KPIT Tech shares hit 15% lower circuit as company expects Q1 revenue decline, sharp hit to margins

Shares of KPIT Technologies tanked over 15% to the day’s low of Rs 559.10 on the BSE on Wednesday after the company issued a preliminary business update indicating that its financial performance for the first quarter of FY27 will fall short of earlier expectations following a sudden drop in revenue in recent weeks.

The company said it expects its Q1FY27 reported revenue in U.S. dollar terms to decline by around 1% year-on-year compared with Q1FY26. The decline has been primarily attributed to sudden actions by some European original equipment manufacturers (OEMs) following their recent profit warnings and adverse business outlook.

KPIT said the impact was not anticipated earlier and emerged only in recent weeks. It, however, described the development as a short-term phenomenon, adding that, over the longer term, clients’ cost-cutting measures are expected to drive higher outsourcing and offshoring, supported by greater automation through the company’s products and solutions. The company said this trend has already been indicated by clients and was also witnessed during the Covid period and similar circumstances.

The company also said its operating profitability, measured by EBITDA margin, and net profit margin for Q1FY27 are expected to decline sequentially by a proportionately larger extent than the fall in revenue, as there was no scope for cost optimization during the short period.

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KPIT acknowledged that its performance in the first half of FY27 is likely to remain unsatisfactory but said the fundamentals of its business continue to be strong. It highlighted strong traction in its Products and Solutions business, the Trucks and Off-Highway sub-vertical, and the U.S., Korea and India markets. Growth in the passenger vehicle segment is also being supported by new client acquisitions.

The company said technology areas such as autonomous driving, connected vehicles, after-sales solutions, and full vehicle design and engineering continue to witness promising traction. It added that these growth drivers are backed by a resilient order book and a growing pipeline.

KPIT said it is implementing AI-led productivity improvement and cost containment initiatives to support a sustained improvement in margins. It also said it will continue investing in AI-led products and solutions to capitalise on future growth opportunities.

The company expressed confidence of delivering sustainable and profitable growth during the second half of FY27. It expects sequential quarterly growth in Q4FY27, which it said would help establish a strong growth foundation for FY28 and beyond.

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