The Pune-headquartered KPIT has arrested a recent slide in its fortunes with a growth in net profit of nearly 50 per cent in the third quarter of 2020-21, registering a 6.7-per-cent growth in its revenue in dollar terms. The independent software developer, which has been concentrating on its role as an integration partner to the global automotive industry, has reported a net profit of Rs41.8 crore for the quarter – up smartly from Rs27.9 crore in the earlier quarter. High cash conversion also continued during the quarter, making it the eighth consecutive quarter of increase in net cash with DSO (day’s sales outstanding) at an all-time low of 58 days.
“Our depth and experience in electric powertrain, autonomous driving and digital cockpit areas are helping us gain traction within our strategic clients,” says Kishor Patil, co-founder, CEO & MD, KPIT. “The automotive and mobility industry is prioritising investments in new-age technologies, where we are at the forefront.”
“We continue to deepen our strategic engagements with our top 25 clients, with emphasis on creating tremendous value for them through leadership in our practices – via platforms, tools and accelerators – as well as delivery excellence,” adds Sachin Tikekar, president & whole-time director of the company. “Our operating performance is also trending in the right direction on the back of larger strategic engagements and overall productivity improvements.”
Over the years, Patil explains, KPIT has chosen a more focussed approach for leadership in automotive and mobility rather than being generalists with a higher scale in the short term. It has thus witnessed significant growth in the space of embedded software in the automotive sector. “We have been investing as well as growing in this area for a long time. As vehicles are becoming more software-defined, we felt this is the time to focus and build a global leader in this area. Also, with the investments growing in this area, we feel we can scale in the medium term.”
KPIT, a global technology company with software solutions that will help mobility ‘leapfrog towards an autonomous, clean, smart and connected future’, works to accelerate development and integration of software components and software functionalities in the ‘connected, autonomous, shared & electrification’ (CASE) area. To achieve this, it has invested over the years in platforms, accelerators and tools that allow it to do this ‘better, quicker and efficiently’ for its clients.
“From prototype and software development to validation and testing, we ensure that software works as conceptualised in production,” says Patil. “We understand the challenges in engineering and various nuances that can determine production-ready software.” With the automotive industry in urgent need of deep software competence from the twin perspectives scale and expertise, KPIT has made just this, its value proposition.
This, he points out, is exactly the company’s business: to accelerate the development of software on one hand and making it ready for production on the other. What comes to the fore, he says, is the team’s deep understanding of the automotive industry and a strong understanding of the CASE domain, better than most other software companies.
Explaining that KPIT has acquired its domain know-how through its sharp focus on the automotive industry and deep relationships with its clients, he points out that these clients are all leaders in their own areas. “We conceptualise features that their end-consumers need most. We understand what these clients need – not only the OEMs, but also their Tier I customers – and deliver solutions that are tailored precisely to each one’s requirements.” These skills and domain knowledge are not readily available, so the company is a net talent creator – and will continue to be one. Investing ‘significantly’ in infrastructure, training and competency development, it has delivered software for numerous production programmes.
Global clients include big names like power management company Eaton, which in 2019 chose KPIT to support the development of next-generation electrified mobility technologies for its e-mobility business unit. With the Southfield, Michigan-headquartered company’s collaboration with the Indian company will focus initially on developing and deploying technologies, software solutions and platforms for several of its components, including inverters, on-board chargers, DC-DC converters and power distribution modules.
“Eaton continues to build competencies to solve complex problems in e-mobility, which OEMs consider critical and transformative,” said its e-mobility president Jeff Lowinger at the time. “KPIT is our extended team in this approach, with its sharp focus on mobility and years of experience in electric powertrain technologies. Our strategic alliance brings valuable capabilities and technologies to enable manufacturers to develop vehicles that are cleaner and safer and deliver value.”
Adds Patil: “The strategic alliance resonates with our vision of reimagining mobility with our customers, partners and people. With our complementary strengths in the automotive domain and electrification technologies, we are geared to address some of the most complex challenges involved in the development of electric vehicles and pave the way for Eaton to leapfrog the competition in the electric mobility space.”
Eaton’s e-mobility business unit for electrified vehicles, set up in 2018, focuses on three primary areas: intelligent power electronics, power systems, and advanced power distribution and circuit protection. The global vehicle electrification market is projected to grow to 15 million pure battery-electric vehicles by 2030.
Last year, KPIT announced the signing of a large-scale order spread over several years with BMW group. The combined power-train co-ordination unit is designed to power the next generation power electronics architecture of BMW Battery Electric Vehicles (BEVs) and involves software development, integration, and maintenance. The integrated charger unit is an onboard charger that is combined with the vehicle control unit.
MicroFuzzy, A KPIT group company that specialises in vehicle electrification engineering,is working with KPIT’s electric power-train team to execute this strategic software programme. The strategic collaboration nominates the Indian company as the single-source software integration partner for the next-generation 11 kW combined charging electronics programme powering the upcoming BEVs. MicroFuzzy and KPIT are responsible for the complete development, integration, validation and series software maintenance, to accelerate the technologies a future electric vehicle requires.
In October 2018, the BMW group had selected KPIT as a partner to press ahead with its scalable autonomous driving platform and develop higher-level functions like Highway Pilot and Urban Pilot. “Tackling this immense challenge calls for an all-embracing approach,” according to Elmar Frickenstein, senior vice president fully automated driving and driver assistance, BMW AG Munich. “This includes building strong alliances that allow us to gain valuable know-how and also speed things up. In order to achieve our objective in 2021, we are collaborating with the best technology partners in the world.”
Beyond CASE, Patil says, KPIT will emerge prominently as an independent software integrator and partner for OEMs and Tier Is. “We believe that is where we have our strength and leadership position,” he asserts.
With defect-free software set to play a more important role than before, the time to market needs to be reduced, ensuringat the same time that the software works in production the same way it did in the prototype stage. The quality of software and the software-hardware integration is key to this. All this requires time and experience. Hence, the need for a software accelerator and integrator will increase.
Taking into account the fact that a vehicle is typically in use for about 10 to 15 years, sometimes even longer, electronics now enables the introduction of new features via Over the Air updates. This makes it possible to achieve good revenues despite falling cyclical sales of new cars. End consumers need new features, which in practice mean new software. “This may lead to different business models for higher life-cycle revenues and monetisation of data and services,” he adds.
Explaining why KPIT has done well despite Covid-19, Patil points out that, though the Covid-19 pandemic did bring some disruption in the industry in the medium term, both the industry and its business fundamentals are strong. “We needed to be nimbler, adapt more quickly and innovate to respond to client needs during this time so that we could contribute to their success,” he says. “Mainly, our focus was to help our clients to make progress on transformation in spite of the Covid impact.” More, this proactive approach towards the ever-evolving situation even enabled the company to win a few long-term deals.
“Since the company bags nearly 70 per cent of its revenues from innovative technologies, it will be a good long-term bet, because of the thrust on elective vehicles in the US and Europe,” says Anand M.S, analyst & co-founder, Investor Relations Society. “Moreover, KPIT's healthy cash reserves and its zero-debt status, especially during the pandemic, make it look attractive.”
KPIT enabled almost its entire global workforce – 98 per cent, Patil quantifies – to work from home by the beginning of April 2020, as its top priority was employee safety, while meeting client commitments. “Our road map on meeting customer commitments was strong, with a clear focus on Zero Defect Delivery and increasing productivity. We focussed strongly on employee well-being and employee satisfaction, ensuring skill utilisation, up-skilling and managerial support to enhance our IT systems and infrastructure.”
KPIT and the Silicon Valley-based lifelong learning platform Udacity are also partnering to upskill and build the engineering talent ecosystem for autonomous technology, including self-driving cars and autonomous flight. This partnership accelerates scalability by providing training and competency in AI, self-driving car engineering, data engineering. “Partnerships with top employers like KPIT are essential to delivering on our mission to democratise education,” says Sebastian Thrun, founder & executive chairman, Udacity. “Self-driving cars engineering is a field with incredible job opportunities and the power to save lives.”
With 6,000-plus ‘Automobelievers’ around the globe, specialising in embedded software, AI and digital solutions, KPIT enables customers to accelerate implementation of next-generation mobility technologies, Patil says, adding: “Our development centres in Europe, the US, Japan, China, Thailand and India enable us to work with leaders in mobility and is present where the ecosystem is transforming.”
Along the way, KPIT hosted a virtual panel discussion with women leaders in mobility to discuss ‘the perfect blend of diversity’ for the industry. This was vital, says Jayada Pandit of KPIT, who moderated the discussion, because women designing these vehicles are fewer than 30 around the world, though women influence 85 per cent of all car purchases globally, worth more than $80 billion. The participants discussed a variety of issues from right opportunities, right mentoring, to being at the right place at the right time – from perseverance and passion to people skills. “The panel discussed inspiring insights, thoughts and experiences with industry expert women leaders in the field of mobility,” she adds.
Beyond business, KPIT has taken its exclusive focus on the mobility and automotive industry to run its annual ‘KPIT Sparkle’ programme, which brings industry and academia together to shape the innovations of the future. This offers a platform to faculty and students of undergraduate, post-graduate and PhD courses from the science, engineering, design and management streams of colleges and universities all over India. This year, more than 21,000 students from over 950 colleges registered, while 2,700-plus teams came up with idea prototypes.
It also runs a ‘Chhote Scientists’ programme, with experiment-led sessions by KPIT employee volunteers and Jnana Prabodhini volunteers, who teach basic concepts of science using easily-available material. It has so far covered 57,388 beneficiaries in 200 schools. “This has been a fulfilling programme, especially it allows KPITians to actually participate by spending personal time,” Patil says.