What Did KPIT Tech Say On June 30?
On Tuesday evening, KPIT Tech said in an exchange filing that it expects its US Dollar revenue to decline 1% year-on-year for the June quarter, compared to the same period last year.
It attributed this warning to a sudden drop in revenue over the last few weeks due to the recent profit warnings and a deteriorating business outlook at multiple European auto companies, including BMW.
The management went on to add that the slowdown was not anticipated earlier and has materialized recently.
Along with the drop in US Dollar revenue, KPIT Tech also expects its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), and net profit margins to decline on a sequential basis, along with a limited room for cost optimization in the near-term.
However, the company has reiterated that this is a short-term phenomenon and that the cost-cutting by clients in the long-term could accelerate outsourcing.
The company’s guidance of a 1% drop is a miss compared to brokerage firm Motilal Oswal’s expectations of a 2% growth. The brokerage expects US Dollar revenue for KPIT Tech to grow by 1.6% in financial year 2027.
What Are KPIT Tech’s Current Valuations?
KPIT Tech’s two-day fall has also begun to impact the rest of its ER&D peers, with shares of Tata Technologies and Tata Elxsi, both declining across Monday and Tuesday.
Shares of KPIT Tech are already down 42% in the first six months of the year, and from its record high levels, the fall is more pronounced, at 65%.
At the current price, KPIT Tech trades at a one-year forward price-to-earnings multiple of 20 times, a far cry from the 50 times multiple it traded at its peak.
KPIT Tech’s Slowdown Warnings
The entire ER&D sector began to decelerate sharply in financial year 2025 itself due to weak spending by auto OEMs, growth slowdown, uncertainties over tech EV Vs Hybrid Vs ICE vehicles, Trump tariffs, and now comes the recent slowdown and profit warnings.
During the second quarter of financial year 2025, KPIT Tech had guided for growth to be at the lower end of its earlier range, citing regional challenges, particularly in Europe.
Come April 2025, which was the fourth quarter of the financial year, the company did not provide any growth guidance for financial year 2026, citing uncertain demand and slow deal ramp-ups.
However, in April this year, the company had said that financial year 2027 looks more promising than financial year 2026 in terms of revenue growth visibility and market opportunity. It did acknowledge that the first half of the financial year will have an impact of two large programs coming to an end.
For financial year 2027, the company expects margins to be between 20.5% to 21.2%, compared to 20.8% in financial year 2026.
Shares of KPIT Tech had ended 6% lower on Tuesday at ₹670.5 and were the second-worst performers on the Nifty 500 index.
