Ladies and gentlemen, good day and welcome to KPIT Technologies Q1 FY 2027 earnings conference call hosted by Dolat Capital Market Private Limited. 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 this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you. Over to you, sir. Thank you, Nasia. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies Limited for giving us the opportunity to host this earnings call. Now I would like to hand the conference over to Mr. Sunil Phansalkar, who is Vice President, CF&G, and Head of IR at KPIT, to do the management introductions. Over to you, Sunil. Thank you, Rahul. Good evening, and a warm welcome to all on the Q1 FY 2027 earnings call of KPIT Technologies. On the call today we have Mr. Kishor Patil, Co-founder, CEO, and MD; Mr. Sachin Tikekar, Co-founder and Joint MD; Mr. Chinmay Pandit, Board Member and Head, Americas; Mrs. Priyamvada Hardikar, CFO; and yours truly from IR. As we always do, we will have the opening remarks by Mr. Kishor Patil on the performance during the quarter and the outlook for the remainder of the year. Then we will have this open for questions. Once again, a very warm welcome to all. Now I will hand this over to Mr. Kishor Patil. Thank you. Good evening. I will take you to our results for quarter one. Automotive industry has been, for some time, facing some challenges globally, especially on account of extreme competition from China. It was accentuated by certain geopolitical situations, whether it is tariff or other parts in different parts of the world. The last one, which was the war, which was probably the most unexpected by many companies. It also had a significant impact in terms of their supply chain and the input costs. With all this, specifically for European players, have been the most impacted, both because they had impact in China market as well as the Chinese competition getting into their own market, which is in Europe. Last but not the least, having the restricted U.S. market because of the tariff or uncertainty because of that. Last, but input cost because of the war. With all that, I think the profitability had a significant impact, apart from their drop in the number of cars sold. This specifically impacted European players, also Japanese players. European players significantly impacted. With that, you could see that there have been many job cuts, many profit warnings, many pay cuts, ongoing restructuring, significant write-offs, etc. On the back of this, after some of this, one month back, we made a disclosure to the stock market about the impact on KPIT for this year. We talked about how it may pan out to some extent. Specifically for the quarter one, we talked about that year-over-year, it would have a degrowth of about 1%, and quarter-over-quarter, about 5% drop in terms of revenue, and more than disproportionate impact on the profitability. On the back of this, for this quarter, year-over-year revenue, we had a CC revenue growth of 0.1%, year-over-year revenue decline of 0.6%, quarter-over-quarter CC revenue decline of 3.6%. In terms of profits, the EBITDA at 17.2%, EBIT at 12.3%, and the PAT at INR 1.17 billion. This is where we are in terms of the actual numbers. The profit, basically the PAT got impacted both on two other accounts, which was, one is the ForEx loss and also share of loss from Qorix, which again, in some way, was an impact of postponement of certain revenue, specifically in the Europe region. That had a further impact on that. On the back of that, what was still good was KPIT, we could do 257 million worth wins during the quarter which was across the world, but mainly driven through connected cars, then after-sales transformation and autonomous. These were some of the few leading areas which helped us to get these revenues. While we reach there, I think the two things which we have mentioned about is this, of course, is not where we have been in the past, and we would like to come back to the growth. During the outlook, we have just mentioned that H2 will be better than H1, and we will return to growth in H2 by Q4, driven by the Q4 performance. Our profitability will return largely when the revenues come. Of course, there are other levers we will use before that. This is where we are now. The point is how we will do it, we have talked about some multiple areas there which could help us getting there. I may say that this is not a response to this situation. We have been working at it for last many months, even during the last year. The issue is about how quickly we can do that. I think the drop in the revenue was quicker than we got the revenues out of some of these areas which we have been talking about. First thing is, overall, I would say that we have been trying to broad-base the revenue in multiple ways. The first thing is on the existing OEMs. In the existing OEM, apart from focusing on increasing our wallet share in the areas in which we work by getting a larger responsibility of the programs and through multiple ways. We have also added many areas of practice or offerings which we provide to the client, which will help us. For example, in the existing areas where we are trying to really You remember we have done an acquisition, Caresoft, some time back. Now we are leveraging that for cost reduction programs, and we will do that more, actually. That is one area which is absolutely essential for these OEMs at this point of time. The second, for example, is after-sales transformation, and that's some of the areas we are doing. First thing is in the existing car OEMs, this is what we are doing. We are seeing now a good traction in these areas. Couple of these areas, these are some of the fast-growing areas which we are seeing. The second thing is new passenger car OEMs. There are some car OEMs, very stable and I would say successful OEMs in Japan, Korea, and also in Europe, which we have not been working enough. These are some of the OEMs we have been engaging for last few years, and now we see places where we could actually be in a position to accelerate their journey. I think this is from the existing car OEMs or some new passenger car OEMs. The second is off-highway and trucks. We talked about it, that we had started focusing on this some time back. There are new logos across U.S., Europe, and Asia, with whom we are engaging in. As you know, like SDV, now SDM is what you look at, like software-defined machines. This has a talent across these off-highway and trucks. Specifically, if you look at the off-highway, there has been a big success for some of these companies. You would know that some of the leading off-highway companies have a market cap which is bigger than most of the OEMs, and they are highly profitable, growing very well over last few years. These are some of the clients we are engaged with, and we would like to visit there. Some of the new logos which we have got, we would like to really double down on these. The third thing is the products and solution. We have multiple products and solution. Again, we have made multiple investments and development. A few of the latest one is have been N-Dream. The second I talked about is after-sales transformation was the IDAT or Technica products, and the Cymotive, the cybersecurity. What we have done is we have been putting together to integrate the whole story across the software development cycle and the vehicle development life cycle. This is all getting powered by the automotive intelligence platform, or I mean, it's a Beacon. What we have done a partnership with Microsoft for a global go-to-market in automotive area, that becomes the base for all this. This should help us. Basically, Technica becomes a infrastructure in the validation, which is powered by Beacon. IDAT becomes after-sales, powered by Beacon. Validation is there, IDAT is there. We are looking at the overall product life cycle across which we can build autonomous, where we have been the world foundation model. Across these areas of offering powered by Beacon, we are providing the product. This is one area where products and solution is really helping us to grow, this will be also margin accretive over the period. This is where we are investing, and this is where we are seeing a good traction. Other adjacencies we have looking at, one is the micro mobility where we are already seeing a good traction. We already have some wins, which is the last mile connectivity. The second thing is about the deep tech, some of the opportunities we are looking at in the area of deep tech. With all this, we are trying to see that we are improve wallet share expansion across all the practices and create offerings which are cross-practice offerings for these clients. This is how we are looking at to do this. Now, this has been our places. This is where we have invested, this is how we were furthering our strategy. Unfortunately, there has been some gap between the impact we had versus the revenue realization. We do believe that this will, of course, be overall revenue accretive and we will return to growth. As we said, by the end of H2, by Q4, we will be back to the growth and hence the reasonable margins which we have been used to. I would like to say that we are not very comfortable where we are. We believe that mobility overall as an area is very much there in multiple forms. It will expand its scope, we will continue to have a balanced growth, a broad-based growth across the clients, across the practices, and across the adjacencies. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. 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 is from the line of Nitin Padmanabhan from Investec. Please go ahead. Hi. Good evening. Congrats on the strong deal wins despite a tough quarter. I had a couple of questions. The first is, by when do we think commercial vehicles will really come back to growth? If you would give some color on why we saw the weakness during this quarter there, and because you have had reasonable deal wins in client additions in the off-highway and commercial vehicles. That's the first question. The second is from a Europe perspective. Europe, we seem to have, at least in the presentation, a reasonable number of deal wins in Europe despite the weakness that you spoke about. Also it looks like some of the OEMs have a reasonable number of model launches or updates by end of next year, which is a large number. In that context, do you believe that this weakness can be sort of temporary? These were the two questions. I just have one last question on margins, which I will sort of ask after this. Nitin, as I mentioned, we of course don't think that these are the kind of permanent drops or anything. We enjoy a very healthy relationship with the clients. We have also broadened our scope. Of course, many of them have to reinvent themselves, so they look at KPIT as a natural partner. We are engaged with all the OEMs you are talking about. That's the reason our pipeline is also strong. What we are not sure in the case of the current part is when these deals will realize. We are not at all worried in the sense whether we would get our share of the business. It is about the timing, and that's why, at least in the short term, we have discounted that part, at least for a few quarters. That's why we have said what we have. On the commercial vehicle, we will be for growth next quarter. Actually, this quarter also, there was one specific thing what had happened was, a quarter before we had one significant revenue in a particular place. That's why it looks like this. I think you will see a growth next quarter. Sure. Perfect. Lastly, on the margins, during the analyst day, you spoke about an aspiration of achieving 22%-24% by FY 2029. That aspiration can still hold or would you worry about it at the moment? I would say the medium-term outlook remains good for two, three reasons. I will not just make a statement. There are two, three things. As I said, we believe that our product revenues will grow, and the solutions revenue will grow exponentially. We still are, I would say that we have a reasonable success. It is not that we have not started. We have already seen the success in some areas. In solutions, there are many solutions we have identified. Some of them are in the initial stages. We believe in the next quarter or two, they will also be ready to be deployed. With this, we believe that our growth will be largely driven by products and solutions, and this will be margin accretive. In the medium term, we do believe that because some of this we have also looked at outcome-based kind of business model. Over the medium term, we do believe that we will be in a position to get where we have mentioned. Super, perfect. Thank you so much, and all the very best. Thank you. Thank you. The next question is from the line of Karan Uppal from PhillipCapital India. Please go ahead. Yeah. Thanks for the opportunity. The first question is on the U.S. geography. It has done well this quarter. Can you unpack the growth between, let's say, OEMs and off-highway, and do you expect this momentum to sustain for next few quarters? That's the first question. Yes. This is Chinmay. The growth in the geography is fairly well-balanced across the entire portfolio. We have seen good growth on the commercial vehicle side, and some of our long-established relationships on the passenger car side as well. I think we have a fairly good visibility for the upcoming quarters to have it continue in the same line. Okay, thanks. Second is on Europe. Actually, the revenues didn't fall off versus what we were expecting. Can we expect the impact in Q2? And also, if you can quantify the revenue impact for European geography. I think there are two things. First is, absolutely, optically, that looks like that. There were two reasons. One is there were certain revenues we were expecting, which did not come there. Some of this, you will see that it will have some impact next quarter as you will see. I think we saw a reasonable impact in Europe, which was about 4% or so. Sorry. For the quarter. For the quarter, about 4% or so. We also see, as you would look at, this impact will not be at a company level. I'm telling you at a geography level. This will be made up by U.S. as well as SEIMA. Where this quarter it shows a particular, because of one transaction, there are multiple things look like that. This quarter it looks drop, and as you know, the revenues are less, that's why that drop looks big. We are seeing a significant growth in SEIMA also. I think with the growth in U.S. and this, you will see, but the Europe impact, you will see next quarter. Okay. Kishor sir, there were two LGV programs which were going to be ramped down. Are they in the base now, or do you expect the impact to continue? If they are in the base, should we expect the Japan, Korea, and China geography to bottom out? One program from Europe is almost getting over now. We'll go to start of production. That's been planned. The one in Japan, that was actually canceled at the last minute. Both these programs are coming to a natural kind of an end. In terms of these specific programs, I think this is where we are. Just to clarify, the program means the actual vehicle program was canceled. Yes. That's the impact. This is what has happened. Of course, we do have a pipeline from these clients. It is not that we don't have a pipeline from these clients. What we are not sure, again, is in the current situation, specifically this being from Europe and Japan, is the timing of when we will be in a position to get further revenues. Got it. Just last question on the margins. The other expenses were up significantly this quarter. Surprising to see expenses being up in this kind of a quarter. Are there any one-timers there? How should we expect margin trajectory from here on for the next few quarters? In terms of other expenses, there has been a certain impact because of the foreign exchange rate also. As you know, these are consolidated accounts. Secondly, there have been some provisions because of the acquisitions that we did and some bit of subcontracting cost in European region that we incurred for our client. Nothing out of the way. These are operational. Going forward, the way we see is the margins will improve, but it will improve incrementally, not significantly till our revenue go back. Revenue will be the major driver. Right. We will be in a position to optimize costs, but only incrementally. That is point number one. The second is the Qorix loss, which we said, I think it will continue for at least next quarter or two. That we believe that's how it will be. Mainly the driver will be the revenue coming back. Okay. Thanks a lot and all the best. Thank you. Thank you. The next question is from the line of Chandra Muthiah from Goldman Sachs. Please go ahead. Hi, good evening and thanks for taking my questions. My first question is just around one of the prepared remarks that, Kishor, you had made. Over the past 18 months, I think the European OEMs have found the going little harder in China because of the higher luxury taxes there. Also on the other side of the coin, the Chinese OEMs have been taking market shares in Europe from the European OEMs in a lot of the markets. I know KPIT has, for the past two and a half years, been trying to seed businesses in China and try to see how we can contribute to Chinese OEMs who are now making a bigger impact in the global EV market. I just want to understand, over the past three to six months, have there been any developments there? Anything changing there which might enable KPIT to participate more in this trend, which at this stage seems to be a little more structured? First thing is absolutely, I have also said that we'll be very patient with China, but we'll continue to grow and invest in China. We have engaged with two OEMs and at least one of that, we are about to get to a meaningful engagement in that case. As a third thing, I must say that we have found a reasonable traction for our products and solutions in China. All the three things are working. The scale will happen because now as you know, China also their volumes have gone down and there also the industry has taken a beating. The impact is basically most of the companies are aware that they will be in a position to really grow only meaningfully outside China profitably. I think that is where they see a very good KPIT as a partner which has been in China as well as has a very strong both client relationships as well as ecosystem play outside China. We do believe, and we absolutely believe in our efforts and strategy for China. Apart from that, as I mentioned earlier, we want to be very broad-based. Multiple areas I talked about. The third thing I would say is China is a place where we want, and we are also learning. As important is, as you know, many global OEMs are forming partnerships in China. We believe that also we can leverage significantly going forward. Got it. That's helpful. Second question is just around, I think in the past, at the start of the year, you have provided some color on how you think the first half versus second half can progress. This year as well, I think you've given clarity that the first half, those two quarters might be sort of similar. Just want to understand the back half. I think you seem to have visibility that things will improve in the back half. Just want to understand what are the key drivers of that and also relative to, I think at the Investor Day after Q4 results, initial thought process was there could be possibility for organic double-digit growth year-over-year. Is that a run rate that you think is feasible for the back half of the year, once the first half sort of headwinds are cycled? I think we have mentioned that, I would think you would appreciate our clarity or if I would say transparency and we share whatever happens at the earliest. When we were of the opinion that in the first half because of some of the reduction of cancellation of SDV programs, our revenues would go down and it would impact the first half. We had this Investor Day after that and where we explained what would be the impact on KPIT and what we would be doing. We talked about the whole strategy. I have not told you anything much different than what we have said there, and we would make up for it. Now, after that, there were major changes in the European ecosystem, and many European OEMs had an impact on their results and the subsequent actions post that. That created a lot of uncertainty because it takes time for people to figure it out and understand what they will do. That is the impact. Frankly, because of that, we have been saying what we have been saying. Beyond this, we have talked about two things. One is H2 will be better than H1, and by Q4 we will have a meaningful growth. That is what we have mentioned. We also believe in our medium term and next year after growth strategy because of the multiple actions we have taken. I must say that the impact we had is in the couple of clients which is significant, but the growth has been more broad-based and across multiple clients. We do believe that by the end of the year and next year, these accounts will bring a meaningful growth. Got it. That's helpful. Completely appreciate all the clarity and transparency that you showed. Just last question. I think over the past two to three quarters, becoming more and more visible that your fixed price contracting is increasing 600 to 700 basis points versus where we might have been last year. Just want to understand, from a margin standpoint in this kind of environment, how that needs to be construed. We've also made the points around that multiple months of working with many AI tools, the Beacon AI project and so on, and how that can also add productivity, efficiency in this environment. Just want to understand how to put these two points together to try to figure out what the range of profitability could be for the company in this sort of newly constituted business model in a steady state environment. The first thing we said that any change in the business model, the basic thing is move to the fixed price business model. Once we do that, we have multiple options. Number one, of course, the usage of AI. Again, I must tell you, it takes some time to move towards completely AI-based delivery, because depending upon how the infrastructure is set up, how much they allow our tools to be used on their infrastructure versus our infrastructure, it takes some time, and there is some buy-in in that process. The second thing is also the solutions which we bring in as a part of the fixed price delivery, which have a better margins. The third is the products. For example, Beacon itself has two business model. One is as a product or a platform, which is basically subscription-based. The second, of course, we use for delivering to the client. With all these combinations, flexibility is available to us to drive with the clients to maximize. That's what we are doing. To answer your indirect question probably, is we believe it has two meanings. One is we are in a position to improve our margins for where we are signing the contracts. First is they are always meaningful. We typically continue to hold some premium against the competition, that I always talk about. Secondly, even in the geographies where it is very competitive, in a certain amount of time, we can move towards a reasonable margin or a better margin. I think this is how I would describe the scenario. Got it. That's very helpful. Thank you very much, and all the best. Thank you. The next question is from the line of CA. Garvit Goyal from Serene Alpha. Please go ahead. Hello, am I audible? Yes. Good evening, sir. Sir, my first question, when we say Q4 will be stronger in the terms of growth, I just wanted to understand how are you seeing European OEM in that particular quarter onwards. Are you seeing them start using KPIT AI solutions to compete against the Chinese competition, or do you think the current situation will be there for those quarters as well, but you will get support from the other geographies? I am asking this because in order to return to our earlier growth trajectory of 20%-25% organic growth and the kind of margins that we did earlier, I think we need to have a decent contribution from existing European OEMs as well. Where we are on that, sir? Let me take that question, and thanks for setting the expectations for next year as well from growth perspective. I think let's talk about European OEMs. What is happening to them, as Kishor talked about earlier, there are three forces at play. Their share in China, which used to be the highest, that has gone down and it continues to go down. Number two, in their own home turf territory, Chinese are gaining market share. And because of the tariffs, they are becoming not so competitive in the U.S. They are under tremendous pressure. Having said that, they also realize that it means structural change. This is not something that gets over, right? They are rethinking their strategies. That's the fact, and this is where all the European OEMs are. Now what does that mean to KPIT perspective? We still believe that all of these OEMs, they've been around, and they're going to be around. They just have to figure out how they're going to be around and viable going forward. In their journey, given our relationship with them, the conversation has shifted toward how does KPIT help these OEMs reduce the cost of their product by at least 30%-40%? Secondly, how do we help them reduce the cost of their production? If they are able to bring these price points down by 30%-40%, they become competitive again. Our conversations have actually shifted towards these two topics for the European OEMs. This will take time as they are sort of re-baselining what does it mean to them and where they really want to spend money. These conversations are already being initiated, and we believe that once we get over this hump over the next couple of quarters, some of these cost reduction initiatives will yield revenues to KPIT. This is point number one. Point number two, our current business is more than 50% comes from Europe, absolutely. The effort over the last six quarters has been to have a broader base growth. That means how do we have balanced growth across Europe, Americas, SEIMA, which we call Southeast Asia, India, Middle East, and Africa. This is a new sort of region for us and JKC. We need to have balanced growth, A, across the four geographies. Number two, within that, how do we get more business and wallet share from our existing clients in passenger cars? Number two, the clients that we never worked with, we have started engaging with them. An OEM in Korea, one OEM in Europe, one OEM in the U.S. and one in Japan. We have started doing this. This is step number one to have broad-based growth. Number two, we have opened seven different OEMs in off-highway segment, and we have started working with four different OEMs in trucks and bus business. The composition of our revenue is going to be broad-based as compared to what it has been over the last three or four years. This is a transformation that we are also going through. I think we are going through it as we speak. Once this transformation happens, I think we believe that we can go back to our growing ways. It's just that there are certain obstacles that come our way. What we are trying to do is to sort of build a more resilient company that can withstand some of these shocks and still grow in spite of these shocks. In a nutshell, this is what our effort has been, and I think the learning from the recent challenges with Japan and Germany is, I think we just need to have a lot more intensity, and we have to run faster. That's what it means. A long answer to your question, I do hope that it helps to understand what we've been doing and how this transformation is taking place in our company. Understood. Basically, what I am understanding is from the timing perspective, there are uncertainties, but yes, the European OEMs are basically considering the solutions of our company. Absolutely. Okay. Secondly, on the deep tech side, you mentioned in the slide. I just wanted to understand more on what are these areas, because in the past also, we were speaking about sodium ion technologies and hydrogen fuel technologies. In the last few quarters, we are not hearing anything on them. I just wanted to understand, what are we exactly thinking in this space? I think two, three things I would say. For example, in that other parts, I think we continue to work on the hydrogen tech, but meaningful revenues will take some time. Though currently, the government is pushing hydrogen specifically in view of multiple controversies. They do believe that hydrogen may be a viable option. Some of these things we will be careful in terms of factoring into our growth. I think the points we are looking at is some of the areas in which we are working in the practices, they are very adjacent to some other parts of the mobility, whether it is you're talking about drones or whether you are looking at a few other areas, humanoid or few other areas, whether it is on the production floor or otherwise, the flying one. I think these are some of the areas which we are exploring right now. Also some other areas where we are looking at and we see an opportunity. Again, these are some initial efforts, but we believe the opportunity is a big one. We are not factoring any significant growth right now, but we believe these are the good opportunity which we should be in a position to capture, and we are in the process of putting together the overall plan. The second is the data center opportunity, where some of our clients, like Cummins or some other clients, are engaged meaningfully. We can probably take these offerings to many more clients in that sector. This is what we are doing. We are putting together our story, and we believe that we will be in a position to grow in these areas, which are, again, the areas where we already have an experience, we already have the offerings, and we are already working with a few clients. We have not yet taken the holistic view yet or made any organizational focus fully on that, which we are exploring, and we would do that. Correct, sir. Sir, about the Sterion Mind Technologies, how is it going right now? I think it is more than two years now, right? What are the updates on that side? No, I think we talked about it. We have taken certain revenue sometime back last year. There was an NRE. I think after that, there has been See, the battery technology takes about two to three years to really put even the pilot production plant. Even if we look at 1 GWh, I think that it takes about more than INR 100 million of investment, and it takes a significant area. That's not come where it actually gets into production. After getting into production, there are certain milestones after which we may get entitled to. It's not something which is immediate from the revenue perspective. Mr. Garvit Goyal, I would request you to rejoin the queue for a follow-up question. The next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead. Yeah. Thanks for the opportunity. Just one clarification question. If I look at the fact sheet, there has been a marginal growth in Europe as well as strategic customers has not declined materially lower than the company average decline. Is it fair to assume what we anticipated in the month of June in terms of a decline in the Europe-centric OEM revenue has not happened and may come in the second quarter, or am I understanding wrongly? I think we were expecting a higher growth there, which has not turned up. At the same time, we have committed the costs, and we were in the middle of the engagement of the projects and etc. First is the revenue has not come through. As I mentioned, you will see that impact coming in the next quarter. It will be impact at a regional level. I have said that it will not be at a company level because we will see a broader growth in U.S.A. as well as SEIMA. Okay. In margin uplift, you are saying the major uplift where you have already guided Q1 two improvement, the major uplift can happen with the growth turnaround, which we expect by Q4. Q4 growth turnaround, we are talking on a quarter-over-quarter basis or on a year-over-year basis? I think, for sure, it will be quarter-over-quarter. I don't have a clear answer to this right now, I guess it will be at least blackish in momentum. I think we could get back to a certain number by that time. Okay. Thanks on all those. Thank you. The next question is from the line of Bhavik Mehta from JP Morgan. Please go ahead. Hi. Thank you. Again, first couple of clarifications. I think during the end quarter update in June, you had said 2Q revenues will be flattish and 4Q will see significant growth. Is it fair to assume that still holds, that we see flat growth in 2Q and then some growth in 3Q and then significant growth in 4Q? A related question has been on the margins when you say you expect to go back to normal levels of margins by 4Q. Are you indicating like 20% as EBITDA? Obviously, it will depend on growth, but is that what the assumption you are working with right now? Frankly, the large part is related with the growth. It really depends on that. Yes, fundamentally, if you look at the way the cost structure, to tell you clearly, the European cost to take out takes a much longer time than the other parts. I think considering that at the cost of some of those, the time as well as the cost will be longer from that perspective. Yes, it will be really when we get to the revenue growth, I think that is when we will be in a position to bring the margins back. Got it. The second question is, you did mention that pipeline in Europe remains quite strong, but it's difficult to put a timeline in terms of when does that convert to deals. Is it also playing out in terms of day-to-revenue conversion also because the deals have been quite strong over the last few quarters, but the revenues are not coming through. What are the client conversations indicating in this environment, especially in Europe? The point is, actually, in certain accounts, it is coming through. I think the point had impacted us is not the wins. Wins we have got, you know. We got the strong. That's why what Sachin was also mentioning earlier is the drop has been pretty strong in the pretty big in these two accounts. We did not drop revenues as much because of the wins in the other market. Conversion, it has been slow for sure, but it has not been pending or perpetually waiting. That has not been the case for project to start. What we feel is European wins, even when currently they will actually get started, they would look at doing more work out of India than Europe and many of those things. That will happen, we do believe that those wins, when they come, they will come. It has nothing to do with the earlier wins. Earlier wins, many of that has already started, many of those projects. We are right now two uncertain things. One is the revenue part, which I mentioned to you, is specifically in European part, when actually where we are now, the pipeline is there and where we have even some recent wins with some accounts when they will start now, not the earlier ones. The second thing is about how the time it will take to cut the cost in Europe. I think these are the two points which we are doing. Just lastly, are you seeing any vendor consolidation exercise being played out at the OEM level, and how are we faring in those exercises? Are we winning share? Absolutely yes. The answer is absolutely yes. We are doing pretty well there. Our belief is the client engagement model will change, even though right now people may look at the client consolidation in the traditional way people are talking about. We believe that over the period, the OEMs will go to the best of the solutions where they can compete with their competition. I think that's why our focus is more on solution and products and AI. Got it. Thank you. Thank you. Thank you. The next question is from the line of Shailesh Jahagirdar from InvestYadnya. Please go ahead. Hello. Can you hear me, Shailesh? We are not able to hear you. Sorry. Yeah. Am I audible now? Yes. Yeah. I have one question that we got some contract from Tata Motors. At business model level, what KPIT does differently, as Tata has their own e-R&D companies and all. KPIT gets the contract from Tata Motors also. How company does something differently that they got this contract? I think it's a valid question. Well, Tata Motors is a large company that is growing. Yeah. Like any other OEM in the world, they also have their e-R&D. Other OEMs have their e-R&D. At the same time, they work with partners like us. Tata Motors has the same kind of model. It's not just their own e-R&D and KPIT. There are also other players that also support Tata Motors. It's nothing new. Our business with JLR is significant, which is also a Tata company, and we have also been working with Tata Motors for many years. The reason we mentioned this particular deal, it's our N-Dream in-vehicle gaming platform. This is the first time such platform has been launched in any vehicle in India. That's why. Okay it has its own unique significance, and that's why it's been highlighted. We continue to look at Tata Motors, both the passenger side as well as the commercial side, as a viable client where we'll have growth with them. The business model here is per vehicle, we charge. Yeah, it's a license. It's a license model. It's a license model per vehicle. Okay. My second question is around that you said the European OEMs are discussing about the cost structure to reduce their cost and how KPIT would help in that kind of sense. Is there a similar kind of discussion are going around for the product development at lower cost to compete with the Chinese OEMs so that product differentiation, at the same time, cost structure would improve for them? Well, what we said was, in fact, in reference to the product itself. How do they make their product far more cost-effective, offering attractive features in order to compete with the global competitors? There are two parts to the cost reduction. One is how do we reduce the product itself? If a vehicle costs INR 100, what kind of contribution KPIT can make to help them get to INR 60 or INR 70? Second is, if their cost of production is INR 50, is there a way for us to take it down to INR 30 or INR 35? What role KPIT can play in this journey? I think these are the discussions that we are having with the European OEMs because they are under the highest pressure. We believe the same thing will also be taken to the clients in Japan as well as in Korea and at some point in the U.S. as well. This is just going to be a fact of life for everybody because the Chinese OEMs have created vehicles at that price point offering incredible features. I want to add one part. It is not only cost, it is the speed. Yes. I think European OEMs are taking too long to bring a new model and that's why in terms of features, in terms of competitiveness goes down by the time new vehicles come on the road. That is one thing which we are focusing, how we can reduce the time to market for the OEMs. Mr. Shailesh, I would request you to rejoin the queue for a follow-up question. The next question is from the line of Ankur Pant from IIFL. Please go ahead. Thanks for taking my question. Just wanted a clarification in terms of the segmental revenue. There was a planned completion, there was a ramp down of SDV programs, and then we were hit by European OEMs towards the end of the quarter. One would have assumed that it's the PV segment which would take the brunt of the revenue contraction. The passenger vehicle segment revenues have just come down by INR 3.5 million in this quarter. It's the CV segment which has fallen more. Just wanted to understand, is the base not incorporating a large part of the SDV ramp down or am I missing something here? I think because last quarter we had one- Hello? Hello. Yes. I think I answered this question earlier that. Sorry. Yeah. I think in the commercial vehicle, there was a one-time large license deal last quarter that is not there this quarter. That's why on a smaller base of revenue, you see a significant impact bottom here. That's the end of it. Going forward, you'll see CV growing for us. When you look at our numbers in Q2, Q3, you will see growth coming back to CV because it's going to be broadly institution, point number one. In PassCar, as Mr. Patil mentioned, we were actually getting ready for growth and that growth has not happened and that's why that was the last-minute setback that we got towards the end of the quarter, last quarter. Has the project completion and the ramp down, a large part of that is already there in the base or that is something which is still pending to us? Well, I think yes. The Japanese part is getting over now as planned and the one that we realized towards the end of next quarter will happen. The complete thing will happen in Q2 and we believe that both accounts will start to stabilize in Q3. Okay. Thanks for that. The second question is on wage hikes. Are you thinking of wage hikes anytime soon or this is something that would depend on how growth comes back and something which would be deferred to H2? How are you thinking about wage hikes? You know, last many years, I think there have been many years when people have not given increments in last five years. I think at least three years most of the companies were very soft. We have not stopped the increments always. This is the first time we have delayed it. We will do it in stages and we will give it to some of the younger grades soon and the senior people will get it over the period. Finally, your overall revenues in terms of sequential growth are down around 4.5% in USD terms. Whereas the strategic clients which are around 87% of your revenue are down only 1.3%, which means that bulk of the decline is from the non-strategic clients which given the situation doesn't really reconcile. Just wanted some clarity on this. I think our degrowth, I have not seen the numbers. We'll analyze and tell you, it has been because of the top two clients. These are of course our strategic clients. We'll analyze the number. I've not seen the numbers. I'll look at it and we can see. Sure. Okay, thank you. It is from strategic clients, as we mentioned, one of the client, the degrowth is not factored completely actually. It will get next quarter you will see the impact. We have said it will be on only the region. At the company level we will grow because of the growth in the other accounts. I think what you are translating this, the numbers of 87% and 84%, don't look at them absolute. 87% is a percentage of the current quarter revenue, how much are strategic clients and 84% revenues of that quarter's revenue. Don't compare 84%- 87%. They are quarter-on-quarter 1.3% decline which is mentioned out here. There were some other revenues which we talked about license revenues last quarter. Thank you. Ladies and gentlemen, in the interest of time, that was the last question. I would now like to hand the conference over to management for closing comments. Thank you everyone for your active participation and I look forward to interacting with you in the near future. Thank you and have a great evening. On behalf of Dolat Capital Market Private Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.