Dear Fellow KPites
FY2019 was a year of true transformation and reincarnation of KPIT in anew sharply focused and re-energized avatar.
As a company we have always been passionate about automotive and havebeen investing in the same for more than a decade. With a view to bring in sharper focuson automotive and mobility we went through a major restructuring exercise which wascompleted during the year.
On January 29 2018 we had announced a transaction of merger anddemerger involving KPIT and Birlasoft. Birlasoft is a part of the USD 1.6 billiondiversified CK Birla Group.
The NCLT (National Company Law Tribunal) directed EGM for seekingshareholder approval for the Merger Demerger Scheme ("Composite Scheme") wasscheduled on August 29 2018. The shareholders overwhelmingly approved the scheme for themerger of Birlasoft with KPIT and the simultaneous demerger of Engineering business into anew company to create two public companies.
The Mumbai Bench of NCLT vide its order dated November 29 2018approved the Composite Scheme. The written order was received by KPIT on December 182018. The appointed date for the scheme was January 01 2019 and the effective date wasJanuary 15 2019.
Thus the Composite Scheme approval by the NCLT resulted in theformation of two companies:
KPIT Technologies Limited (USD 270+ Million revenue company) aglobal leader in Automotive Engineering and Mobility Solutions which evolved from theexisting Engineering Business of KPIT.
Birlasoft Limited (a USD 475+ Million revenue company) a newDigital Business IT Services company focusing on the mid-tier IT space formed bycombining Birlasoft with the erstwhile KPIT IT business.
We are more excited than ever before with this reincarnation of ourcompany.
As we all are experiencing the world of mobility is going through ahuge revolution and it is in for a paradigm shift something that has not been witnessedin the last 100 years. This shift is largely driven by electronics and software the areaswhich we call ours. We are fortunate to be at the right place and at this very right timeto ride on the opportunities presented by this perfect storm of technology shifts &business model changes. We want to be a key participant in this shift to build a new worldof mobility.
In the light of this change we have redefined our vision which readsas follows:
for creation of a cleaner smarter & safer world
Let us explain the vision in greater details:
Reimagining: The paradigm shift in mobility gives us an opportunityto think afresh.
We will achieve this by
Building Platforms Tools Accelerators Innovativebusiness models using domain knowledge
Delivering globally with diverse teams in cultureslanguages and thoughts
Learning & applying transformational technologies(Artificial Intelligence Digital Big Data)
Mobility: Technologies that enable people and goods to move incleaner smarter and safer way. This includes passenger commercial & offe-highwayvehicles and organizations that offer mobility as a service.
With you: Every KPIT Stakeholder is a key participant in thisvision
Customers - Accelerating the realization of ourCustomer's vision
Employees - Providing an opportunity for our freethinkingentrepreneurial employees to paint on this canvas while building on our strong foundation
Partnership - Partnering with our customers mobilityecosystem stakeholders universities research organizations and other infl uencers tomake the vision a reality.
Overall Business Performance (Engineering Business)
During the year the Engineering Business reported total revenues ofUSD 270.8 Million registering a growth of 22.9%. The reported EBITDA for the year stoodat 11.5% while the operational EBITDA was 12%+. The difference between reported andoperational EBITDA is principally the expenses related to the merger-demerger scheme.
During the year we continued to invest (hiring talent) in our globaldelivery centers especially in Germany and in research & development. Growth in theensuing quarters will help us leverage these investments and thus expand the operatingmargins.
How we fared vis-a-vis our goals for FY18-19
Customers: The growth during the year was led by growth in theStrategic Accounts with the Strategic Accounts (T25) growing at 30% during the year ascompared to last year. The growth during the year from a practice point of view wascontributed by the focus practices of AD-ADAS (Autonomous Driving Advanced DriverAssistance Systems) ePT (Electric Powertrain) Connected (Infotainment) and Diagnostics.
People: We invested heavily during the year to build our GlobalDelivery model with Germany being the largest center for these investments. Ability tohire talent locally and deliver globally is one of the key strategic areas of focus forus. Attrition across the industry has gone up and we had top-block attrition in lowerdouble digits. The target is to get this attrition in a mid to lower single digit range.We piloted Predictive Attrition Framework during the year to help us address criticalattrition well before time. With focus on hiring locally we are progressing well on thevisa independence target.
Technology and Innovation: The technology roadmap definition andprogress on the same is being monitored through PDFs (Practice Development Forums) for allthe practices. The next step in this regard is customer by customer plan of engagementwhich is now being initiated. Along with this plan of engagement comprehensive engagementwith customer CTO and/or Customer Research Group Head is progressing well. All key newtechnology initiatives are being driven/enabled/facilitated by the CTO (Chief TechnologyOfficer) team.
Delivery Excellence: We have institutionalized the process foridentification and monitoring of large high risk programs over the entire life cycle ofthe projects. This has enabled prevention of major deviations from plan in majority of thecases and in some cases empowered immediate corrective actions to arrest any derailing.There is a continuous improvement in the customer CSAT (Customer Satisfaction) scoresacross practices.
Technology and Innovation:
Research and development have always been on the forefront of ourbusiness strategy. KPIT CTO Function is our R&D arm and is responsible for technologyincubation co-innovating with customers fostering a culture of innovation not onlywithin the organization but also in the business ecosystem and carrying out advancedresearch in collaboration with research labs and academia. It is accredited as a researchand development facility by the Department of Scientific and Industrial Research (DSIR)under the Ministry of Science and Technology.
The total number of patents filed by us as at the end of Q4FY19 stoodat 45 (38 with complete specifications and 7 with provisional specifications). In totalwe have 49 patents granted across geographies (the same patent if granted in twogeographies is counted as 2 granted patents). Most of these patents are in the domain ofelectric and hybrid technologies ADAS (Advanced Driver Assistance Systems) BMS (BatteryManagement Systems) Infotainment VLSI (Very Large Scale Integration) and HighPerformance Computing.
FY2019 was the fifth year of KPIT Sparkle a national design anddevelopment innovation contest for science and engineering students. The theme for the2019 edition was "Energy and Mobility for the Future." It sought futuristicsolutions based on cutting-edge technologies to solve problems in areas such as renewableenergy generation energy storage energy utilization and clean safe shared connectedand secured mobility.
In the last five years KPIT Sparkle has received nearly 6000 ideasfrom more than 50000 students nationally. The participation in KPIT Sparkle grew from ameagre 2000 in its first year to around 22000 in this edition. This represented morethan 1100 colleges in India. The Top 30 teams presented working prototypes of theirsolutions at the grand finale held on 23rd and 24th February 2019. Team Aqua from ArmyInstitute of Technology Pune won the platinum award of ` 1.0 Million fordeveloping a vertical axis water turbine (VAWT) which is 24% more efficient than aconventional system.
KPIT Sparkle 2019 was privileged to be associated with the Governmentof India's Department of Science and Technology (DST) NITI Aayog's AtalInnovation Mission (AIM) All India Council for Technical Education (AICTE) India DesignCouncil and the National Institute of Design as the knowledge partners and PimpriChinchwad College of Engineering (PCCOE) Pune Noida Institute of Engineering andTechnology (NIET) Greater Noida and Sandip University Nashik; as academic partners. KPITalso partnered with the Centre for Innovation Incubation & Entrepreneurship (CIIE)IIM Ahmedabad Incubation Cell IITM Science and Technology Park BHAU Instituteand Centre for Innovation Incubation and Linkages (CIIL) Savitribai PhuleUniversity to provide incubation opportunities to deserving ideas.
The Year Ahead
The Mobility Industry is going through a lot of disruptions. While onone side there is a fall in the sale of vehicles across the globe on the other sidemobility players are increasing investments in electric automated and connected vehicles.OEMs are desirous of launching newer models with added features in a shorter span of timeand at the same time are focusing on operations cost reduction and stafferationalization.The government regulations across the globe are becoming stringent especially in the areasof emissions and safety. Thus in these volatile times for the industry that weexclusively focus on we are not giving a formal guidance for FY20.
Having said that the outlook for the year remains positive and weexpect FY20 CC revenue growth to be in the range of 16% - 18% with EBITDA margins in the14%-15% range.
I am confident of maintaining sustainable profitable growth momentumgoing forward because of a core committed team within KPIT and continued support fromstakeholders like yourself over the years. I regard this highly and appreciate itthoroughly.
Warm Regards Sincerely yours
S. B. (Ravi) Pandit
Chairman & Group CEO