← Throughline · holding view Deep analysis ↗ Q2 FY26
TATAELXSI Tata Elxsi Ltd · Auto SDV Q2 FY26 · concall
Pattern: other vertical fy27

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

5 weak · 11 clean — pushback across 5 of 16 Q&A turns

Focused evidence 5 of 16

Analyst · weak

Other vertical growth in FY27; customer concentration

Manoj Raghavan: Healthcare and automotive double-digit growth FY27. Media & Communication wait and watch given visibility - difficult to commit. Will relook in Q3 and Q4. Auto and healthcare have multiple multimillion-dollar customers. Media has accounts but not seeing growth.

Analyst · weak

European auto data weak vs revival

Manoj Raghavan: Not looking at vehicle data. These are programs for next 2-3 years. German OEMs need to compete with China. Total cost of ownership lower needed. Most companies restarted investments. Not just older programs - new programs too. Europe focused on emission norms - 55% reduction vs 1990 by 2030 in place.

Analyst · weak

China competition impact

Manoj Raghavan: Not competing with Chinese - our customers are. Germany auto industry backbone of economy. German government will push and incentivize. As long as those companies exist needing to compete with China, we benefit. Very miniscule presence in China. China market different - lot of internal collaboration.

Analyst · weak

Healthcare last 2 quarters underperformance

Manoj Raghavan: Definitely next financial year double-digit growth. Won new deals/customers. H2 better than H1. Some projects rolling off, lacked continuity. Working on new customers, new businesses. Strengthening team delivery and sales. Healthcare primarily US with little Europe.

Analyst · weak

H2 growth vs Media slowdown; margin headwinds

Manoj Raghavan: H2 far better than H1. As revenues pick up, margin profile picks up. Utilization 70%, target 75% end of year. Will manage wage hike headwinds and show margin recovery vs H1.

▸ Other Q&A (11)
Analyst ·

Auto demand trajectory; cybersecurity incident impact; margin trajectory

Manoj Raghavan: Lot more confident about auto spend coming back. H2 definitely much better than H1. Europe definitely grow. Japan very positive. India pretty good. US still muted - coming quarter muted but adjacency aero/rail/off-road good traction. Cybersecurity at JLR - rather than quantifying, would have shown CC positive growth without it. Margin recovery slow but improving. H2 better than H1. Utilization 66% to 70%. Target 75% by end of FY26, 80% next year.

Analyst ·

Auto H2 better; OEM spend areas; offshoring trend

Manoj Raghavan: H2 better only US clarification - all other markets good auto traction. Tata Elxsi known for offshoring - 30+ years experience. Areas: SDV, electrification, EVs, AD/ADAS, infotainment, cockpit. Revival in traditional powertrain ICE-related areas. Major markets: Europe #1, US #2, Japan, India significant. China relatively small.

Analyst ·

Auto pickup over 4-6 quarters; margin walk; wage hikes

Gaurav Bajaj: 90 bps currency gain net cross-currency. Offset by 40 bps employee cost (campus onboarding final batch + sales strengthening). 30 bps other expenses (AI infrastructure partnerships). 20 bps operating margin uptick. PBT level 110 bps from hedging gains and UK R&D credit. Manoj Raghavan: Next year double-digit growth from transportation. Wage hikes - part of team in Q3, will wait till end of month given cybersecurity issue resolution.

Analyst ·

Top customer normalcy emerging

Manoj Raghavan: Definitely seeing more positive conversations. People coming back for discussions. Were prepared for worst, things looking much better now.

Analyst ·

Media bottomed out vs large deal one-off; attrition

Manoj Raghavan: Large deal ramp-ups happened. Growth will moderate in H2. Industry under stress with M&A and corporate action. Not projecting large H2 growth in this segment. Attrition gone up marginally - denominator going down increases ratio. Not significant. H2 better attrition expected.

Analyst ·

Suzuki SDV deal size; vendor consolidation; Tier 1 stabilization; Comms volume commitments

Manoj Raghavan: Suzuki - first deal Pune ramped well. Recent deal cloud-based hardware/simulation in Trivandrum. Both 5-10 year deals. Peak headcount 6-8 quarters. Multi-year, multi-million dollar. Auto vendor consolidation deals - Tata Elxsi traditionally not strong. Multiple OEM deals announced - Mercedes, European OEM, Japanese OEM all ramping. Tier 1 - moved focus from Tier 1s to OEMs over 8 quarters. This quarter stabilized with maybe slight Tier 1 growth. Comms - commitment 3-year, achieved Q2 objectives, more to achieve in H2.

Analyst ·

US holding back vs Europe; tariff impact on Europe; depreciation/tax

Nitin Pai: US doing very well on adjacency side - off-road, commercial vehicles, aerospace and defense. OEM side - new age OEMs and traditional OEMs. EV incentive withdrawal, emission norm relaxation - portfolio reset. New age OEMs - one or two winners well funded, others on horizon. Manoj Raghavan: Tariff causes Europe to look at best cost locations and outsourcing. Gaurav: Depreciation declining - no significant capex added, will continue declining slightly. Effective tax rate 26-26.5% full year, higher this quarter due to higher non-tax-exempted other income.

Analyst ·

Bayer deal size

Manoj Raghavan: Marquee deal. Multi-year relationship at least 5 years. Competed with best in India, evaluated competition seriously, selected us. Multi-year, multi-million dollar deal. Stability for next 3 years if not more.

Analyst ·

Semiconductor industry exposure

Nitin Pai: Not directly. Work with semiconductor platforms/partners. Software on top - Infineon, Qualcomm. No chip design intent. Software part contributes to topline. Important enabler for OEM engagements adopting platforms.

Analyst ·

JLR cyber impact in Q2 auto growth; Q3/Q4 acceleration; fixed price jump

Manoj Raghavan: Without cyber impact would have been positive instead of -0.5% CC. Yes, Q3/Q4 acceleration expected. Fixed price - few fixed bid deals + system integration good revenue. H2 not big change in ratios.

Analyst ·

Hyperscaler data center work; AI productivity vs innovation

Nitin Pai: Yes - have own mini-NVIDIA data center for AI experimentation. Dell award - infrastructure for on-prem data centers, AI workloads. Two parts: (1) AI/GenAI for productivity, quality, cost benefit; (2) innovation/features - ADAS, predictive analytics radiology/MRI. Not all GenAI - lot is AI. GenAI journey careful and calibrated re infringement/liability. Innovation features 14-15 years autonomous journey starting 2014. Yes work in cancer detection patterns.

▸ Prepared remarks (3 blocks)
Coming to the Q2 performance. We reported an operating revenue of INR <strong>918.1 crore</strong>s with a growth of 2.9% in actual currencies and 1% in constant currencies quarter-on-quarter. During the quarter, we reported an EBITDA of INR 193.3 crores, corresponding to a margin of 21.1%. Our PBT stood at INR 214.7 crores at a margin of 22.2%. Our key markets continue to be volatile, but we delivered strong quarter-on-quarter growth across key overseas markets led by U.S. market, which grew 7.9% quarter-on-quarter. Our Media & Communication business reported a smart 6.8% sequential growth, strengthened by ramp-ups of large deals, which we announced in the previous quarters and new deal wins. I'm pleased to share that the launch of MBC Now, Saudi Arabia headquartered content super aggregator catering to audiences across Middle East and Africa, is powered by our in-house developed OTT platform TEPlay. However, the industry environment continues to be volatile with business restructuring and M&A across leading operators and broadcasters. Our transportation business that accounts for over 53% of our revenues registered a growth of 0.7% in the quarter gone by. We are happy to report a robust pipeline momentum that is driven by global OEM SDV programs and other large deal wins. This quarter, we opened the second engineering center in a partnership with Suzuki that focuses on cloud hardware and loop simulation setup, enabling faster SDV transition. Our adjacency strategy is also showing good progress with customer additions and deal wins. In the Aerospace and Defense segment, we are happy to report a turnkey airport guidance systems development program from a U.S. headquartered aerospace supplier.
Our Healthcare and Life Sciences business reported a decline of <strong>2.3%</strong> primarily due to the conclusion of some large regulatory and MDR programs. We are building a strong pipeline of new customers and large deals across key regions in the Healthcare and Life Sciences business, and I'm confident of sustained growth in the coming quarters. I'm pleased with the launch of the Dedicated Technology Center for Bayer devices and Radiology. The center is designed to co-develop advanced radiology devices and technology that enable early and accurate diagnosis and treatment of critical illness. Our system integration business recorded a growth of 20.5% over a previous quarter. We're also pleased to announce the award we won from Dell Technologies for the Best Infrastructure Solutions Group supplier category. Enterprises are investing in on-prem infrastructure as a pivot to AI data centers and edge computing for their AI-powered enterprise applications and workloads. This award recognizes our differentiated next-gen capabilities for infrastructure design integration and run management as enterprises mainstream AI-led applications. We have delivered strong operational excellence and growth across customers, regions and industry verticals in this quarter, and we have created a strong foundation for sustainable growth. We look forward to carrying this momentum into the second half of the current financial year.
Operating revenue INR <strong>918.1 crore</strong>s, +2.9% actual / +1% CC QoQ. EBITDA INR 193.3 crores, 21.1% margin. PBT INR 214.7 crores, 22.2% margin. US market grew 7.9% QoQ. Media & Communication +6.8% sequential. Transportation +0.7%. Healthcare -2.3%. System Integration +20.5%. 90 bps gain from currency, offset by 40 bps higher employee costs (campus onboarding) and 30 bps other expenses (AI infrastructure) = 20 bps uptick on operating margin. PBT level 110 bps sequential increase. Effective tax rate 26-26.5% for full year. Utilization moved from 66% to 70%, target 75% by end of FY26.
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