KPIT's bet on futuristic products paying off

The Pune-based developer of smart technology for cars hopes to touch revenue of $1 bn by 2017

Imagine you are driving your car at over 100 kmph and you see an object in your path at a distance. You need to decide quickly what you want to do. The camera in the car, with the help of several multicore processors, immediately zooms in on the obstacle and tells you whether it is a child, a log or an animal. The information helps you decide your reaction. In another instance, as you start your car, you get a message that the battery needs an immediate check. You also get a message from your dealer that your car batteries are in need of urgent inspection as the system at his end senses problems.

This is automobile technology moving into the realm of science fiction. "We do not compete with the IT services players much," admits Ravi Pandit, chairman of KPIT Technologies, the developer of these futuristic products. KPIT Technologies, earlier also known as KPIT Cummins, has come a long way since its inception in 1990 as an IT services company. Its merger in 2002 with Cummins Infotech, the Indian arm of manufacturing major Cummins, gave it its focus on automobiles.

"We are progressively less and less of an IT services company and more of a technology company," says Pandit who could be a geek obsessed with hi-tech gadgets rather than a chartered accountant and company executive. "That was one of the reasons why we sold our banking tech business a few years ago."

 

KPIT is engaged in some nifty automotive innovations, including designing engines that have low emission rates. It is working, for instance, on how to ensure infotainment systems do not become outdated during the life of the vehicle but absorbs changes that are brought in by technology and telecom. "Affordable electronics is another area of our work," says Pandit. These days high-end cars come with rich tech features like power assist and vision systems. How can we bring them to smaller cars? Can you do electronics more smartly?"

Pandit says that over the next 20 years, the large number of cars running on diesel or petrol will be replaced by battery-run or electronic cars and KPIT is keen to work in these areas. "These shifts represent million-dollar initiatives for auto firms and we are an integral part of this, which gives me confidence that we will see only growth," he affirms.

No wonder, then, Pandit is confident that the company will touch revenues of $1 billion by 2017 from $500 million this year. He quickly clarifies though that this is a target for employees rather than a formal guidance. "Original equipment makers differentiate electronic hardware into software and electronic and mechanical hardware. Within the software segment, it is players like us that companies prefer to work with," says Pandit. As an instance, he points out that KPIT is reworking the entire sensor layer for one of the largest automotive manufacturers of luxury cars in Europe. "This manufacturer installs 110 small engine control units and 360 sensors in the car. Of these, 40 sensors monitor the temperature. We are working with it to save euro 2 million a year by eliminating some sensors," he explains.

It is this ability of KPIT to become an integral part of an automotive firm's product road-map as well as its improved financial performance that is making several analysts take a second look at the company.

"I am very positive about KPIT. It does have some of the elements of traditional IT players, but it is the automotive play that has good growth prospects," says Shashi Bhusan, research analyst, Prabhudas Lilladher. "I think the company has a strategy and a team in place after the recent rejig. Its SAP business is turning around, as is the Oracle business. They are all set for high growth."

The focus on automotive and discrete engineering segments means a continuous investment in research and development. When asked if a long gestation period in technology wouldn't take a toll on the performance of the company, Pandit says that is the path the company has chosen. As an example of this, he cites Revolo, KPIT's hybrid kit for cars consisting of an electric motor, battery and software meant for vehicles with an engine capacity of 700-3,000 cc. The Revolo system is considered revolutionary as it can convert any car on road into a hybrid without tampering its transmission. Revolo was conceived in 2010, but four years later, it is yet to see the light of the day.

"I had not anticipated that it would take four years to get the process going. It has been a learning process. Usually, the homologation for a new vehicle test takes three months. However, this is the first time that a technology has been brought in that affects vehicles on the road. Thus the existing homologation rules do not cover this. In India, formation of rules takes long. But we hope to soon see a solution," says Pandit.

There is optimism about the company on the street. The company is also planning to list on the bourses abroad in the next two years.

"KPIT is at a stage where Mindtree and Persistent Systems were a few years ago," says an analyst. "Investors weren't too confident about buying the stocks of these mid-cap firms, but look where they are today. KPIT is the same story."