>KPIT CUMMINS (TATA SECURITIES)

Revenues increase 4.6% sequentially: KPIT’s consolidated revenues grew by 4.6% in 1QFY11 to Rs2,061mn. In US$ terms, the growth was 5 .6%. The growth in 1QFY11 was driven by a 3% volume growth and around 2.5% increase in realisations. The increase in realisation was on account of higher share of revenues from SAP and auto businesses, which have a higher average
realisation. In 1QFY11, the SAP business grew by 9.6% sequentially, with auto and engineering business growing by 4.8%. The company also commented there were some early starts to the projects resulting in higher-than-expected revenue growth in 1QFY11.

EBITDA margins decline by 310bps: In line with expectations, KPIT’s EBITDA margins declined by 310bps in 1QFY11 on account of a) Salary increases of 12% offshore and 2% onsite and b) Addition of more than 400 employees in 1QFY11. Going forward, we expect margins could improve on account of a) Economies of scale and b) Improving utilisation as the freshers
hired in 1QFY11 start getting billed in the quarters ahead.

Net profit declines by 6.8%: Though the company’s EBIT declined by 15.6% sequentially, the net profit declined only by 6.8% to Rs194mn. This was mainly on account of a) Lower forex losses as the INR appreciated by 1% in 1QFY11 and b) Lower taxes.

To read the full report: KPIT CUMMINS