Tata Technologies , a global engineering and product development digital services company, has reported a 6.4% sequential revenue growth to Rs. 1,323 crores in Q2, marking a return to growth after a few softer quarters. The company's performance demonstrates resilience in a challenging macroeconomic environment, with notable improvements across its key business segments.

Services Business Growth

The services business, contributing 77% of total revenue, grew by 5.1% sequentially to Rs. 1,013 crores. This growth was driven by strong performance in the Aerospace and Industrial Heavy Machinery segments, which delivered a 14% sequential revenue increase in US dollar terms. The automotive vertical also showed signs of stabilization with a 0.5% sequential increase.

Technology Solutions Performance

The Technology Solutions portfolio, accounting for 23% of revenue, saw a robust 10.6% sequential growth. This was attributed to strong momentum in both the Education and Products segments, with the education business recovering as previously deferred projects moved into execution.

Financial Highlights

The company's normalized EBITDA margin improved to 16.4%, reflecting a 30-basis point increase quarter-over-quarter, after adjusting for one-time cyber incident-related expenses.

Strategic Acquisition

Tata Technologies has signed a definitive agreement to acquire ES-TEC, a move that significantly advances its European presence and automotive engineering capabilities. This acquisition will provide direct access to Volkswagen as a key customer and add over 300 highly skilled engineers with expertise in ADAS, Connected Driving, and Embedded Software.

Operational Metrics

• Total headcount: 12,402 (stable compared to Q1)
• Trailing 12-month attrition rate: 15.1% (up from 13.8% in Q1)
• DSO (Days Sales Outstanding): 109 days (up from 87 days in Q1)
• Net cash position: $123 million

Outlook

While the company anticipates some moderation in Q3 due to seasonal factors and temporary headwinds, including JLR's IT system restoration, management expects a sharp recovery in Q4. The recent large deal wins and improving demand signals provide confidence for future growth.

Warren Harris, CEO and Managing Director of Tata Technologies, commented, "Q2 has been a quarter of meaningful progress and renewed momentum. Despite operating in a complex macro environment, we have delivered sequential growth across both services and technology solutions, maintained profitability, and continued to invest in strategic capabilities that position us well for long-term success."

As Tata Technologies enters the second half of the fiscal year, the company remains focused on deepening customer relationships, driving operational excellence, and building a future-ready organization through continued investment in talent, technology, and transformation.

Tata Technologies , a global engineering and product development digital services company, has provided insights into its near-term business outlook, highlighting both challenges and opportunities ahead.

Q3 Outlook: Slower Growth and Margin Pressure

Tata Technologies anticipates a period of slower growth and margin pressure in the third quarter. The company attributes this expected downturn to two primary factors:

1. Salary Increases: The implementation of salary hikes is likely to impact the company's profit margins.
2. Temporary Customer Challenges: Some of Tata Technologies' clients are facing short-term difficulties, which could affect the company's growth rate.

Q4: Expectations of Recovery

Despite the projected challenges in Q3, Tata Technologies expresses optimism for the fourth quarter. The company bases its positive outlook on two key drivers:

1. Recent Contracts: New agreements secured by the company are expected to contribute to revenue growth.
2. Rising Demand: An anticipated increase in market demand for Tata Technologies' services and solutions.

Financial Outlook

It's important to note that Tata Technologies has not provided specific revenue or earnings forecasts. The company's statements regarding future performance are based on current market conditions and recent business developments.

Investor Considerations

While Tata Technologies' outlook provides some insights into the company's expectations, investors should consider the following:

• The lack of detailed financial projections
• The potential impact of global economic conditions on the company's performance
• The competitive landscape in the engineering and digital services sector

As always, investors are advised to conduct their own research and consider their risk tolerance when making investment decisions.