Warren Kevin Harris, CEO & MD, Tata Technologies, says our services revenues in Q3 were impacted by the transition that is going on with one of our customers in Southeast Asia. We are at the tail end of the development of two electric vehicles for one of our customers and we are transitioning from the engineering work to launch support. So, the headcount is reducing. It commenced in Q2, accelerated in Q3 and we will likely be done with that transition in Q4. We expect some of that to continue in Q4, but given the deal wins and the order book that we have taken into next year, we are extremely bullish for the fiscal year 2025.Services, which is 78% of your revenues were soft, led by seasonality. Do you expect this weakness to continue in Q4 as well?
Warren Kevin Harris: Well, the third quarter is always a soft quarter for us. We have the festivals in India and the Christmas and the New Year holiday around the world. But our services revenues in Q3 were also impacted by the transition that is going on with one of our customers in Southeast Asia. We are at the tail end of the development of two electric vehicles for one of our customers here and we are transitioning from the engineering work to launch support. So, headcount is reducing.

We saw that commence in the second quarter. It accelerated in Q3 and we will likely be done with that transition in the fourth quarter, so that has had an impact in terms of services growth tapering. We expect some of that to continue in Q4. But given the deal wins that we have been able to celebrate and the order book that we have taken into next year, we are extremely bullish for the fiscal year 2025.

Operational efficiency and lower sub-contract drove 140 quarter-on-quarter EBITDA margin expansion for us. We have talked about 200 to 250 bps expansion over the medium term. What levers do you have which could take you higher?
Warren Kevin Harris: We benefited in Q3 because, one, business mix improved in the second quarter for that same customer that I referred to in terms of the transition. We were doing a lot of test and validation work and that is work that we buy in from some of the testing houses around the world and so margins on that business are lesser. We also were impacted in Q2 by the relatively generous salary increments that we rolled out.

In Q3, our bought-in services and our contract, the headcount, went down. We have also maintained a laser-sharp focus on things like offshoring, people pyramid and productivity. It is a reflection of the discipline that we are driving into our business, the rigour that we are driving into the business. We expect margins to incrementally improve over the course of the next 12-18 months. I do not think we will see a 140 basis point improvement in any one of the quarters in the next year, but we expect to incrementally drive the appropriate levers in the right direction and I think you will see improvement in margins, particularly over the medium to long term.

Your deal wins have been fairly strong this quarter. What is the nature, though, of these deal wins and which are the segments that are driving this growth?
Warren Kevin Harris: We had a very strong quarter in terms of deal wins in both automotive and in aerospace. In automotive, we had a $50 million TCV win with one of our automotive customers in the United States. They are looking to add capacity, but they are looking to add capacity in offshore locations and so we won that deal to really build capability for them here in India. We won a $25-million TCV deal with the European aerospace OEM, that is focussed upon the deployment of digital tools to help them accelerate their manufacturing throughput.

We won a top hat deal in China with one of the speciality vehicle manufacturers and then we have also won a number of digital deals that are focussed upon extending the integration of the tools that define the digital product with those tools that underpin the manufacturing process and that is an area that we are developing quite a recognition around and we have won a couple of deals, one with a new energy vehicle company in the US and another with a European OEM.

You talked about the deal win in aerospace and I believe Airbus order is also expected to ramp up well. Is it fair to assume that FY25 growth will be led by the aerospace vertical?
Warren Kevin Harris: Yes, most definitely. We were empanelled by Airbus about 18 months ago. We have been opening up offices in Toulouse and Hamburg to complement the footprint that we have got close to the Airbus facility in the UK. We have been going through the accreditation that is required by Airbus and at the same time, in parallel, we have been building a significant order book with, so we expect to discharge some of that this quarter. But as we go into next year, we will start to see a ramp up. And, of course, the relationship between Airbus and the Tata Group continues to grow, not only is Airbus partnering with the group to develop and build the C-295s here in India, but you may have seen the helicopter announcement last week and so that partnership continues to scale and is very strategic to both groups and we expect that commitment to provide tailwinds for Tata Technologies.

You have signed MOUs with Intel and others. Help us understand what this would mean for Tata Tech in the SDV space.
Warren Kevin Harris: The deal with Agratas is a deal that really extends upstream the capabilities of Tata Technologies. We have been somewhat renowned in terms of our electric vehicle development capabilities and we have done a lot of work in and around the integration of batteries and battery management systems. But the partnership with Agratas will focus upon pack design and the manufacturing processes associated with bringing packs to the market.

So, we are excited about that. The deals with Intel and Agratas are incredibly strategic in the context of our software-defined vehicle ambitions. The industry is transitioning from a supply chain that is essentially controlled by the OEM to much more of an ecosystem. Some of the silicon players will have greater and greater influence over the product development process in and around mobility systems and so the partnerships that we are establishing with some of the major players propels Tata Technologies to the front end of the SDV world and positions the type of bundle proposition that is going to be very meaningful.

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