TATATECH - Tata Technologies Limited Share Price

In the earnings call for Q4 FY25, management highlighted a cautious but optimistic outlook amidst ongoing global macroeconomic challenges. Despite a 1% annual revenue growth to Rs.5,169 crores, management emphasized a 12% underlying growth when excluding the completed VinFast project. The EBITDA margin remained healthy at 18.1%, supported by operational efficiencies.

Key forward-looking points included the acquisition of 17 significant deals throughout the year, including one exceeding $500 million. The management noted a concerning 14% sequential decline in the Technology Solutions segment due to reduced discretionary spending and execution challenges in the education sector. However, they expressed confidence in their Services business, which accounts for 80% of total revenue and grew 1.1% sequentially.

Looking ahead, management projected continued short-term uncertainties in customer decision-making but expected sustained investment in new products and manufacturing capacity as companies aim for long-term competitive advantage. They outlined their strategic shift towards enhanced customer collaboration and AI-led innovation, with specific organizational changes aimed at boosting customer-centric focus and accelerating growth.

Management noted that the BMW joint venture is performing better than anticipated, contributing Rs.12 crores to net profit in Q4, which they expect to grow in FY26. They also conveyed confidence in their aerospace segment, which saw robust growth and is expected to maintain momentum in FY26. Overall, management aims to position Tata Technologies as a trusted partner in engineering and digital transformation, targeting future growth driven by software and AI capabilities.

1. Question from Abhishek Kumar: "Are there tangible signs that global OEMs are looking at increasingly doing more offshoring?"

Answer: Yes, the positive sentiment from our recent customer interactions suggests a willingness to execute delayed investments. Clarity in the regulatory environment is crucial for our customers to move forward. Although tariff announcements have created uncertainties, we're hopeful that if trade negotiations succeed, we could have a strong finish to the first half of the fiscal year.

2. Question from Abhishek Kumar: "What explains the better than expected ramp-up in the BMW joint venture?"

Answer: BMW's commitment to our partnership is strategic, focusing on automotive software and AI. Unlike many, they are patient capitalists willing to invest long-term. This forms the foundation for accelerated scaling in our JV, reinforcing our collaborative efforts despite the current economic environment.

3. Question from C Muthiah: "Once clarity returns, will deal sizes bounce back or is that a medium-term journey?"

Answer: The sentiment suggests that deal sizes could indeed increase. We are experiencing confidence that the plans delayed due to recent announcements will likely close towards the end of Q1 and into Q2 as we regain clarity in the market.

4. Question from Rajiv Berlia: "What are your thoughts on the demand from the aerospace vertical compared to automotive?"

Answer: Our aerospace sector has demonstrated significant growth, nearly doubling in FY25. The partnership with Airbus is pivotal, allowing us access to their supply chain, which is struggling with demand. Unlike automotive, the aerospace business remains robust, and we expect that momentum to continue into FY26.

5. Question from Kunal: "Do you see flexibility on pricing due to demand uncertainty?"

Answer: We've maintained disciplined pricing throughout FY25, which has helped preserve our margins. While we've occasionally used pricing to enter new customer relationships, our overarching strategy is to uphold our pricing discipline to ensure sustainable operations moving forward.