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Informist, Wednesday, May 13, 2026

NEW DELHI – In the backdrop of a gradual recovery in demand, Kotak Institutional Equities expects 2026-27 (Apr-Mar) to be another year of tepid growth for pure-play engineering research and development companies in the information technology services sector. Demand from the aerospace and plant engineering segments remains healthy while that in the automotive sector is mixed, the brokerage said in a report penned on Monday. "Valuations still discount a sharp growth acceleration despite limited near-term visibility," the brokerage said.

According to Kotak Equities, global automobile original equipment manufacturers are reprioritising their research and development corpus towards sustaining existing model portfolios and extending the lifecycle of exisiting platforms rather than the development of new electric vehicle and software defined vehicle platforms. This will likely lead to smaller deals and higher pricing scrutiny as part of cost-optimisation efforts, the brokerage said. This scenario favours companies with stronger capabilities and higher exposure to mechanical engineering, it added.

From the geographic lens, original equipment manufacturers in Europe continue to focus on cost-reduction across development and operations to remain competitive and limit market share loss to their Chinese counterparts, the report said. They have initiated restructuring programmes to improve medium-term profitability and offset margin dilution from the rising share of battery electric vehicles, it added.

Kotak Equities expects Tata Technologies to outperform its peers in FY27 on the back of a strong orderbook. "TTL (Tata Technologies) could benefit in the near term due to deal rampups, while reduced new platform development weighs on growth prospects for other vertical-focused players," the brokerage said.  

Engineering research and development firms reported mixed performance for the March quarter, largely in line with expectations, Kotak Equities said. Tata Technologies' services segment, KPIT Technologies, and Tata Elxsi were among companies that posted sequential organic revenue growth for the quarter while L&T Technology Services and Cyient's digital, engineering, and technology segment recorded a decline. Profitability improved sequentially across companies by up to 160 basis points, largely supported by the depreciation of the rupee, the brokerage said. Meanwhile, the year-on-year margin trends were mixed.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Shakshi Jain

Edited by Akul Nishant Akhoury

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