KPIT Tech targets 18pc EBITDA margin in medium term, says official

Large investments, including a corporate office in Munich, have dented profitability for KPIT Technologies and the target is to get operating margin up to 18 per cent in the medium term, its management said on Thursday.

To boost employee morale, the company is planning to allocate shares to 70 per cent of its over 7,000 employees by March as against only 20 per cent who own the company at present.

The company, which had merged with Birlasoft in 2018 before splitting into two publicly listed companies in ealry 2019, has invested in hiring over 700 people at the Munich office, which is one of the most expensive locations in the world, its co-founder and chief executive Kishor Patil said.

In results announced on Wednesday, it reported a post tax net of Rs 40.93 crore in the December quarter, up from Rs 36.73 crore in the year-ago quarter.

The Pune-headquartered company which provides software solutions mainly to auto and mobility companies worldwide reported operating margins at 13.4 per cent in the December quarter, which was flat as the quarter ago period.

"Most of the investments that we have to do are over now and we will be restricting the investments to 3-4 per cent of our revenues from here on. The target is to take the EBITDA to 18 per cent in the next few years," Patil told PTI.

The company, which added 1,000 people in calendar 2019, is also finalising a location to have an development centre in India but it may not impact margins, he said.

It sees a healthy demand and deal flow, and will continue hiring in the new year as well, he said.

The attrition was at "early double digits" as of December and the company is targeting to get it down to single digits in March quarter, he said.

As a token for completing one year as a standalone entity, the company is targeting to give shares to over half its employees or over 3,500 people in the March quarter, Patil said, clearing that these are not ESOPs.

Indian automakers are investing in technologies despite the reverses in demand, Patil said, adding that companies globally ought to invest for holding on to market shares in the competitive segment.

The company scrip gained 0.46 per cent to close at Rs 99.35 apiece on the BSE on Thursday as against a 0.69 per cent correction on the benchmark.