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Informist, Tuesday, Jan. 21, 2025

 

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--Tata Tech: Operated in economic uncertainties in Oct-Dec 
--CONTEXT: Tata Tech management's comments in post-earnings analyst call 
--Tata Tech: Operating profit margin Oct-Dec impacted by wage hikes 
--Tata Tech: Challenging automotive segment trend Oct-Dec, same as Jul-Sept 
--Tata Tech: Operating environment posed some challenges to earnings Oct-Dec 
--Tata Tech: Tech segment revenue Oct-Dec aided by renewal deals 
--Tata Tech CFO: Net cash position $154 mln as of Dec 31 
--Tata Tech CFO: Will continue to focus on improving operational efficiency 
--Tata Tech CFO: Will increase campus hiring with selective lateral hires 
--Tata Tech: Automotive slowdown in US, Europe, not in Asia, India 
--Tata Tech: See automotive recovery in US from early FY26 
--Tata Tech: Automotive recovery in Europe will take longer 
--Tata Tech: Not intimidated by existential crisis for some western auto cos
 

 

 

By Arya S. Biju

 

MUMBAI – Despite operating in a challenging business environment with economic uncertainties and a seasonally weak quarter and higher number of holidays, Tata Technologies Ltd.'s services segment clocked a 1.1% sequential revenue growth in constant currency terms in the quarter ended December, the company's management said in a post-earnings conference call.

 

Going forward, the company said it will remain committed to maintaining its operational efficiency, while supporting growth. The continued progress in margin expansion levers such as pyramid optimisation as well as improved productivity reflects this commitment, Savitha Balachandran, chief financial officer of the company, said.

 

The earnings before interest, tax, depreciation, and amortisation margin of the technology company for the December quarter was impacted by a 150 basis point wage hike across all levels of employees, Balachandran said. The EBITDA margin declined sequentially by 40 bps to 17.8% in the quarter. The impact of wage hike was offset by cost optimisation measures undertaken by the company, she added.

 

Tata Tech will continue to improve its talent pyramid by increasing campus hires while making selective lateral recruitment aligned with business needs, Balachandran said. Attrition rates continue to move in a favourable direction, supported by a broader decline in industry-wide attrition rates, she said. The company's trailing 12-month attrition rate improved further in the quarter with a sequential decline of 20 bps to 12.9%. Tata Tech will provide more training to employees in areas such as software-defined vehicles, generative-artificial intelligence, and cybersecurity, she added. 

 

The company remains focussed on enhancing cash collections and optimising conversion levels to maintain liquidity and support growth, Balachandran said. "Our disciplined execution drove strong cash conversion in the first nine months, with free cash flow exceeding 100% of net income," Balachandran said in the company's investor presentation. The company had a net cash position of $154 million at the end of December, up from $145 million on Sept. 30. 

 

AUTOMOTIVE SEGMENT

The demand slowdown in the automotive segment in the US and European markets is not seen in Asia, China, and India, Warren Harris, chief executive officer and managing director of the company, said. Automotive is one among the three verticals supported by Tata Tech. With clarity on Donald Trump's policy position in US, the company sees investments returning sooner in the region than in Europe. "I think Europe is still grappling with the fact that many of the OEMs (original equipment manufacturers) are still selling a significant number of units in the China market," Harris said.

 

Tata Tech said it is not intimidated by the existential crisis for some western automotive companies. The industry is moving towards electric, software-defined, and autonomous-driving vehicles. "And that's one of the reasons that we (Tata Technologies) continue to be bullish in the medium to long term, in terms of the opportunity that the automotive (industry) represents for our company," Harris said.

 

Answering a question about the company's views on Trump assuming power as US president, Harris said they expect various parts of the Inflation Reduction Act to be revisited, and removal or resizing of some of the incentives for electric vehicles. With this, the original equipment manufacturers are expected to make more investments in plug-in hybrids, and internal combustion engine vehicles. Tata Tech has a strong capability in all the three areas, he added. 

 

Tata Tech reported its Oct-Dec earnings after market hours on Tuesday. The company's consolidated net profit for the December quarter rose 7% sequentially to INR 1.69 billion, and its revenue rose 1.6% on quarter to INR 13.17 billion. Shares of the company closed at INR 816.85 on the National Stock Exchange, up 0.5% from Monday.  End

 

US$1 = INR 86.57

 

Edited by Ashish Shirke

 

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