) contributed around 86% of the overall revenues as compared to around 82% last year.


The EBITDA for FY21 stood at 15.2% as against 13.7% for FY20. The EBITDA for FY21 was 3,101 Million as against 2,954 Million for FY20. The Net Profit for FY21 stood at 1,461 Million. In the medium term, we want to focus on improvement in operating profitability with emphasis on productivity improvement, increase in offshore revenues, broadening of offshore employee pyramid, leveraging of fixed costs and scaling up in our strategic accounts.


The Shareholder’s Funds as at March 31, 2021 stood at 12,068 Million.


The Cash Balance as at March 31, 2021 stood at 8,224 Million as against 3,820 Million as at March 31, 2020.

The dSO were at 54 days as at March 31, 2021 as against 66 days as at March 31, 2020. We have consistently focused on faster cash conversion and as a result have been able to bring down the DSO substantially. As on March 31, 2021 our total debt stood was NIL. As on March 31, 2020 the total debt was at 542 Million comprising of 376 Million of Term Loan and 166 Million of Working Capital Loan.

Thus, the Net Cash Balance as at March 31, 2021 stood at 8,224 Million as against 3,278 Million as at March 31, 2020, a net increase of 4,946 Million.


The total headcount for the company stood at 6,366 as at the end of FY21. The same was 7,125 as at the end of FY20. The Development Headcount was 5,848 as against 6,594 last year. The detail update on People is covered under the CEO and President’s Joint Letter.


The CEO & CFO certification provided elsewhere in this Annual Report discusses the adequacy of internal control systems and procedures in place.


A separate report on Enterprise Risk Management is provided elsewhere in this Annual Report.


Though the COvId-19 pandemic did bring some disruption in the industry in the medium term, industry and business fundamentals are strong. Our aim was to be nimble, adapt quickly and innovate to respond to client needs during the pandemic time and contribute to their success. Our business fundamentals were very strong and we continue to deliver consistent results.

Our key focus initially was on employee well being and safety, upholding of client commitments and improving liquidity and conserving cash. We enabled 98% of our global workforce to work from home by the beginning of April 2020 as employee safety while meeting client commitments was our top priority. Our road map on meeting customer commitments was strong with a clear focus on Zero Defect Delivery and increasing productivity. We are appreciative towards all our employees for the tremendous resilience shown by each one of them and grateful to our clients for showing confidence in us.

Cautionary Statement

Certain statements under ‘Management discussion & Analysis’ describing the Company’s 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 Company’s operations are influenced by external and internal factors beyond the Company’s control. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements, basis any subsequent developments, information or events.