Ladies and gentlemen, good day and welcome to the Tata Elxsi Q1-FY 2025-26 earnings conference call hosted by Tata Elxsi Limited. As a reminder, all participant lines will be in the listen-only mode. Should you need assistance during this conference, please signal the operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Shashank Ganesh from EY. Thank you, and over to you, Mr. Ganesh. Thank you very much. Good evening to all the participants on the call. Good morning if you're joining from the western side. Before we proceed to the call, let me remind you that the discussion may contain forward-looking statements that may involve known or unknown risks, uncertainties, and other factors. Therefore, it must be viewed in conjunction with the business risk that could cause further results, performance, or achievements that differ significantly from what is expressed or implied by such statements. To take you through the results and answer your questions today, we have the senior management of Tata Elxsi, represented by Mr. Manoj Raghavan, Managing Director and CEO; Mr. Nitin Pai, Chief Marketing and Chief Strategy Officer; Mr. Gaurav Bajaj, Chief Financial Officer; and Ms. Neha Vyas, Company Secretary. We will start the call with a brief overview of the past quarter by Mr. Raghavan, followed by a Q&A session. We would appreciate your cooperation in restricting yourself to two questions to allow participants an opportunity to interact. If you have any further questions, you may join the queue, and we will be happy to respond to them if time permits. With that, I would like to hand over the call to Mr. Manoj Raghavan. Over to you, Manoj. Thank you, Shashank. Very good evening to all of you, and thanks for joining us today for the Q1-SY 2026 earnings call. I hope that you and everyone in your families are safe and healthy. For the first quarter of SY 2026, we reported an operating revenue of INR 892.1 crore, EBITDA margin stood at 20.9%, and PBD margin was reported at 21.1%. This quarter was challenging across key regions with geopolitical uncertainty and industry and customer-specific issues impacting R&D spend and deal closures across geographies. Our transportation business, that represents over 50% of our overall revenues, did well to exit flat in constant currency terms. The automotive industry is still in a state of flux with the China business and tariff-related uncertainties casting a cloud on R&D strategy and spend, while the tier one supply business continues to be challenged. We had announced large deals in the previous quarter in SDV, vehicle engineering, for Mercedes-Benz, a European OEM, and Suzuki. These are now ramping up, and we have the necessary capacity and capability to service them and grow over the next few quarters. Our largest customer is stabilizing in the outlook and revenues, and we expect to stay steady for the rest of the year. We are in discussions for some large strategic deals with the OEMs, including some new logos in Japan, U.S., and Europe. I'm pleased to report our continued progress in the efficiency strategy with two strategic deal wins from the off-highway segment in ADAS and connected vehicles. We're confident of the continued recovery and growth of our transportation business through the rest of the year, backed by deals that we have won, a healthy pipeline of large deals, and a new customer logo. Our media and communication business reported a decline of 5.5% QoQ in constant currency. The large consolidation deals we announced at the end of Q4-SY 2025 will contribute to revenue growth in upcoming quarters. The transition investments that are part of such consolidation deals have largely contributed to this dip in this quarter. While the overall business environment in this industry continues to be subdued, we have been working on shaping some large deals, both for consolidation and existing clients, and some strategic AI and automation-led large deals with new logos. I'm also pleased to announce a strategic multi-million dollar design digital deal with a U.S. tech giant for next-generation AI and product feature development. We expect to bring back growth in this vertical in Q2 on the back of the deal ramp-ups and healthy deal pipeline. Our healthcare and life sciences segment declined 6.7% QoQ in constant currency, primarily affected by tariff-related impact on medical devices with two key customers in the U.S., which is a primary market for this vertical. This has impacted R&D and discretionary spend in the short term, and we expect recovery in the service line in the second half of SY 2026. We are expanding our customer base across the U.S., and I'm pleased to report two key wins, including a global pharma and biotech leader from Europe and a medtech leader from Japan. On the talent front, we'll continue to add to our talent base with over 400 fresh engineers planned in this quarter. We expect a steady improvement in bottom line and margin, even as our two largest businesses, transportation and media and communications, return to growth in Q2, SY 2026, and beyond, and utilization improves on the back of ready capacity and capability we have invested in over the past few quarters. Before I conclude, I'd like to announce the launch of our new reimagined website, which went live earlier this week. I encourage all of you to visit our new website that positions Tata Elxsi at the forefront of an AI-first design-led proposition for brands and businesses to deliver reimagined products and experiences, improve their efficiencies, and time to market. Thank you. With this, I hand it over back for the Q&A session. 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 their touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Bhavik Mehta from JPMorgan. Please go ahead. Hi. Thank you. A couple of questions. Firstly, on the auto vertical, can you comment in terms of how the demand pattern has changed over the last few months, both in terms of deal closures as well as deal ramp-ups? Are the clients staying in wait-and-watch mode given the tariff situation, or are we seeing them restart their spend, you know, moving forward? The second question is on healthcare. Can you talk about, or let's say, can you give more color on the two client-specific issues? Is this cancellation of projects or was something ramped down? We should come back in the second half. Thank you. Okay. Thanks, thanks, Bhavik. On the auto sector, we see deals coming through in Europe and the APAC region, right? Some of the deals that we have won in the previous quarters, the ramp-ups were a little bit slow. That ramp-up has started accelerating. In the last quarter, we did see good ramp-ups of the deals that we had closed in the previous quarters. That trend continues, and we expect that trend to continue in the upcoming quarters as well. Our US market is still a little bit slow, but other markets we see much better visibility, deal closures, as well as ramp-ups happening. Regarding healthcare, these are primarily US customers, two large customers of ours, wherein some of the new projects that we are expecting to ramp up in the quarter, that was put on pause, primarily because of lack of clarity, given all the uncertainties in their own business and so on. However, we expect that to get started in the coming quarter. We are expecting that some of this will get started immediately in Q2 itself. We also have a set of other new logos that we have opened in the healthcare space. These are still small businesses for us, but we expect a continuous growth of that. We expect in H2 we will be able to ramp up a much bigger business with some of the new logos that we have opened. Bhavik, does that answer your question? Yes, thank you. Thank you. Our next question comes from the line of Manik Taneja from Axis Capital. Please go ahead. Hi. Thank you for the opportunity. Manoj, I recently had two questions. The first question was with regards to the business outlook within the top single customer, which has continued to do very well, and given some of the annual report disclosures, it appears you expect further growth in this account in SY 2026. Would you clarify on that front? The second question was with regards to the way our margins have shaped up through the course of recent quarters. While I do understand there is some element of limited revenue growth at play, how should we be thinking about payer capacity in the context of the fact that over the course of the last five quarters, you've cut headcount and still your margins have been down? Do you now really think our margins can claw back to what we used to report in SY 2023 or 2024, or we might probably need to adjust to a new normal in terms of margins? Thank you. Sure. Thanks, Manik. Regarding Jaguar Land Rover, yes, the situation at Jaguar Land Rover is a little fluid, given their own sales and other related issues that they have. However, from our perspective, I believe that we will be able to maintain at the current level. We may not have an aggressive growth there, but I think we have enough visibility to maintain our business and also have some incremental growth there. Coming to the margins, as you rightly said, a lot of the margin situation is because of the drop in the revenues. As the revenues pick up, we are confident of getting back to the margin profile. We foresee that over the next three quarters, we will gradually be able to pull back the margins. It's not going to happen all of a sudden, but all efforts are on to really look at all the levers that are available to us and to focus on margin improvements in the coming quarters. If you look at it because of the Q1 current situation, maybe from a financial year perspective, we could end up with a margin which is lower than what we have performed in the last financial year. I think we should be able to pull up the margin gradually over the next three quarters. Manoj, my question was more for the medium term. You used to operate at about 29%, 30% EBITDA margin. Do you think that's the margin we should probably think about as the business improves, not just in this year, but beyond this year? Yeah, that is the aspiration. That is exactly what we are aiming for. We definitely need to get back to those margin profiles. In the medium term, definitely, that's what our focus is. Sure. How should we be thinking about reselling for us, given typically we used to give reselling things Q2 for the junior folks? Any comments that you could share with regards to what you are thinking about for this? Yeah, most probably those hikes will happen from Q3 onwards, October timeframe. Okay. As of now, you're still planning for reselling? Yeah, yeah. Thank you and all the best for the future. Thank you. Thank you. Ladies and gentlemen, if you wish to ask questions, you may please press star and one on your touch-tone telephones. Our next question comes from the line of Muzaffar Shaikh, an individual investor. Please go ahead. Hello. I'm audible. Oh, you are audible, sir. You may proceed. Yeah, thank you. I would like to ask about the government KLIC and the factory that is coming up in Gujarat. Where are we on that? Do we see it coming in the coming quarter? Sorry. That's the semiconductor factory in Gujarat in Dholera is actually Tata Electronics, right? Tata Elxsi has nothing to do with that factory. Tata Electronics is a customer of ours, and you know we continue to support them in some of the projects that they're doing, but we are not really involved in the factory. Yeah, okay. Thank you. Thank you. The next question is from the line of Debashish Muzamdar from Svan Investments. Please go ahead. I believe I'm the management team. One follow-up question which Manik was earlier asking about margin. If I understand correctly, one of the reasons Tata Elxsi used to report a very strong set of margins is because they are focusing on offshore-centric deals. Over the last two to three quarters, what we have seen is it's a consistent fall in margins. Is it like we have shifted our focus more into on-site focused deals? Also, their margins are initially low and will be able to kind of catch up later, or is it like a normal process of business which is in fact to my knowledge? No. Our offshore-centric business continues, Debashish. There is no change in that. A majority of our business continues to be more than, I think, 76% continues to be offshore. There is no change. However, I think the margin is more to do with the top line degrowth that we are seeing. Once we get back to our growth, our margin profiles will come back. Of course, also the type of deals that are there, the consolidation deals, the large deals that we have signed up, a lot of it also puts a little bit of pressure on our margins. That is something that we are working to see how we can improve using operational efficiencies. Of the last quarter, the last two last quarters, the deals that we have won, which is Asia-specific, when those deal ramps up happening, we are seeing some margin pressure. Is it like those deals are concurred or those deals are such a way that it will kind of lower margin business for us? It's not lower margin business, but in some cases, we need to take over and manage the transition. In some of those cases, we may not get revenues in the initial period. However, the revenues will start ramping up once the steady state happens. We have some of those deals also affecting us at this point in time. However, as the deals ramp up and when we take overall control of it, the margins will definitely come back. Sure, sure. Understood. You are confident of kind of operating at 29-30% kind of EBITDA margin in medium term? In the medium term, yes. Okay. One last question from my side. Do you normally provide a good color around tier one OEMs and tier ones in transportation and also off-highway and passenger vehicles? If you can give some idea around the different segments, how different segments are doing for us and as an industry overall. Yeah. As I said, right, automotive industry, I mean, if you look at our transportation business, you know in actual currencies, there's a strong growth, but in constant currencies, we have ended flat. I think that's a fantastic performance. Almost 72% to 75% of our revenues now come from OEMs, which is the passenger car makers. The tier ones have sort of reduced, which is in line with what we see in the industry, right, moving forward. From an efficiency perspective, we continue to see deals, deal closures happening. I think we have announced some of the deals also, both in the off-highway segment and commercial vehicle segment. Our investments in aerospace and defense, we continue to build teams. We have still not announced any large deals there, but I think those are all in both. Hopefully, you know in the subsequent quarters, we should be able to announce some large deals in Jaguar Land Rover as well. Sure, sure. Thank you so much for answering the question. Thank you. The next question comes from the line of Manik Taneja from Axis Capital. Please go ahead. Hi, Manoj. While you partially alluded to the investments in defense and aerospace, if you could help us understand the likely investments that we will make in terms of expanding our GTM in these segments, will that probably create more headwinds in the near term from a margin standpoint, or are these limited investments and they're going to manage to other operating levers? No. We have already ramped up almost a 150 people team in this space. We have invested in building capabilities. For example, we have built our own capabilities in drones. We have built capabilities in eVTOLs. If you actually come to our campus, you can see some of these actually flying, right? We have shown demos to global players. We have been working with HAL, NAL, and some of the different flags in Bangalore. A lot of interesting work actually happening. I wish we were in a situation to really convert some of this into deals and bring in revenues. I think we're almost there. We should be able to hopefully announce some deals, some very, very good discussions happening with potential customers, both the large players in the U.S. as well as different flags and DRDOs and ISROs in India. By the nature of the business, these are all long lead-time businesses, but the capability that we have built is fantastic. I am saying that because of the real interest that some of the folks that we have shown some of these technologies, right? What we see from them, the interest that we see from them. Yeah, I think we are not expanding the investments further. We really would want to close some deals and get into a revenue situation before we start investing again. Okay. Any medium-term revenue targets that you would want to share with regards to these incubated work segments? I wouldn't want to put a number there, but you know I would say at least we would like to make a start this quarter, right? What we're looking at is anywhere between INR 50 crore of revenues this year, right, to get started. All the best. In the subsequent couple of years or three years from now, hopefully, we will be able to ramp up significant business in this domain. Sure. Thank you, and all the best. Thank you. Thank you. Our next question comes from the line of Moez Chandani from Ambit Capital. Please go ahead. Yes. Good evening, and thank you for taking my question. My question is on the media and communications segment. There, you've said that the industry has been subdued for several quarters now. Anything incremental that you've seen on Q1 versus where you were a couple of quarters back? What needs to change for this segment to really revive in terms of growth? I know that you're expecting growth to come back in Q2. Where do you see the industry going in the medium term? Do you see a material acceleration in terms of growth there? Yeah. I think this industry, you know, globally has been very subdued, right? It's not only for us. If you look at most players in the media and telecom market, they are reporting very, very muted numbers. There are structural issues in the industry as well, right? If you look at it, a lot of M&A is happening. During COVID, this industry grew very rapidly. After COVID, all of a sudden, you see that most operators, whether it's media services operators or telecom operators globally, have not been able to add net new subscribers. The subscriber numbers are actually coming down. The ARPUs are coming down. There's a little bit of an issue structurally in this industry. A lot of the deals that we see at this point in time are a lot about efficiency-driven deals. How can we do more with less? Consolidation deals. Of course, we are starting to see AI and GenAI-led deals as well in this particular industry segment. As I said, we also see in the media space, if you look at it, we see M&As happening. We see even large companies, whether it's a Warner Bros. or a Disney or an NBCU, taking decisions of hiving out the digital pieces as a separate company and the legacy pieces as a different company. There are a lot of things happening in this particular industry. From a telecom perspective, again, 5G investments have really not brought in new revenue streams for operators. We're now getting into the 6G era. We see a lot of focus on using open source, bringing down the cost, automation, how to improve operational efficiencies. These are all the themes that are playing out. We are trying to capitalize on some of these, right? For example, we have built our own product called Neuron, which really helps in the automation piece. How can we help customers automate their deployments, their operations, using automation frameworks, using GenAI, and so on, so that without adding manpower, can they still continue to deliver better operational efficiencies for their customers? There are various things that are playing in this particular industry. We operate from a services perspective. At the same time, we also have certain products that we license to customers that act like a differentiator as compared to a lot of our competition. They're trying different things to really open up the market and also to grab wallet share and so on, right? Efforts are on, but the market currently, I think, is in a very, very difficult situation. Having said that, I think we have reached the bottom from Tata Elxsi's perspective. Some of those have also been because of the large deals that we have won and the transition period and transition cost. All of that is now behind us. Hopefully, from the coming quarter, we should be able to report better results in this particular vertical for us. Having said that, as I said, the market is still very, very, it's not an easy market at all. The deals are all, most of the deals, the large deals especially, are around efficiency themes here. All right. Hope I answered your question. Yes, yes. Thank you for that. My next question was on your system integration and support segment. That's seen a very sharp decline on a quarter-on-quarter basis at nearly down 30%. How should we think about that? Do we expect that this is going to continue to decline going forward? No. I think that is all because of one deal that we won in the last quarter, which was a one-time deal, a large deal, I think almost INR 13 crore, INR 14 crore worth of deal. It's a small business for us, right? In percentage terms, you might say, "Oh, there's a big drop." Actually, it's not that big a drop, okay? Don't go by the percentage. What has happened was last quarter, there was a large deal. That is the Baruch Pavilion in Japan in Osaka. That was fantastic work that we delivered last quarter. We were hoping there were other deals, similar experience design deals that we were bidding for in this quarter. However, closures did not happen on time. That's the reason why there is a sharp dip in that business if you look at it from a percentage terms perspective. That is the nature of the business. These are, you know, you could get, you know, INR 10 crore, INR 15 crore, INR 20 crore deals with a turnaround time of, you know, three months or four months. We really need to find replacement deals and so on. That's the nature of the business there. If you look at it, our business will usually be around INR 25 crore, INR 30 crore a quarter for us. All right. Got it. Thank you. Thank you for answering my questions. Sure. Thank you. Thank you. We have our next question from the line of Bhavik Mehta from JPMorgan. Please go ahead. Thank you for the call. I I have just one question on the media and telecom segment. Can you explain how does the large transition cost impact the revenue? I understand there are upfront costs because of knowledge and coming to that impact the margins. How does it impact the revenues? Just curious about that. Yeah. I think, Bhavik, if you look at it, it's a large deal that we have won, right? What happens is that deal comes at certain commercial terms, which is lower than, you know, the rate at which we have been working in the previous quarters. If you look at it, when we get into that deal, for example, this was the first quarter of that deal. Our entire portfolio of business in that particular customer, the rates have been reset to a lower, you know, per unit rate because of the commercial constructs of that deal. If you look at it, volumes have not gone down. Because of the rate negotiation that has happened on the overall portfolio, the business has come down. So how? There is a commitment. It's a three-year commitment. We will be able to make up this over the next three years. Is this reset already happened in one Q, or should we see this being a headwind to some extent going forward? It has already happened in one quarter, the first quarter. Okay. Got it. Thank you. Thank you. Our next question is from the line of Ashis Dash from Niraya Asset Capital. Please go ahead. Hi. Good evening. My question is on healthcare and medical devices vertical. These verticals have been giving sharp spikes. Sorry to interrupt, Ashis, but your line is not very clear. May I request you to please check the mode that you're using? Hello. Is it better now? This is much better, sir. Please proceed. Okay. I was thinking healthcare and medical devices vertical. I see that this vertical has been taking place for the last three quarters. Sorry once again, Ashis. Right now, your line is breaking up. Before we move to it, I just want to understand what makes you confident that it will take over in the second half. I just want to understand that what I believe is that this vertical has good margins. Ashis, sorry to interrupt, but your line is breaking up in between right now. May I request you to please obtain better network and rejoin the queue? Thank you. Our next question is from the line of Vimal Jamrdas Gohil from Alchemy Capital Management. Please go ahead. Thank you for the opportunity. One of my questions was on autos. Given the fact that the entire sector is in a bit of a flux because of tariffs, and we've done a good job of keeping our heads above water, I want to understand the ramp-up of the newer deals and as to why will they not get, or why will the ramp-up not get impacted because of the situation we are in. What leads to your confidence on the ramp-up of the last deals that you've won? Why will the existing deals not ramp up if the current ones that you've won in the previous few quarters, if they're doing well, why shouldn't the existing ones also do it? Shouldn't they do well? No. What is the confidence you asked, right? The confidence is because we had certain, you know, between the customer and us, we had, you know, to achieve certain ramp-ups in Q1. We have certain ramp-ups to happen in Q2 and beyond, right? I'm happy to tell you that the Q1 ramp-up has happened as per expectation, right? We don't see any pullback. We don't see any, you know, slowdown that is happening from the ramp-up perspective. Of course, given that the markets are not, you know, in a very favorable position and so on, still, the ramp-ups have happened. The sort of engagement that we're having with customers, the sort of reviews that we're having on a regular basis gives us the confidence that, look, this ramp-up, whatever deal that we have planned, is going as per original plan. We're not changing any of those, you know, deal terms, right, so far, right? That is a commitment in Q2 as well that, look, this is a ramp-up that we will have, and we are progressing as per that schedule. There is no pullback. There's no budget cuts. The projects are coming in. Engagements are happening with the customers. All of that is happening as per plan. That's why we are pretty confident that, you know, those deals are going ahead as per plan. Manoj, it's encouraging to hear the new deals ramping up well. My follow-up then would be on the existing business, especially with tier ones. Tier ones for us have done very well over the past few quarters, wherein we've faced some pain on the OEM business. Our OEM business has done very well versus the tier one sort of struggling. Why isn't it that our existing tier one contracts are showing the kind of growth that the newer deals are showing? No. The tier one business globally is very, very stressed. That is because the tier ones are also not winning large deals, right? Many of them are losing deals because OEMs are taking over that role. OEMs are becoming more like, you know, tier ones, right? OEMs are really, you know, wanting to own software. We see that happening across the globe, that more and more deals are, you know, in the automotive industry, the OEMs are taking that ownership. Even if there are tier one, you know, opportunities, most of the tier ones have their own GCCs here. The current, I mean, whatever we've seen of the tier ones is a lot of the work is being done out of the GCCs. To that extent, you know, our business from tier ones, we continue to see that decline. Whatever little business that we are seeing is from the GCCs and our engagement with GCCs. Manoj, what about OEMs? How will the existing business from OEMs pick up from Q2, Q3? When do you expect that to pick up X of the newer deals? No, no. We are already seeing that, right? We are already seeing, you know, when I say, you know, more than 72% of our revenues today is coming from OEMs, I think maybe a couple of quarters ago, it was 60%. We are seeing a gradual move that more and more of our business is coming from OEMs. Of course, the large deals we have won, that is also helping. Across the globe, we continue to see, you know, deal momentum in OEMs. A lot of the, you know, deals, whether it is in Japan or in APAC region and India, we see a lot of, you know, OEM moment there. Europe also, the new deals that we are seeing is from the OEM. That is also improving. U.S. is a little bit slow. Some of the OEM, you know, customers that we are engaged with, they've seen some amount of disruption and, you know, what do you say, projects are stoppages and so on. We're not getting a clear idea as to when we'll be able to restart some of those discussions with the U.S. OEMs. By the U.S. OEMs, I think we are seeing, you know, we are seeing a good recovery happening across the market. Fair enough, Manoj. Wishing you all the very best with the rest of the year. Thank you. Thank you. Our next question is from the line of Karan Uppal from PhillipCapital India. Please go ahead. Yeah. Thanks for the opportunity. Just continuing the discussion Vimal asked, the ramp-ups which you are seeing in the auto business, could you clarify which areas you are seeing the demand? Is it EVs? Is it hybrids? Is it SUVs, body engineering? Which are the areas in which you are seeing the demand? We continue to see demand in ADAS and SUVs as well as electric stations. Some of the older relationships we have, you know, we still continue to see work on body chassis, infotainment, you know, cockpit areas as well. Okay. Also, just wanted to check on the modular deal which you have announced. If you can provide the ballpark range, what was the deal size? What is the scope of work given to Tata Elxsi? Is it around OS, middleware, cloud, verification, validation, or all these areas? If you can clarify that. How is the pipeline for SUV-related work? Yeah. I think we have whatever information on Mercedes-Benz, we have already issued a press release, right? We are not going to provide any further color other than what is already provided. A lot of the business actually comes from the SUV area, plus a little bit of powertrain area as well out there. How are you seeing the pipeline for SUV-related deals, Manoj? A lot of the OEM deals that we are signing up and a lot of the conversations are around SUVs. Okay. The last question from my side is on FY 2026 growth. For example, vertical mix, how do you see each of these verticals performing? You have mentioned some ramp-up visibility is there in auto segments. In media also, you are a bit positive. From the folio perspective, how do you look at the vertical growth? I think, you know, of course, you know, for the financial year, I think our growth will be led by the transportation business. That would continue, you know, because on the back of the deals that we are signing and also on the traction that we see in the market, the growth for the company will be led definitely by the transportation business. Media and communication business will recover. That's the plan that we are working on. We hopefully will see the growth from Q2 itself. Healthcare, you know, I would be a little careful there. I mean, there's tariff-related issues and so on, and the fact that it's a smaller business for us. You know, we don't have a large list of customers. It's a select set of good customers that we have. That will be a little volatile for us. However, we hope in H2, we will start seeing the growth in that particular business. We have done a lot of investments there, including from a leadership perspective, from a sales perspective. You know, we have done a lot of investments, and we are hoping that from H2 onwards, we will, you know, see an uptick in business there. This business is also a little bit of a long lead cycle business. We are working on some good opportunities and so on. Closer takes time in the healthcare business. Yeah. That's how the three businesses would stand out. Okay. Great. Thanks and all the best. Thank you. The next question comes from the line of Arvind Jadhav, an individual investor. Please go ahead. Hello. Thank you for the opportunity. I'm looking at the headcount reduction in the quarter on quarter and year on year. Also, the attrition rate is also increasing, like in quarter on quarter and year on year. Looking on all these, it looks like the business environment is quite challenging right now. Is there any strategy to bring back the past glory in the performance going forward? No. Of course, that's what we have been discussing all along. I mean, the business environment is definitely tough. We discussed about how the three verticals, we also talked about how, you know, the growth will be led by the transportation vertical that we have. That's what we have been working. The media and communication also will come back to growth. Healthcare will take some more time. We are hopeful that, you know, whatever steps that we are taking, we will be able to, you know, grow our business, right? Yes, the headcount has come down because we have not been aggressively hiring. We still have a decent bench that is available. As the business grows, we'll be able to utilize the bench at the same time, you know, improving our margin as well. We are very conscious about the situation, Arvind. Hopefully, you'll see, you know, the performance come back in the coming quarters. Okay. Are you probably entering in new geography or in any new vertical, or are there any growth opportunities there? We still would focus on the main geographies, which is U.S., Europe, Japan, and India. Of course, we have entered into the Middle East, Africa, and Latin America, and Southeast Asia. These are new geographies that we have some business today, not a major business, I would say. Hopefully, we'll be able to ramp up our business there. On M&A, yes, we are looking, we have certain, at any point in time, we have certain pursuits. Again, it will only be whatever we look could be a tuck-in sort of an acquisition, right? Regarding new verticals, we are looking at adjacencies for each of our three main verticals. We are currently focused on the aerospace and defense as a new vertical, and we are investing. I think I talked about it in one of the previous questions. That is what we will be focusing on in the financial year. Are you optimistic in the margin in the aerospace and defense sector? Sorry, what was the question? Regarding margin in the aerospace and the defense business, are you optimistic on that? Yeah. I think we'll answer that question once we see the, I mean, we are taking a very differentiated position and a very different approach as compared to some of our traditional partners for traditional, sorry, as compared to some of the traditional companies that operate in aerospace and defense, right? We believe we have an opportunity to win deals at decent margins there. Arvind, you are audible. Please go ahead. Arvind, you may proceed. You are audible. Yes. Sir, any guidance regarding FY 2026 revenue and net profit? Any idea? Any gain, some idea? No, we don't give guidance, you know, either revenue or profitability. Okay. The last question from my sector, is there any plan for the stock split or any bonus issue regarding the shareholders? I think that question was addressed in our AGM by our Chairman. A lot of our shareholders have asked about it, and you know we will be answering that in the board. We will get back at a proper time to the shareholders. Okay. Thank you, sir. That's it from my side. Thank you. Our next question is from the line of [Kobin] h from Morgan Stanley. Please go ahead. Yeah. Hi. Thanks for taking my question. My first question is with respect to the media vertical. I just wanted to understand this large deal that we had won last quarter. By when do we expect this to fully ramp up? Can you provide any color around that? Full ramp-up should happen by H2 of this financial year. Okay, you mean by the fourth quarter? Yeah, most probably within third quarter and fourth quarter. Yeah. Okay. Understood. With respect to the mobility verticals, while you highlighted that there are certain deals which continue to ramp up and there are more ramp-ups which are coming from 2Q onwards, are there any potential areas of leakages that you still expect in the coming quarter? Given that we mentioned that tier ones, they continue to be weak, and in Jaguar Land Rover, we expect momentum to be maintained in the sense we don't expect an aggressive growth out there. U.S. OEMs may also be weak. If I add all of that, it's probably three-fourths of the portfolio. Just trying to understand if there is any area of potential leakage or weakness which is there in the quarter. I think the tier one portfolio would continue to be under stress, right? This is purely because of the business issues that the tier ones are having. Already, our revenues from tier ones have come down. I think we have reached a stage where I don't really foresee too much of a drop in that portfolio. The fact is that their businesses are challenged. That could be maybe a little bit more of degrowth in the tier one. It should not impact us so much because the growth that we are seeing from the OEM side will be much larger and faster as compared to the degrowth. We should be able to show positive growth is our expectation. Understood. Understood. Just a last question on margins. If you could provide the margin walk for the quarter, given that the cost increase this quarter is quite sharp. Just trying to understand what's the sort of investment that has gone in this particular deal on the media side. I will ask Gaurav to take you through that. Hey. Hi, Suhlad. Suhlad, as you see, our overall total cost has not gone up significantly. I think it is almost flattish or slightly, you know, up from the last quarter just by four or five off the road. That cost increase is mainly on account of current impact on the onsite people's salary costs and some of the visas that have been applied in the quarter. However, the margin walked, the major, you know, flow-through and dip in the margin is because of the revenue, you know, sequential decline. Otherwise, you know, on the operating side, the cost doesn't have any signature change. Oh, okay. Okay. Understood. Thank you. Thank you. The next question is from the line of Rohan Nagpal from Helios Capital India. Please go ahead. Hi, thanks for the opportunity. Am I audible? You are audible, sir. Yes. Okay. Yeah. Just continuing on the ramp-up within the OEM business, if I look at the impulse to spend and invest more in R&D and the electrification and SUV programs, etc., that has been constant for the last two or three quarters or maybe longer, actually. If I look at the macroeconomic environment, it seems to be stable, if not deteriorated. I mean, TCS called out continued uncertainty, and they actually called out a demand contraction. That is in contrast with what you're saying in that you're fairly confident of growth from the OEM side of the business for you. I'm just trying to understand qualitatively what is driving the growth. What has happened now that the OEMs are finally ramping up their spending and there is increased momentum in deal closure? I'm not talking about all the OEMs suddenly deciding to spend and so on. I'm talking about the OEMs where we have engaged and the OEMs where we have signed some of the large deals over the last couple of quarters. They have shown inclination to spend, right? I'm confident of the sets of portfolio of accounts that Tata Elxsi is handling at this point in time. Given that we had better objectives in Q1 and we don't see any of the customers going back on the deals that they have signed, we are confident that that will continue. Understood. I'm not talking about the larger overall macro, you know, what is happening to the larger overall spend in the market. I'm not talking about that. Fair enough. I was just asking because you said that there is a slowdown, so to speak, in North America. I'm not quite sure where that'll come up. You said Europe and Asia, you see that ramp. Okay, I guess we can add it in that subset. Yeah. Even on the pipeline, if you're looking at the pipeline, are you seeing if pipeline is increasing, is it the pipeline for follow-on work with your existing portfolio, or are you seeing a slightly broader uptake in pipeline even for logos that you don't engage in? I think you called out new logo relation, right? Yeah, yeah, yeah. It is both, right? Customers, existing customers of ours, also we see an uptick in business in the subsequent quarters. The new logos that we have signed on, we are seeing that whatever large deals that we signed on, that is continuing to our execution. From an execution perspective, we continue to execute as per plan. Okay. All of this momentum is solely within your existing customers. You see, it's going to be difficult to expand to other logos within this year is what you're implying. Is that correct? No, I'm not saying that. We do have pursuits from a new logo perspective and new customers, right? That continues. I'm not saying that we are not going to get business. In fact, as we speak, there are other opportunities and deals that we are chasing, proposals being made. The good part is we are seeing all those discussions happening, conversations with the new customers happening. That is positive. That gives me hope that, look, you know, we can do, I mean, moving forward in the next three quarters, we will be able to grow our business in the transportation industry. Okay. I just wanted to confirm that I'm understanding this correctly. It's not just an increase in the momentum of, say, deal ramps within your customers, but there is an increase in deal momentum or at least velocity of conversations with the broader automotive ecosystem with OEMs in Europe and Asia. Is that correct? Yes, in Europe and Asia. U.S. continues to be slow for us. Fair enough. Thank you. That's it from my end. Thank you. The next question is from the line of Rajakumar Vaidyanathan from RK Investments. Please go ahead. Yes, I'm audible. Sir, you're audible. Yeah. Sir, just a question on the margin front. The question is, given the SUV work you said that I just wonder once your revenue has been higher, would you have a feeling that you would be able to capitalize the margins that you have earned in the year of? Sorry, we are not able to hear you because you're not very audible at all. Rajakumar, you're very muffled. Maybe you could check the mode that you're using on your phone. Hello? Can you hear me now? Hello? Not really, sir. You were breaking up in between as well. Hello. Is it better now? Yes, please go ahead. Yeah. Sir, the question is, your revenue engines are not firing now. I just want to know if once your revenue engine fires, that you have extensively invested in AI and GenAI. I'd assume that you'll be able to surpass whatever margin in the past years with the benefit of AI and GenAI? I think your voice was still not very clear, but I guess your question was that once the revenue and all the new verticals started to fire, whether we would be able to get back or surpass our historical margin using GenAI engine. I think we answered that question previously. I think the focus is to steadily grow from here. Once the revenue gets back, I think we are very confident that we will get back to our historical levels of the margin. That would be our midterm aspirations to get to those levels of margin. I think from here onwards, you will see there will be a gradual uptick in the margins as we progress on the steady state. I mean, steady revenue starts to build up on a quarter-to-quarter basis. Okay. Sir, just to lay down the same question, what I want to know is what is the impact of this AI on your headcount? In other words, if you were using one headcount earlier, has it brought down the number to 0.9 or 0.8, whatever is the number that you want to see? Of course, you know, we are using AI and GenAI. We are increasingly talking to customers and so on. Unlike IT or a BPO or some other industries, the impact of AI is still not going to be very dramatic as we speak, right? There are a lot of legal issues. Customers are talking of open-ended liabilities. There are a number of legal issues to be sorted off before you can see uptick of usage of AI and GenAI in the engineering space. You cannot assume that because AI and GenAI is now available, you will be able to deploy lesser manpower and so on and so forth. Yes, for certain tasks, it is possible. For certain types of projects, it is possible. It is not a generic, you know, for all projects, we will be able to do it. I'll be very guarded and not to mislead you in saying that, look, GenAI is a panacea for all issues that we're going to have. That's not going to happen. Okay. Got it. Sir, the next question is, I just want to know how big is the gaming segment for you folks and any output you can see? We don't operate in the gaming segment. We used to maybe 10 years ago, but we have sort of got out of that segment. Okay, sir. Last thing on housekeeping questions. I see the tax rate has moved to almost 27% in this quarter. Is that the guidance for the whole year? Last year, there was 23%. It's 26%. I I think we have been mentioning during the last few quarters that some of the benefit under the SEZ is coming to closure. We have been moving from 100% tax holiday bracket to 50%, and hence, the tax bracket will move towards a north of 25%. That's what we are seeing now. Last quarter was lower because there were certain tax order credits, you know, income tax reference order were there. Otherwise, if you see our normalized tax rate for the last few quarters, it is now above 26% odd. Okay. Got it, sir. Thank you so much. Thank you. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the call over to the management at Tata Elxsi for closing comments. Thank you once again for all the investors for all the questions that you have. Look forward to seeing you again end of next quarter. Hopefully, you know, we will come up with a much better performance that we anticipate in the coming quarter. Thank you so much. Look forward to talking to you again soon. Bye-bye. Thank you. Thank you. On behalf of Tata Elxsi Ltd, that concludes this conference. Thank you all for joining us. You may now disconnect your line.