KPIT Technologies share price plunges 14% today: Key factors behind fall

Shares of software development company KPIT Technologies plunged 15 per cent to Rs 1,395, hitting over four-month low on the BSE in Thursday's intraday trade, amid heavy volumes, on sluggish commentary for the second half of financial year 2024-25 (H2FY25). The stock is trading at its lowest level since June 4, 2024.   A combined total of 0.77 million shares of KPIT Technologies worth around Rs 1,141.62 crore exchanged hands on the BSE and NSE today.  

 

The fall in the stock price came on the back of the company's mixed Q2FY25 results, announced on October 23. Along with the earnings, the company also announced that its board had approved raising funds of up to Rs 2,880 crores, or an equivalent amount thereof, in one or more tranches.

 

During Q2 FY25, KPIT reiterated its FY25 constant currency (CC) growth guidance of 18-22 per cent (vs 19-22 per cent guided during Q1) and Ebitda margin of 20.5 per cent plus. It, however, indicated that growth will now be at the lower-end of this band, implying 1.5 per cent compound quarterly growth rate (CQGR) for H2. It attributed this to higher offshoring demand by original equipment manufacturers (OEMs), delayed project starts etc. 

Management expects higher offshoring and cost reductions that they are passing on to customers to deflate revenues; therefore, they expect the revenue to be on the lower end of the guidance at 20.5 per cent with chances of 20-30 bps upside to that, analysts at JM Financial Institutional Securities said.

 

However, because of higher offshoring and higher fixed price engagements, they expect profits to be on the higher side. In terms of furloughs, management commented that they have good deal wins, however based on the environment they are not sure when they would ramp up, therefore they expect Q3 to be soft, the brokerage firm said.

  Meanwhile, the company’s consolidated net profit remained unchanged at Rs 204 crore on a quarter-on-quarter (Q-o-Q) basis. Revenue jumped 4 per cent Q-o-Q to Rs 1,471 crore from Rs 1,365 crore reported in the first quarter of FY25. The company's consolidated earnings before interest, taxes, depreciation, and amortisation (Ebitda) rose 4 per cent Q-o-Q to Rs 301 crore in Q2 FY25 from Rs 289 crore reported in Q1 FY25. 

 

Commenting on the performance of Q2 FY25, Kishor Patil, Co-founder, CEO, and MD of KPIT, said, "The mobility industry, specifically the automotive sub-vertical, has been under pressure to keep up with changing regulations, reduce the cost of vehicles, and meet the demands of ever-changing consumer preferences in recent times. We continue to prioritise investments in technology and markets ahead of demand to help our T25 clients stay on the cutting edge of technology and competitiveness. Based on this, we reiterate our revenue growth and profitability outlook for the full year. We have taken an enabling board resolution for fund-raising in view of some of the strategic opportunities that are on the horizon. The actual fundraise will happen only when some of these potential prospects are in advanced stages of discussion."  

Analysts at JM Financial, thus, remain constructive on the medium-term trend of shift towards SDV and KPIT's role in it; mega deals in the pipeline which, if closed, could give a positive surprise even for FY26 growth.  "We expect the uncertain demand outlook to weigh on the elevated multiples of the company. We, therefore, lower our target multiple from 60x to 55x. We maintain our 'BUY' rating with a revised target price of Rs 2,040," the brokerage firm said.

 

KPIT Technologies fundraising news

  KPIT Technologies said that it has received an approval for raising of funds of up to Rs 2,880 crore in one or more tranches by the way of issue of equity shares or convertible securities or qualified institutional placement (QIP). It also received an approval to liquidate and dissolve Somit Solutions USA its wholly owned step-down subsidiary. Operations, Employees & Customer contracts of Somit USA has been fully integrated into KPIT Technologies Inc. for its optimisation of operations.

 

About KPIT Tech

  KPIT Technologies is a leading independent software development and integration partner helping mobility leapfrog towards a clean, smart, and safe future. With around 13,000 employees across the globe specialising in embedded software, AI, and digital solutions, KPIT accelerates its clients’ implementation of next-generation technologies for the future mobility roadmap.

 

As of October 24, 2024, KPIT Technologies commands a market capitalisation of Rs 39,384.87 crore, and is a constituent of the BSE 500 index. 

 

KPIT Technologies shares have dropped nearly 20 per cent in the last one week, and 13.55 per cent in the last one month, and 3.67 per cent year-to-date. However, the IT stock has offered a return of 25 per cent in the last one year to its investors. 

 

The company’s shares have a 52-week range of Rs 1,928.75 - 1,092.90 on the BSE, as of today.

 

At around 1:04 PM on Thursday, KPIT Technologies shares were trading at Rs 1,436.65, down 11.98 per cent from its previous close of Rs 1,632.25 on the BSE. 

 

Meanwhile, the benchmark equity indices BSE Sensex and NSE Nifty50 are also trading in negative territory. The Sensex was quoted at 80,053.86, down 28.12 points or 0.04 per cent, and Nifty50 at 24,400.75, down 34.75 or 0.14 per cent.