Honda cancellation and two SDV ramp-downs forced a reset.

Follow-up: With higher oil prices globally and automotive companies facing cash flow shortfalls, what impact does that have on near-term R&D spending reopening?

We have not seen the impact on the OEMs yet because of the conflict at this point in time. If it continues beyond three to six months, it'll have repercussions. Today we are not seeing it in any conversation with any of our clients. They're solely focused on rationalizing their costs and creating funds to invest into future programs. It may impact the truck business faster than the pass car business if this continues beyond a period of time. We are watchful, but nobody's taking any actions as of now.

What is India as a percentage of revenue today, and where do you envision it over the next three to five years?

Right now, we are about 4% of our revenues are from India and they will increase substantially. The share will go up and we do believe If it is going to be the third largest market. That's why we are doubling down. I mean, if it is going to be, in my view, 10 years, second largest market, we would like to really double down and play a very dominant role in this market.

Japanese OEMs seem to have lost their way globally — the ramp down seems to be from a Japanese OEM. What are these Japanese OEMs thinking and does their eventual catch-up to SDV help KPIT?

Toyota has done reasonably well — they're the biggest still. They're the most backward on SDV journey which actually means there's a runway for them before they lose market share, and an opportunity for KPIT to help them rapidly get on the SDV journey. Nissan has gone through a difficult period but is coming back slowly — cutting costs dramatically. Honda's US market is where they make money. All three have dramatically lost market share in China. The recent wake-up call is larger, and you'll see similar actions from Honda in the next month or two. They're betting big on hydrogen and sodium cells to disrupt China beyond battery electric. In the near term, yes there's a challenge but there's also an opportunity for KPIT.

When do we expect Qorix middleware contribution to normalize?

When the new architecture programs start coming in — typically with multiple changes there is a one to two years delay in these programs. In off-highway commercial, there is already an opportunity to introduce Qorix. Sachin Tikekar clarified: not all middleware equals Qorix — Qorix is a platform; wherever it goes KPIT will go as its implementation partner. The middleware demand will start to pick up for us in trucks and off-highway as we do more and more of their software-defined machine programs.

How are European and North American OEMs responding to challenges they're facing? Is focus on cost consolidation or do you see appetite to improve SDV spends?

Two separate markets, different strategies. Europe has the highest pressure — tariffs and more intense Chinese competition. Their strategy is to dramatically reduce costs — product cost and production cost. They're looking at new set of partners, some from China, some from India. There is tremendous headroom for them to reduce costs by looking at how they do this work and with whom. One of the three European OEMs is already thinking about the future. In North America, GM and Ford are in a protected market with 80% of revenues from North America with no Chinese competition. Their view is very different — actually investing in the future. GM is working on the second generation of SDV. For KPIT in Europe it creates a tremendous opportunity to be part of their new ecosystem in a more strategic manner. In the US we are already part of their future programs.

How big is the off-highway software market and is adoption as high as to compensate for any decline in passenger car?

There is no decline that we are seeing in passenger car — we do believe the spend will go up. However as the size of our company grows, we need to also expand our horizon in a strategic manner. In trucks outside China, five OEMs dominate 80% of the global market share so spend is limited to them. Off-highway is a different thing — there are specialists in different countries. Their spend is not quite as much as passenger car — 90 million passenger cars versus less than a million off-highway. However their applications are very different and they are 15 years behind when it comes to making investments in software. That creates headroom for us to grow for the next several years.

Were the ramp-downs planned or strategic changes? And are there other large projects ramping down at end of FY27 or FY28?

One was a plan — we are very proud to say it'll be an SDV hitting the ground running in a more efficient manner in the next 3 to 6 months. We are already signing up for serial life programs with this OEM. The other one was a surprise, not only to us, but to the rest of the world, when that OEM decided to stop their EV programs and take a $15 billion hit. In the foreseeable future, we don't see any other programs coming to an abrupt end. Definitely not to the tune of what we saw with this particular OEM. The reason we talked about building resilience growth is we have to be ready for these kinds of surprises.

Was the program that was stopped (Honda) a strategic client and what was its incremental impact in Q4? Also, despite Honda declining, Japan market showed growth — is that one-time or can it be sustained?

The planned ramp-down of one OEM happening as it gets to production started impacting in Q3 as well — a little bit happened in Q3, a little bit in Q4, but the more significant impact will be felt in Q1. The surprise OEM program reduction was a little bit in Q4 but the dramatic reduction actually happens in Q1. For Japan: we've had tremendous growth. We are not going to have a one-pony story in Japan going forward. We have a partnership with a Tier 1 in Japan, targeting 3 truck and off-highway OEMs, and the remaining two pass car OEMs including the big one. In the mid-term we'll have a lot more broader base growth coming out of Japan.

For the 50%+ solutions/products target beyond FY27 — are these replacement products competing with existing products or net new capabilities where clients don't have tech adoption yet?

It's a mix — no black and white answer. But even for the replacement category, there are new things KPIT is bringing to the table — end-to-end ownership, AI introduced into that, and problems that are newly being addressed. The early market tests have been done already. Sachin Tikekar added: products are replacing something provided by somebody else — completely a replacement. Solutions are a little more disruptive — not replacing like-to-like but replacing an ecosystem to some extent of the OEM.

Back of envelope: KPIT is $730 million today, and in three years aiming for $950M-$1B with ~$550-600 million from solutions/products. Currently at ~$110M, that implies 3-4x growth in solutions/products in three years. Is that correct?

Yeah, absolutely. I think there are two things to it. One is Most of the current business, as we said, fixed price was the first step, but then that will get converted into AI-infused solution. So that is the first step. So many of these will get converted into AI-infused solution. Which will give us better productivity and margins and more ownership, and that's why the scale will grow. That's the first part. And the second is the product. So I think from that perspective, that number would be fine. We believe, actually. That's a nonlinear growth. We just want to 100%, we cannot say, but we believe that's a very reasonable number.

In deals competed against peers (post-Infosys acquiring Intech, SCL acquiring ASAP), has KPIT seen any market share loss?

You can look at the revenues of the acquired entities which you talked about — what has happened to their revenues actually. So to answer very quickly, we are not seeing any loss to this. Actually. In Europe, specifically, we are looking, our biggest opportunity is consolidation, which is happening and KPIT is certainly a major beneficiary of that.

In Europe there are plenty of assets for sale (Bertrand, EDAG, Cariad ecosystem players). Do any of those interest KPIT? And any interest in mechanical engineering ecosystem?

Most of these companies are struggling both in terms of revenue and profitability — having so many employees in that part of the world with less than 35 hours a week with that cost is a liability. Even the OEMs who own stakes in these companies are preferring to move away because their value is actually reducing costs and bringing innovation. We have seen all these assets, and the disruptions coming and the products and solutions we are bringing are far superior to what these companies have. Also they are not cost competitive. On mechanical: the Caresoft acquisition is important in off-highway commercial where mechanical content is high. In pass car we're focusing on cost reduction. Third part is manufacturing efficiency because that's where they're trying to reduce manufacturing costs in Europe.

What are the key drivers for wallet share expansion from ~10% to eventually 20%+ — is it cost effectiveness, solutioning, or AI harness?

All of the above. In all honesty, it's all of the above. Essentially, we just have to help them. We have to help them create efficiency Within their own system, correct? I think that's the part, and that's why, you know, our solutions are going to be helpful. You know use of AI in the programs that we deliver is going to be very useful. And that's what is really... that's what is creating differentiators. When we are working on any kind of engagements in a competitive scenario, we end up winning not because we offer the lowest cost, but we offer the highest reliability and the greatest return on their investment. The 10% wallet share, it will increase by 20%. In the immediate future, right? It will not move from 10% to 20% of their wallet share. It will increase by 20% this year.

If 30% growth on solutions/products is partly from converting existing services, does that mean some shrinkage of existing scope of work in the short term?

No, it won't harm, in that way. In one or two cases, it can happen, smaller projects, but largely the idea is to take a larger responsibility and take the ownership. So, there will be an efficiency, but you are doing more work. So that's how it will compensate.

On the Cymotive acquisition — what drove sharp revenue gains in the last two years and does it work with clients beyond Volkswagen?

Like almost all acquisitions we've done, we look at expertise constrained by something but we know it's great expertise and try to take it to the rest of our customers. In Cymotive from a cybersecurity perspective — in-vehicle and outside the vehicle — there's a good portfolio far ahead of everything else. The competency of people there is relevant especially in context of what will happen in the future: AI will create more cybersecurity challenges and quantum timeline has advanced (2035 has come down to 2029). We want to take this competency to other customers. Kishor Patil added: on the Cariad side, the consolidation moved their work to India — already in multi-million vehicles which gives confidence to other OEMs. Cymotive revenue came down due to the Cariad cycle and overall Cariad business being impacted. But the bigger opportunity is to take it to others — and the fact that it is in millions of vehicles already is very compelling.