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Informist, Thursday, Oct. 9, 2025

By Arya S. Biju and Rajesh Gajra

MUMBAI/NEW DELHI – Tata Elxsi Ltd. expects the second half of the current financial year to be better than the first half for its business in the automotive sector, supported by a robust deal pipeline and ramp-up of existing deals, the company's management said in a post-earnings call with analysts Thursday. The company believes that it will be able to see double-digit growth in the automotive segment of its broader transportation business in 2026-27 (Apr-Mar), the management said.

"I think from an automotive customer landscape perspective, as compared to the last couple of quarters, ...today, I feel a lot more confident about the spend coming back," a top management official of the company said. The traction for the company's automotive business in the Europe, Japan, and India markets is expected to continue going forward. However, it expects the business in the automotive sector in the US to remain muted for at least the upcoming quarter. "The US is still a little muted for us, and ...we hope that in the next half (of the current financial) year, we will have a lot more clarity," a top management official said. 

On the impact of the halt in operations of one of its top clients, Jaguar Land Rover, following a cyberattack in September, Tata Elxsi said that the incident had some impact on its September quarter earnings. "Some of the projects that we were supposed to start in September, that had to be pushed out," the management said. 

Among other verticals, the company said it is confident in sustaining growth in its healthcare and life sciences vertical, as the company builds a strong pipeline of new customers and large deals across key regions. However, during the September quarter, revenue from this segment declined 2.3% sequentially, primarily due to the conclusion of some large regulatory and medical device regulatory programs, the company's management said. 

However, when it comes to the media and communications vertical, the company expects the growth to moderate in the second half of FY26. During the September quarter, the segment saw a near 7% sequential rise in revenue, primarily driven by a ramp-up of large deals. The company had been facing challenges in this segment for the past few quarters and the company has a wait-and-watch approach to it.

On the margin front, the management said the operating margins in the September quarter were aided by favourable currency movements but were partly offset by other factors. It said the margin profile will improve as the revenue picks and utilisation rate improves, and the company may show margin recovery in Oct-Mar as compared to Apr-Sept. The company's September quarter earnings before interest, tax, depreciation, and amortisation, margin inched up to 21.1% from 20.9% in the trailing quarter. The earnings before interest and tax margin moved up to 18.5% in the September quarter from 18.2% in the previous quarter. 

The design and technology services company said it targets to achieve 75% utilisation by the end of the current financial year and 80% by the end of FY27. "...from a utilisation perspective, we have improved our utilisation from about 66% to 70% and above in the last quarter. And we see an increasing trend of that," a top management official said. As the company achieves these targets, it will be able to manage headwinds like wage hikes and still show margin recovery, Tata Elxsi said. 

To an analyst's question on depreciation expense coming down over the last 3-4 quarters and the likely run rate going forward, the management said the decline has been on account of no new or significant capital expenditure being incurred. It said there may be a few more quarters before the company invests in additional capacities. "So, hence, you will continue to see depreciation coming down slightly on a quarter-to-quarter basis for at least two more quarters," the management said. In the September quarter, the depreciation and amortisation expenses declined 3.4% on quarter to INR 234 million.

With the revenue picking up, the company expects the second half of FY26 to be better in terms of attrition rate, Tata Elxsi's management said while answering a question on the rising attrition rate over the past few quarters. During the September quarter, the company's attrition rate increased to 15.4% from 15% in the June quarter. The company said that the increase in attrition rate in the latest quarter is only marginal and not very significant. 

Tata Elxsi disclosed its earnings after market hours Thursday. Its bottom line for the quarter rose a little over 7% sequentially to INR 1.55 billion. This was in line with the Street's view of a net profit of INR 1.55 billion. Its revenue from operations for the quarter rose nearly 3% sequentially to INR 9.18 billion, beating analysts' estimate of INR 9.17 billion by a slight margin. Its total income from operations for the quarter was INR 9.67 billion, up nearly 4% on quarter. However, on a year-on-year basis, the company's net profit fell over 32% and its revenue from operations fell nearly 4%.

Thursday, shares of the company closed over 2% higher at INR 5,573 on the National Stock Exchange.  End

Edited by Deepshikha Bhardwaj

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