Ladies and gentlemen, good day and welcome to the KPIT Technologies Q1 FY24 conference call, hosted by Dolat Capital. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Rahul from Dolat Capital. Thank you, and over to you, sir. Thank you, Selvin. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies Limited for giving us the opportunity to host this call. Now I would like to hand the conference over to Sunil Phansalkar, who is the Head IR at KPIT, to do the management introductions. Thank you. Over to you. Thank you, Rahul. A warm welcome to everybody for the Q1 FY 2024 post-earnings conference call of KPIT Technologies Limited. On the call today, we have Mr. Kishor Patil, Co-founder, CEO and MD, Mr. Sachin Tikekar, President and Joint MD, Mrs. Priya Hardikar, CFO, and Sunil from Investor Relations. As we always do, we'll start the call with opening remarks by Mr. Patil on the performance and the way forward, and then we'll have it open for your questions. Once again, a very warm welcome to all of you, and I hand this over to Mr. Patil. Good afternoon. I'm very happy to take you through our quarterly results. We started the year on a very positive note in Q1. The revenue growth has been 51.7% in constant currency year-on-year. On the constant currency, quarterly growth is 7.1% and 8.2% reported. In case of profit, the profit grew 56.9% year-on-year. The net profit for the quarter grew by 20.1%. It has something one time. If you take out the one-time adjustment, the net profit grew quarter-on-quarter by 8%. EBITDA is at first time after exceeding 20%. EBITDA has grown 65.2% year-over-year, 13.3% quarter-over-quarter. Overall, you know, it is the performance has been a little ahead of our expectation. The pipeline during the year, we had $190 million wins. Generally, it is again across the geography. DSO is at 50 days. Last 12 executive quarters, we continue to grow both in revenues as well as in profits. On the people side, we have 550 people net addition during the quarter. We are doing our business and recruitment in the normal course of business. While we do not give exact numbers, the campus recruitment is going full-fledged to one of the higher numbers we are going for. Also the increments they are going ahead. The increments also in the normal course of business. They are for across the organization, they will be effective as always from the first July. Otherwise, the business is normal on the people side. On the attrition side, attrition is in low teens. On the key parameters like, you know, what we call as key staff and, you know, basically top blockers, the attrition has come in a single digit. Overall, we believe that this is a great opportunity for us to improve the quality of talent and hiring. On the technology side, the one update is the Qorix, which we, you know, the entity we spun off from KPIT is a joint venture with ZF. There is a good development. The team is in place. We have hired a CEO. We have hired a CTO from outside. We have moved the teams from KPIT. We have identified. We'll be moving it in due course. Currently, we are going through the compliance of merger control in different parts of Europe. The overall other... That, that's on the Qorix side. Not only that, but, we have got a very positive response from the market. Almost we are very close to sourcing 1 win sourcing this or the first product for the platform for Qorix, and very good discussions otherwise. Overall, otherwise, on the KPIT side, we have increased our investments into R&D. We believe there are multiple areas in which we need to invest. So, naturally, you know, these, all these results are post increases in the R&D. The areas in which we are investing includes, you know, generative AI, where we are put a team together to understand the productivity inside, as well as what we can do for the clients. otherwise, the other key areas we have identified, which are beyond what we are developing, which will create many more opportunities for us in future with our existing clients. On the T25 side, we continue to go deep and wide. All our engagements are going as we had planned. Actually, in couple of major engagements we talked about in the past, Honda and Renault, we are actually accelerating at a faster rate. The pipeline is pretty strong. As in most of our clients, we are seeing new horizons of opportunity, which hopefully once we, you know, the new offerings we form, we will get better opportunity to actually go into these areas. In terms of next year, we continue with our guidance of constant currency growth of 27%-30%, EBITDA 19%-20%. As you know, we give the guidance, which very few companies give for the year. We don't give quarterly guidance, it is our policy that once we give at the beginning of the year, we make any changes to the guidance, if at all, at the end of quarter three. The overall, in case of next quarter, as I mentioned, there will be increments, and it would have an impact, gross impact of 2.5%. With the growth coming in, we will offset large part of this impact on the profitability. In terms of sustainability, we have created and this is an area of focus for us. As you know, we look at cleaner, smarter, safer world for reimagining mobility. Sustainability is something which we have taken up very strongly in the organization. We continue to engage with our clients on the initiative. We continue to engage with our employees on this, how it can be, you know, sustainability can become a key part of our lives and also on the infrastructure. We are very excited with the, we are excited where we are. As I said, the key trends in the mobility industry continue to grow. Key clients continue to invest in those. We are in a pole position, we feel very positive, and we are excited about the different opportunity in front of us. Thank you. We can now have it open for questions, please. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead. Hi, good evening, thank you for taking my questions. My first question is on the margin that you've delivered this quarter, 20%. It seems to be 90 basis points higher, QOQ. Just trying to understand some of the key factors that contributed here. Any colors maybe on how much employee utilization rate improvement might have helped here? I think the mix of business that you've done more middleware revenue this quarter than the previous quarter, that's a monitorable factor as well. Also, if you could share just to what extent the Technica integration costs have that sort of fallen away? I think there was commentary around that over the past couple of quarters as well. Just the factors that have helped in the 90 basis points QOQ margin expansion, any color there would be helpful. Thank you. I think two things. First, naturally, our growth has been little ahead of our estimate. That is one point which allowed us to really leverage for it. The second thing is we could deliver with better utilization. That is the second part, in terms of overall utilization has gone up. That is the second part. The third part, if I may say, there are certain platform and, you know, accelerators kind of a deal we have products. I think little bit of a change in the mix of that. With all these three things, we have been in a position to improve our margin. The cost of integrations have largely been taken care of by, there will be, of course, some part because we have external consultants, for about a year, which keep on doing that. Most of the major part of the integration costs have already been. Got it. That's helpful. The second question is on the demand side, specific to the middleware deals. I think late last year, we had announced that there were 10 large global OEMs looking at doing more work on the architecture, consulting, middleware side, and we were on 7 of those RFPs. We've announced on Renault and Honda. Just trying to understand on the remaining sort of 5 RFP opportunities, could you share with us any key monitorables for you? Maybe how client appetite is shaping up on these opportunities? Very positive. I think now, when we started, I think our experience has, is naturally we have matured into that. The second important part is we have now created an integrated offerings, not only what KPIT has, but also what Technica has, and from other entities have. We have integrated that well. Of course, in addition to that, I think we have created certain upfront offerings, I mean, front-end offerings in architecture validations, and before that, blueprinting and consulting. I guess, I mean, overall, you're putting together what it allows clients to do is substantially reduce their risk or at least get an idea about risk in that program upfront. That is very well received. You know, the engagements are continuing to grow as, you know, in most of the places, what we talked about, all the, continue to grow in this area. Actually, in all the areas. Wherever we are engaged, all these areas, it continues to grow. As I always said, you know, middleware is not by... I mean, that's one area of the, which is one area which is important, but as soon as we get into that area, it creates opportunities for us in the other areas also. Got it. That's helpful. Just my last question, just looking at news flow over the past two to three months, there's been a lot of action on the Asian OEM side. Companies like Toyota, now we have a new CEO, who's accelerating the shift towards EVs there. I think the Korean names also, because of the IRA, the East Asian companies, Japan and Korea-based companies, seem to have an advantage in terms of some of the CapEx that's going into electrification in Europe and in the U.S. as well. Just trying to understand what sort of commentary you're hearing from some of your Asian clients, and if you could give any color around that, would be very helpful. I actually agree with you. I think Asia is a good market, and as a company, you know, that's a market which we are very bullish about in the, you know, in future. Whether it is India, whether it is China, it is Asia, all these markets, we believe, will be good markets for us in years to come. We do see, you know, they are a bit behind, and that's exactly where we think we can bring value to them through our experience of working with the other OEMs. Got it. Thank you very much, and all the best. Thank you. Thank you. The next question comes from the line of Karan Uppal from PhillipCapital India. Please go ahead. Yeah, thanks for the opportunity, congrats on a very strong set of numbers. The first question is on the guidance. With a very strong start, the guidance now requires a very soft pass rate for next three quarters. Are you looking at moderation in growth going ahead, or are you baking in some conservatism, looking at the macro environment? I think I mentioned in my earlier comments, it's we don't give quarterly guidance. We don't revise the guidance quarterly. We give it at the beginning of the year. If at all, it really demands, if there is a bigger acquisition or, then only we revise. Otherwise, we relook at it only at a quarter three. That's what we have been following for last many years, and we feel very comfortable with this. Okay. From demand perspective, nothing to worry at this point of time. All your deal wins and the pipeline looks strong, right? The demand part continues to be robust for us. All our client engagements, we continue to go deep and wide with the existing clients. It is for us, as the foreseeable future is totally solid. We just have to keep at it. Okay, sir. Thanks. Thanks for that clarification. Second question is on the other expenses. Now, if you look at the other expenses line item, that is now at 15% of revenue, which used to be around 17% one year back. If you look at FY 2021, at that time, it used to be 19%-20%. Have you optimized it to the maximum level, or do you think that still there is some bit of optimization which is still left? And what is the nature of spending optimized? Is it more on the G&A side or also on the S&M side as well? If you look at it is, I mean, this is a clear reflection of leveraging of some of the fixed costs that we have with the good revenue growth that we have had. It is leveraging these costs which are there. Most of these costs would be the G&A, the G&A part. On the sales side, we are investing in some areas, but as you know, our strategy is to focus on select set of clients and go deeper into these clients, which means that as we grow more and more in individual clients, as a percentage of the, that revenue generated, the S part will also keep reducing. Okay, sir. Thanks. Thank you a lot for that. Thank you so much, and all the best for going forward. Thank you. Thank you. Thank you. The next question comes from the line of Nitin Padmanabhan from Investec. Please go ahead. Yeah, hi, good evening. Congrats on the solid numbers. Just wanted your thoughts on how should one think about the flow-through revenue that comes through once you sell middleware? You mentioned an OEM is looking to source products. ...How does that typically flow through in terms of incremental opportunity on the services side? The second is, typically, when we think of, these products, what are the kind of margins that typically accrue for these? Just two things, overall. Hi, Nitin. This is Sachin Tikekar. Just clarification, the middleware product is gonna be part of Qorix, just so you know, and KPIT will continue to be the software integrator, just off the bat, a clarification. Secondly, the way it works is when we get involved in middleware, which is somewhat of a heart of the new architecture, it gives us larger visibility into the left side of the V as well as the right side of the V. That means we can actually work on the core architecture, we can work on the blueprint, on the, you know, prior to the requirement side, it gives us better handle on that. On the other side, you know, we can also do more of verification and validation, and there is everything in between. In between, there are applications and features to be added, which are typically, in the areas of infotainment or e-cockpit or autonomous driving, body and so forth. What happens is when you get involved in the middleware, you see other areas where we can continue to provide software integration services to the same OEMs. It's a beachhead of sort for us to get in there, that way we really understand what is it that the client is trying to do, and what could be the possibilities in terms of providing solutions to, you know, sort of meet their objective. Sure. The OEMs that you spoke about, where you're seeing possibly initial, sort of interest, are these OEMs where currently you have, a lower, share and, can possibly sort of help you sort of accelerate your share gains within that? Or are they large ones where you already have very good sort of, relationships and scale? It's First of all of them are existing OEMs. With some, you're right, I think there is a very deep engagement to start with, and some of the announcements that you've heard over the last few quarters. There are other existing OEMs where they worked on middleware to some extent, and now they want to learn from our experience to take the journey forward. It's, it's both ways, Nitin. It's with the existing clients with whom we have announced sort of larger engagements in middleware and related areas leading to SDV, and then, you know, some of the other existing ones who want our involvement going forward. Sure, perfect. This is very helpful. Thank you so much, Sachin. All the very best. Thank you, Nitin. Thank you. Thank you. The next question comes from the line of Mohit Jain from Anand Rathi. Please go ahead. Yeah, sir, first of all, super quarter, so not much to ask there. Everything is, like, perfect, revenue, margin, GP. The question I had was more from a medium-term standpoint. Any assessment that you can share on your wallet share in key accounts, meaning strategic 40? At what stage do you think you may need to expand on the client base to sustain your growth rates on the client base, at what time? Okay, understood. Let's take one question. The first question was. Sure. You know, medium-term view. Our medium-term view continues to be fairly robust. Our conversations with existing clients are getting richer and more engaging as we get involved deeper into their core architecture towards SDV. We see and we really think that, based on that, we really think that there is quite a bit of headroom to cover within the existing clients in the short to mid term. Having said that, I think it's a very interesting question that you ask is, you know, essentially, when do we need to go beyond our T25 OEMs? It's a continuous sense and scan process for us because it's a dynamic environment, and you know, there are new players that are coming in, then there are some old players who get revived suddenly. We have to keep a close eye on that. Every year we make sure that there are at least couple of OEMs, you know, that get added to our kitty, so that, you know, we don't put all our eggs in few baskets. We like the focus, and it's paid rich dividends to us. At the same time, we want to make sure that, you know, we are not. There's no serious concentration with just a handful. First was around wallet share, like, where in your assessment, like, when we see their R&D budgets. Yeah. How much should we ballpark addressable for us? Where are we in that journey, in terms of, say, penetration, whatever way you measure it? There is, as I mentioned, there is tremendous headroom to grow across all the clients. With some with whom we have long-term engagements, obviously, they have given us the visibility, so the headroom is somewhat limited, but not really, because as we get deeper, we see lot more. In some of the others, I think there is lot more to do. You know, we have to understand that this work towards software-defined vehicle that will enable the CASE- ... is tremendous amount of work, and it requires many shifts and iterations along the way. To get there, I think most OEMs are taking at least a two or a three-step approach. First is, you know, step one towards their 2026, 2027 program. Step two is towards 2029, 2030 programs, and so forth. It's hard to define wallet share, because they have to continue to save money on one hand and, you know, sort of spend more money on towards software-defined vehicle. Correct? I think, in some areas, I think with some of our clients, we in some specific areas, we have very large wallet share, and some of the others will continue to increase our wallet share. Let me take this opportunity to address some current and future discussions we may have on this call. See, initially when we started, we thought OEM opportunity is about INR 50 million for us. I'm sure you remember that. We thought our project size would be INR 10 million, INR 20 million. Now it has gone INR 20 million to INR 50 million to INR 100 million. Similarly, we believe our client engagement, there are few clients who are coming to INR 100 million this year, right? Going forward, we believe that's where many of our diamond clients would be there. We believe now the opportunity is at least INR 150 million, if not INR 200 million. Fundamentally, as we have gone ahead, we have built our expertise, we understand what is the spend. We know which areas we are very differentiated, where we can add value, and we continue to do that. We are very well entrenched, not only from just an engagement perspective, but actually, how do we get more into architecture, some of our platforms, some of our deeper knowledge, different type of engagement. That's how we are engaged with them. The spend of the client is pretty big, actually, so it's not this. I think, during this quarter, I mean, I don't want to go into it. I guess you all know, because we did not get that question. Naturally, there is a lot of spend if we had to break the spend of OEM. OEM will spend certain money, which will be in-source. If you take an example, suppose they have to spend, out of 100, depending upon the client, some of them, in-source 30% or 50%, that's what they want to do. They will outsource. There are different business models which are coming, which, will be on the part of the revenue equation. They will not be part of the engineering spend. These are all areas as what we are tapping into. Going back to the first part, when the client is trying to do the, in-source, that, again, is an opportunity for him many times, because they cannot really find the talent or this, again, to engage, with the company, such as KPIT. They can also work with some other clients, because basically they are trying to get services from different players. The other part of that is, many of them also, I mean, I want to address it upfront, because there are the captive centers, et cetera. They will certainly set up the captive centers, because this part, 30%, 40%, is big, and they cannot find these 3, 4, 5,000 people, you know, of this expertise outside. Not only that, they have to do it also, largely also on the IT side, because that's where they can also reduce their costs. In future, we see, we have had the discussions also in many cases, where they want to set up their centers. They want to do this part, where we may participate or we may not participate, depending upon, you know, how we feel. Many of them are also looking for a partner in India for doing IT plus engineering or as a center or doing even a joint venture with them, which ultimately, of course, they will acquire in a certain time of frame. We want to remain focused on what we do. We want to focus at a higher end of the business, where we can take the full ownership of the business. We want to be ahead of the, you know, thought leadership. That's how we want to drive. We want to be on a place where we can add value into their monetization part. From that perspective, this is what is happening. Any news coming in of a client, it doesn't mean that is at the cost of KPIT. We are very, very confident. We are in a very confident zone. We are very comfortable zone. I just thought, you know, I will address this point because, you know, these small things could keep on coming. That's why I wanted to address. Thank you very much, sir. Just to be sure, you are saying, you can get, say, $200 million also from one client, from? Absolutely. Very good. Sir, that clears a lot, sir. Thank you. Thank you. The next question comes from the line of Dipesh Mehta from Emkay Global. Please go ahead. Yeah, thanks for the opportunity. Just continuing on the, I think, on prior questions answer. I just want to understand how global auto majors are choosing their partner? What kind of the constraint they are facing? Because the overall demand remain very strong, whether the talent sourcing is the big challenge for them, and that's why they prefer to work with multiple partners. Capability-wise, they are finding differences, and that's why they have multiple partner kind of strategy. Do you think, let's say, two year, three year down the line, there would be some consolidation may happen? If you can provide some understanding about how overall ecosystem is currently evolving, and how KPIT is trying to benefit from the emerging trends. Second question is about the data-related question. If I look. Can we do one by one? I think it just makes it. Sure. In this case, I think this is what actually I answered to a large extent. Just to tell you, right now for next 7, 8 years, as we see, OEM is in an area where they are trying to do what they don't know necessarily. They are trying to catch up with some of the other, in some technology area. In some areas they are very advanced, in some areas they are not, and they have to catch up with multiple things. There are a lot of unknowns for them and for everyone else in the industry. That's where they are trying to engage with somebody who has experience working with multiple companies. They understand their problems, they have ability to solve it, and they have solved it in some way. That's where actually KPIT is playing. KPIT is playing. That's why when we... I mean, there are many people use this term SDV very loosely. We are talking about the platform which they build for the future and the new architecture. That's where they need a very, very solid partner. I think when we explain some of our deals in the past, including Renault, right at point of time, we were nowhere. We were not even engaged with the clients. We got engaged with the clients because they thought they need a different kind of engagement. KPIT is engaging on these areas and the new areas based on a different level of expertise, end-to-end expertise. If you ask me, this KPIT is actually partner with the highest scale, with the very solid competence. In terms of range of expertise, the depth of expertise and problem-solving kind of expertise, that's where KPIT stands out, and that's what KPIT is basically winning. The other part, where they are trying to build their own centers and this, there they can engage with the people because they are looking at certain specific skills or specific projects. As I said, we work on more platform side here. They're working between the projects or programs. That's where they engage with multiple clients on project basis or, you know, specific engagement basis. That's what they are trying to do. Understand. Understand. Another question which I have is about data-related thing, about if I look revenue by vertical, which we report, the other segment, which we spoke sometime back, sharing, it seems to have increased substantially after if, let's say, if I adjust for the two segment which we report, passenger and commercial vehicle. Others seem to have almost 4, $3.5 million-$4 million addition quarter-on-quarter. If you can provide what led to that sharp increase, almost 35% of incremental revenue came in others this quarter. Second question is about margin. Now, we are at closer to 20%. How one should look margin trajectory? We have given guidance for current year, but from medium-term perspective, whether this is the optimal range, or you think there is a upside to margin? Thanks. On the first question, if you look at others, I think, this is the first quarter where we have consolidated FMS revenues. The majority of that portion has gone there. You'll see some split happening from the next quarter onwards. There is nothing which is substantially changed in that segment apart from this. Otherwise, there would be a nice, normal growth that has happened in that segment. On the second part, on the margins, we are at the 20%, as Kishor said in his opening comments. We'll have wage hikes next quarter, and there would be some impact on the operating margins next quarter. Obviously, we have guided for a 19%-20% margin for the whole year, and we are confident of being in that range. If you take a medium-term view, obviously, as we have said earlier, there are opportunities where margins can go up. Of course, we will also look at whether we need to accelerate some of our investments in order to look at growth going forward, and balance out that with the margin. That is how we look at it. From an operations point of view, there is definitely scope for improvement in margins, even beyond 20%. Understand. Thank you. Thank you. Thank you. The next question comes from the line of Ankit Agrawal from Yellowstone Equity. Please go ahead. Yeah, hello. Thank you for taking my question. My first question is on Qorix. It seems like a high potential, like a product company, which tend to have large upfront investments and long gestation periods. Just want to get a sense of, like, what kind of investments would be required and before the company can generate revenues and, you know, what kind of gestation period are we looking here? As we have said earlier, when we announced Qorix, this is a company which will work on the product side for the middleware platform. From the KPIT point of view, we will invest about EUR 5 million upfront, and then in another EUR 5 million over after about 18 months. That's what the investment from KPIT side would be. Of course, the other partners, ZF would also invest into the joint venture post receiving approvals from our all the regulatory approvals from merger control processes. That's what it is. Just to remind you, KPIT has moved a lot of IPs it has built in this area, that is valued differently. Of course, just to corollary of that, ZF will invest more cash in the time. The third aspect is about the gestation period. Since we are actually putting our own IPs in it, our time to market will be much faster than, let's say, a start-up. Okay, understood. Still, like, some idea, like 2, 3 years, 5 years? What? Gestation? Two, three years. I think, I mean, that's what we have planned actually, for three, four years. I think, looking at the traction we see, I think it may be ahead of time. Okay, that's very helpful. Thank you. Then, more of a bookkeeping question. What kind of effective tax rate we should bake in on a steady-state basis? About 25% for the year. Okay, 25. Okay. Great. That's all I had. Thank you. Thank you. The next question comes from the line of Sandeep from Equirus Securities. Please go ahead. Yeah, thanks. Thanks for the opportunity, congrats on again, a great set of numbers. Most of the questions being answered. Just looking at FY 2023 being a solid year in terms of closure of large deals as well as mega deals, that clearly shows that our win ratios are going up, and we are becoming a preferred vendor in eyes of the OEM. Is it fair to say with opportunities increasing, our offering gaps is also reducing? A book-to-bill ratio between 1.5-2 times can be maintainable beyond FY 2023, in which year we have shown a book-to-bill of 2.4 times as a whole. Sandeep, we are not sure whether we are able to hear. We didn't hear you properly. Can you repeat your question maybe in smaller pieces? Yeah, yeah. What I am trying to say is, FY 2023 being a great year in terms of closure of mega deals and the large deals, and which has resulted in a book-to-bill of 2.4 times. It clearly indicates that our market share is increasing. We are becoming a preferred vendor in this space. Looking at the opportunity and the offerings which we have versus peers, is it fair to believe that 1.5 to 2 times book-to-bill is quite maintainable? I think it is difficult to look at and say about the guidance for the book-to-bill ratio. What we believe is, if you look at the closures that we have done, of course, last year there were some mega engagements which we had closed, which has improved that. Definitely, I think going forward also, looking at the current pipeline and our positioning, it is fair to assume that it will be quite sturdy. Sandeep, what I would like to add is just to, just for clarification, is yes, we announced 2 sort of long-term engagements. We continue to have meaningful engagements with all the other clients. We don't necessarily announce for various reasons. Of course, there are 2 big ones where the business is growing. If you look at just the pipeline that we have announced for this for the last quarter, it was on the back of our existing clients, which are not these 2 clients. I just want to say that it's got little more broad-based among our top 25 OEMs and not just dependent on 2. Okay, helpful. Just a follow-up, is there a mega deals pipeline, continuing strong and robust, and anything in the advanced stage versus what we have done with Renault and Honda? Similar size of deals are in the pipeline, and anything in the near term can be closure? Sandeep, I think as Mr. Patil mentioned, as we go deep and wide with these clients, we just see much more than meets the eye. Not all of them will be sort of packaged together as what you'll call mega engagement. However, over a period of time, looking back, they'll all seem like mega engagement. You know what I mean? Essentially, the point is, going deep and wide, and some we possibly may announce, but mostly, they'll just be, work that we'll continue to do and add to our existing T25 OEM clients. Okay. Okay, thanks and all the best. Thank you. Thank you. The next question comes from the line of Akshay Ramnani from Axis Capital. Please go ahead. Hi, thanks for taking my question, and congratulations on a great quarter. I have a few question. I'll go one by one. First one is on your comment upon OEM revenues becoming $100 million or $150 million plus. Does that in any way affect your or limit your ability to. ... scale up another OEM to a similar size, since you're already working with their competitors. Just trying to understand that, does this type of scale with a particular OEM mean that your business remains, structurally remains a high concentration of business and client selection thereby becomes very key? Actually, that's a fair question. For us, I think as we go deep and wide, I think some of them will move into that INR 100 million, INR 150 million to INR 200 million category. However, one has to understand that OEM used to work with Tier 1, that used to serve their competitors. They are used to working with key partners, that work, you know, with their in or direct or indirect competitors across the globe. That has been the case with KPIT, and that will continue to be the case in case of KPIT. As we become the software integrator to many of them, we don't see that as a hurdle for us to continue to go deep and wide. As long as, you know, we are there to solve their meaningful problems, they are more than happy to engage with us, knowing really well that what we do with them remains only with KPIT, right? That's something that we have to do very judiciously and will continue to do so. We are not looking at it as a concentration risk, because we are looking to scale this for multiple of clients. Overall, I don't think any big change than what we have, or probably it will be more balanced in future. Got that. Second one was: in the presentation, there is a mention of focus on improving the rate realization. If you can please elaborate on that. How is the pricing environment? What kind of price increases are we talking about, and when do they kick in? I think, we continue to do this as and when our, you know, contracts allow us to do. We haven't faced any issues right now, I mean, in increasing the rates. I mean, maybe we have to be also mindful about what we ask for. We have been in a position to slowly, steadily increase our realization. One is the rates, but the second is also when we are moving towards the fixed price projects, how we engage, and, you know, get a premium at, how we can improve the productivity. These are the areas we are continuing to do, that will also help us in improving the realization. Got that. Another one was, similar, to, the pricing model. Since we are now, heavily investing in IPs, would you look to price them towards more outcome-based or, license-based services? Or would these just continue to be tools and accelerators and enabling to you to become a larger software integrator? How should we look at that strategy? We would like to be as a software integrator, and naturally, we have accelerators, platforms, which we have some licensing, et cetera, but it's some part of the business. We believe overall, if you look at it, there are different models which are evolving, and we are not in a hurry to change, make any change to our business model. This is what client be comfortable, we are comfortable with. In certain specific area, we naturally are experimenting different models. As we feel more comfortable and the clients feel more comfortable and they see better value, we will do that. For some time at least, we will continue to go with our current model. Great. Last question from my side was, if you can also touch upon the offshoring trend. Are we going to see any increased offshoring in second half of this year as the some of the large deals mature, or, there is a little bit of shift, in H1 versus H2? I mean, that depends upon the stage of the project, as we have said. We are also creating nearshore facilities. We are doing offshore facilities. For sure, you know, there are two parts. One is whether we have that kind of a competence and where we have that competence and how we can leverage that. Of course, it should be economically viable and cost efficient for the client. We don't have to be lowest, but we have to be moderate on the cost side. That's the balance. There is, of course, opportunity to increase more as these projects stabilize in next couple of years. Got it. Those are my questions. Thanks for answering them. Thank you. Thank you. The next question comes from the line of Anika Mittal from Invesco Advisory LLP. Please go ahead. Hi. Good evening, sir. My first question is, in the last quarter, towards the revenue share of Technica, are we seeing a trend where, say, 24 something Technica goes up? I'm sorry, we couldn't hear you clearly. Could you just repeat the question, please? Sure. Am I audible now? Better. Okay. My question is, in the last quarter, what was the revenue share of Technica? Are we seeing the same growth, say, 20% in Technica going ahead? See, now, I mean, we have already said that, we are completely integrated now, and, it is really difficult even for us to know what is the Technica growth, what is KPIT growth. It is all. Mm-hmm. Integrated together, it is KPIT plus Technica together growth. It's difficult to segregate that out. Sir, my next question is, Honda has recently done an agreement with SCSK regarding the software development. Are we seeing any downside on the revenues due to this diversification in vendors by our clients? I think that is probably a couple of times addressed already in the call, where we have said that that has got no impact, and we are actually ahead of our engagements with our clients ahead of our plan, and we believe that we can add to a little better or more than what we had earlier anticipated, so that has got no impact. Sir, my last question is, any update on the hydrogen technology on which we were working? Any progress which you can share? We, as a strategy, will continue to invest in future, and hydrogen being one. We've been working on it for several years now. Now, the only change is some of the production programs have actually started to take place, and we are very happy to share that, there is a large hydrogen, truck integration program on which we are gonna be a key partner. The good news is, what we've been talking about as the future is becoming reality in some pockets. Thank you, sir. That's it from us. Thank you. Thank you. Thank you, Anika. Thank you. The next question comes from the line of Karan Uppal from PhillipCapital India. Please go ahead. Yeah, thanks for the follow-up. Just, 1 slightly long-term question. In terms of the overall SDV development, where the entire software architecture is changing, where are OEMs in that journey? When can they derive the meaningful revenue from after-sale services? Which are the areas which are looking promising in terms of monetization? Happy to hear your thoughts, sir. I think most of their programs are late by about 1 year in the first place. We believe that many of them have compromised in some way for multiple reasons in the best possible architecture. Of course, they will also learn from this experience. Really, in true sense, I guess they will be ready by about 30, in some cases, places, 32, by something which is very solid. On the services side, I guess, in some specific area, yes, the monetization will start and will start maybe next couple of years, and it will keep on increasing. The real tech, real opportunity is when the SDV structure is fully integrated. Any areas where monetization, you think, is looking promising, where customer adoption will be quicker? Any areas where, the monetization will start early in-. Yeah. I mean, one simple thing is the maintenance or whatever the dealers are doing, right? What basically Tesla did, right? They basically eliminated dealers to a large extent and kept them only for certain services. For the new generation of cars, that's what people are trying to do, so that will be one area. Upscale of certain new features of software, that will be the another monetization part. I think certain areas in terms of entertainment and gaming will be third area where it could happen. Payments may be the fourth area it could happen. These are some of the areas which may happen. I can't predict exactly when and how. Also, what they are doing is some of the things that were available as part of the vehicle, as soon as it gets moved through a software, they're actually offering that as on demand. Again, that's one area which will continue to grow, which has started to happen in some bits and pieces, will continue to grow. Okay, sir. Thanks a lot for the detailed answer. Thank you so much. Thank you. Thank you. The next question comes from the line of Rahul Jain from Dolat Capital. Please go ahead, sir. Yeah, thanks for the opportunity. you know, in the Microsoft call earlier in the day, they mentioned that Mercedes-Benz is bringing ChatGPT via Azure to more than 900,000 vehicles in the United States. making, you know, for this car voice assistant more intuitive. are we going to see that as a good incremental opportunity, or this is just a small extension, would not be much significant? This is in line with what Mr. Patil just said. You know, some of these things, now you can call it ChatGPT or generative AI. Essentially, these are some of the services that are getting extended through the vehicles. You know, that's their way of creating a service model. It's an interesting one that they have announced, and you know, we'll see variations of it going forward. Right. Right. Also, you know, with many this global OEM planning increased production exposure, in India, does that make your proposition any better or would not make much difference, as these may be already, deeply engaged already with us? How is that? Yeah, I mean, there are always some local projects specific to geographies. I'm sure we can play a more meaningful role there. Right now, most of the people are doing largely what they are doing globally, but I can see now the things changing, and there are specific to India, some features being added, some programs being taken up. I'm sure we can add value. Sure. That's it from my side. Thank you. Thank you. Thank you. The next question comes from the line of Pankaj Kumar, an individual investor. Please go ahead. Hi. Are you able to hear me? Yes, Pankaj. Yeah, first of all, congratulations for an excellent result. Thank you. In the last conference call, you said that, Q3 and Q4, the second half is not going to be as good as the first half. Still you believe, it will be like that only? Yeah, I think we have said that the acceleration will happen in H1, better than H2. H3 is traditionally a weaker quarter. Q3 is traditionally a weaker quarter, and we wanted to accelerate looking at, you know, to be safer, we wanted to accelerate in the first part of the year, and that's what we are trying to do on the existing programs and projects we have. In that context, we have said market and the opportunities look great, otherwise the environment looks good. If at all we have to revisit, we'll revisit it quickly. All right. The second thing is, you said that there will be 250 BPS of gross margin impact due to wage hike, but you would be able to manage that. Finally, there will not be any impact in the next quarter. Is that understanding correct? No, no. We have said that the gross impact is about 250 BPS on the margins. We will be substantially able to absorb that with operational efficiencies and revenue growth, but there would be some impact on the margins. Okay. Thank you. That's it from me, sir. Thank you. Thank you. As this was the last question for the day, I would now like to hand the conference over to the management for closing comments. Thank you, everyone, for being a part of this call, and if you have any further questions, please write to me. My email address is mentioned in our investor update. Thank you so much, and have a great evening. Thank you, everyone. Thanks. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines.