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Informist, Tuesday, Jul. 14, 2026

 

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--Tata Elxsi: Chasing few large consolidation deals in media, comm vertical 
--CONTEXT: Tata Elxsi management's comments in post-earnings analyst concall 
--Tata Elxsi: Expect growth in transportation vertical in coming quarters 
--Tata Elxsi: Should be able to disclose sales from adjacent ops by year-end 
--Tata Elxsi: Hiring a few freshers, see scope with utilisation still 
--Tata Elxsi: Engagement with top client steady in transportation vertical 
--Tata Elxsi: Some ramp-ups going slower than expected in transportation ops 
--Tata Elxsi: Business model to stay in favour of offshore-based execution 
--Tata Elxsi: Seeing good pipeline in transportation ops in US, Asia-Pacific 
--Tata Elxsi: Wage hike impact will be balanced by some costs waning in Q2 
--Tata Elxsi: Plan to roll out company-wide hike for eligible employees Q2 
--Tata Elxsi: Attrition level hovering around 16% as of now 
--Tata Elxsi: M&As in media, communication ind helped secure many deals 

 

By Shakshi Jain and Gunjan Rajput

 

NEW DELHI – Design and technology services provider Tata Elxsi Ltd. is seeing some weakness in demand among automotive clients in Europe, but a healthy pipeline and fruitful conversations in the US and the Asia-Pacific give it confidence about growth in the transportation vertical in upcoming quarters, the management said in a post-earnings call with analysts late Tuesday. This is despite Europe being the highest revenue-generating geography for the company.

 

Revenues from original equipment manufacturers comprise 78% of the company's sales in the transportation vertical, which in turn accounts for more than half of Tata Elxsi's overall top line. The global automotive industry is grappling with a structural slowdown triggered by supply chain disruptions, geopolitical strife, and a sharp rise in commodity prices. Earlier this month, automotive software solutions provider KPIT Technologies Ltd. warned of lower-than-expected revenues and margins for the June quarter due to a weak business outlook among European carmakers. This led to a 25?ll in its share price and weighed on peer stocks, including those of Tata Elxsi.

 

"The top customer has been steady for us, so that's definitely a positive, and I've already indicated the softness in the OEMs in Germany. I mean, there are large deals that we have already closed. Those ramp-ups are going a little slow there," a top company executive said, adding that the company has, however, seen good recovery in the US and the Asia-Pacific.

 

Tata Elxsi also expects to be able to sustain growth in the media and communications vertical over the next 2-3 quarters. "There are deals that we are chasing. There are some pretty large consolidation deals in the media and telecom space. Some of these, we are very, very confident that we should be able to swing in our favour," the management said.

 

The media and communications industry is seeing several mergers and acquisitions, which have helped Tata Elxsi win some deals, as per the management. "When an M&A happens, of course, the customer is trying to, you know, see how to optimise and how to move work to vendors that are a lot more offshore-centric so that their overall cost can come down," it explained, adding that this value proposition works for Tata Elxsi and for the clients.

 

The management also assured analysts that Tata Elxsi's business model will continue to favour offshore delivery of services. The company's onsite-offshore revenue mix shifted slightly in the June quarter, with the onsite revenue increasing by 90 basis points sequentially to 25.9%. "We have incurred additional costs of deploying forward teams as well as specialist third-party contractors to help accelerate transition and mitigate visa delays for our engineers," the management said. "This is partly reflected in our onsite-offshore ratio and bottom-line performance and should ease over the next 2-3 quarters."

 

Revenues from Tata Elxsi's core software development and services segment contributed around 97% of the company's total sales for the June quarter, growing 1.1% sequentially and nearly 6% on year in constant currency terms. Within this segment, media and communications sales grew nearly 3% sequentially in constant currency terms, supported by continued ramping up of key deals and expanded strategic long-term deals with global operators, broadcasters, and device original equipment manufacturers, the company said in its press release.

 

Meanwhile, revenues from its transportation business declined 0.4% sequentially but rose 6.7% on year in constant currency terms for the June quarter. Contribution from the healthcare and life sciences business declined 0.3% sequentially and over 22% on year in constant currency terms.

 

Overall, Tata Elxsi posted a sharp sequential decline in its net profit for the June quarter as its total expenses rose faster than revenue for the three months. The company's standalone net profit for the quarter fell almost 23% sequentially but rose over 18% on year to INR 1.71 billion. Its revenue from operations grew 2.8% sequentially and over 14% on year to INR 10.21 billion.

 

According to the management, the June quarter saw several one-off increases in costs, which resulted in a dent in the bottom line. This includes transition costs tied to some large deals and costs associated with retention of select employees. "There were costs in relation to a particular customer that we had to incur in this particular quarter (Apr-Jun), which we do not anticipate going forward, and the fourth is upfronting of certain annual costs," the management said.

 

Tata Elxsi plans to roll out company-wide wage hikes for eligible employees towards the end of the September quarter, which would have a negative impact on the company's margins. However, this pressure should be offset by waning or absence of some of the higher costs seen in the June quarter, the management said. Currently, the attrition level hovers around 16%, as per the management.

 

Tata Elxsi carried out a cycle of wage hikes for junior employees in October last year, followed by one for senior members of the workforce in January. The management said that given the demand for niche, artificial intelligence-ready talent, especially with global capability centres engaging in aggressive hiring, the company wants to retain the talent it has.

 

The company has also been hiring freshers, though in small numbers, the management said. "...our utilisation is just about 75%. Right now, we still have some leeway to go," it added.

 

On the new areas of focus for the company, the management said it should be able to disclose relevant sales figures by the end of the current financial year. Tuesday, shares of the company closed at INR 3,697.30 on the National Stock Exchange, down over 3% from Monday.  End

 

US$1 = INR 96.20

 

Edited by Rajeev Pai

 

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