← Throughline · holding view Deep analysis ↗ Q1 FY26
TATAELXSI Tata Elxsi Ltd · Auto SDV Q1 FY26 · concall
Pattern: auto demand pattern healthcare

Q1FY26 Mercedes-Benz/Suzuki flagship SDV naming and Tier 1 stress framing faded by Q4FY26.

1 deflection · 3 weak · 8 clean — pushback across 4 of 12 Q&A turns

Focused evidence 4 of 12

Analyst · weak

On auto vertical demand pattern over last 3 months and healthcare client-specific issues

Manoj Raghavan: Auto - deals coming through in Europe and APAC region. Some deals from previous quarters had slow ramp-ups, now accelerating. US market still slow. Healthcare - 2 large US customers had projects on pause due to lack of clarity in their own businesses. Expect Q2 restart. Some new logos opened in Healthcare, ramping up in H2.

Analyst · weak

Auto demand areas; Mercedes deal scope; FY26 vertical mix

Manoj Raghavan: AD-ADAS, SDV, electrification demand. Older relationships continue - body chassis infotainment cockpit. Mercedes - press release covers what's available; SDV plus little powertrain. Lot of OEM conversations around SDV. FY26 - growth led by transportation. Media and communication recovers from Q2. Healthcare careful given tariff issues, smaller business, select customers. H2 healthcare uptick expected.

Analyst · deflection

Headcount reduction strategy, new geographies, M&A

Manoj Raghavan: Headcount down because not aggressively hiring. Have decent bench available. Main geographies - US, Europe, Japan, India. New geographies - Middle East, Africa, Latin America, Southeast Asia. M&A - tuck-in acquisitions only. New verticals - aerospace and defense focus. No revenue or profitability guidance.

Analyst · weak

OEM ramp-up amid macro deterioration; pipeline expansion

Manoj Raghavan: Talking about OEMs we have engaged. Customers don't go back on signed deals. Confident in portfolio of accounts. New logos pursued. Existing customers see uptick. Europe and Asia momentum. US continues slow. Conversations with new customers happening.

▸ Other Q&A (8)
Analyst ·

JLR top customer outlook for FY26 and margin recovery to FY23/FY24 levels

Manoj Raghavan: JLR situation fluid given their sales/related issues. Maintain at current level, no aggressive growth, some incremental growth. Margin drop is because of revenue decline. Confident of getting back to margin profile as revenues pick up. Over next 3 quarters, gradually pull back margins. Q1 financial year may end with margin lower than last year. Aiming for 29-30% EBITDA margin profile in medium term.

Analyst ·

Margin pressure - shifting to onsite deals or normal business?

Manoj Raghavan: Offshore-centric business continues - more than 76% offshore. No change. Margin issue is top line degrowth. Consolidation deals also put some margin pressure. Asia-specific deals - need to take over and manage transition; revenues come once steady state happens. Confident of 29-30% EBITDA in medium term.

Analyst ·

Aerospace and defense investments and revenue targets

Manoj Raghavan: Already ramped up almost 150 people team. Built capabilities in drones, eVTOLs. Working with HAL, NAL and defense labs in Bangalore. Long lead time business. Expect INR50 crores revenues this year to get started. In subsequent 2-3 years, ramp up significant business. Not expanding investment further until deals close.

Analyst ·

Media and communications industry outlook

Manoj Raghavan: Industry globally subdued. M&A happening. Subscriber numbers coming down, ARPUs down. Structural issue. Deals are efficiency-driven, consolidation, AI/GenAI led. NEURON product helps automation. We have reached the bottom from Tata Elxsi's perspective. Large deals won + transition costs are now behind. From coming quarter, better results. Most large deals around efficiency themes.

Analyst ·

Large-scale transition cost impact on revenue

Manoj Raghavan: Large deal at lower commercial terms than previous rates. Entire portfolio rate reset to lower per unit rate. Volumes not down, but rate negotiation lowered business. 3-year commitment. Will make up over 3 years. Reset already happened in 1Q.

Analyst ·

Confidence on ramp-up of new auto deals; OEM vs Tier 1

Manoj Raghavan: Q1 ramp-up happened as per expectation. No pullback, no slowdown. Q2 commitment continues per schedule. Tier 1 globally stressed - Tier 1s losing deals because OEMs taking over. OEMs becoming like Tier 1, want to own software. Tier 1s have GCCs handling work. Tier 1 business continues to decline.

Analyst ·

Media large deal full ramp-up timing; mobility leakage areas

Manoj Raghavan: Full ramp-up by H2 of this financial year, between Q3 and Q4. Tier 1 portfolio under stress. Reached stage of not too much more drop. OEM growth larger and faster than Tier 1 degrowth. Should show positive growth. Gaurav: Cost increase due to currency impact on onsite salary, VISAs. Margin dip due to revenue decline.

Analyst ·

AI/GenAI impact on headcount; gaming segment

Manoj Raghavan: Using AI/GenAI, talking to customers. Impact not dramatic. Legal issues, open-ended liabilities. AI for certain tasks/projects, not generic. Won't mislead - GenAI not panacea. Don't operate in gaming segment - moved out 10 years ago. Gaurav: Tax rate ~26% as SEZ benefits closing, moving from 100% to 50% tax bracket.

▸ Prepared remarks (3 blocks)
For the first quarter of FY '26, we reported an operating revenue of INR<strong>892.1 crore</strong>s. EBITDA margin stood at 20.9% and PBT 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. Automotive industry is still in the state of flux with the China business and tariff-related uncertainties, casting a cloud on R&D strategy and spend, while the Tier 1 supplier business continues to be challenged. We had announced large deals in the previous quarter in SDV vehicle engineering for Mercedes-Benz, an 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 their 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 OEMs, including some new logos in Japan, U.S. and Europe. I'm pleased to report our continued progress in the adjacency strategy, with two strategic deal wins from the off-highway segment in AD-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. 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 FY '25 will contribute to revenue growth in the upcoming quarters.
The transition investments that are part of such consolidation deals has 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 multimillion dollar design digital deal with the U.S. tech giant for next-generation AI and product feature development. Our Healthcare & Life Sciences segment declined <strong>6.7%</strong> quarter-on-quarter in constant currency primarily affected by tariff-related impact on medical devices with two key customers in the U.S., which is the 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 FY '26. We are expanding our customer base across geos, and I'm pleased to report two key wins, including all 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 FY '26 and beyond, and utilization improves on the back of ready capacity and capability we have invested in over the past few quarters.
Operating revenue INR<strong>892.1 crore</strong>s. EBITDA margin 20.9%. PBT margin 21.1%. Transportation flat in constant currency. Media and Communication business declined 5.5% QoQ in constant currency. Healthcare & Life Sciences declined 6.7% QoQ in constant currency. SI business showed sharp decline due to one-time INR13-14 crores Bharat Pavilion deal in prior quarter; SI usually around INR25-30 crores per quarter. 76% of business continues to be offshore. Wage hikes deferred from Q2 to Q3 (October timeframe).
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