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FRA REPORT

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2 views

FRA REPORT

Uploaded by

ankitkumar18020705
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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FRA REPORT

Comparative Analysis of Tech Mahindra and KPIT Technologies


By: Ankit, Vishal, Kritika, Sanskar, and Dipti

Tech Mahindra and KPIT Technologies are prominent players in India’s IT sector but operate
in vastly different niches. Tech Mahindra thrives on its expansive portfolio, catering to
diverse industries, while KPIT Technologies specializes in engineering solutions tailored for
the automotive sector. This report delves deep into their operational and financial
performance, juxtaposing their strategies and identifying areas for improvement.

Overview of the Companies

Tech Mahindra

Part of the Mahindra Group, Tech Mahindra is one of India’s leading IT services firms. The company
excels in IT consulting, business process outsourcing, and digital transformation services, catering to
industries like telecommunications, manufacturing, healthcare, and retail. Known for its expertise in
telecom, Tech Mahindra has been a consistent performer in the IT space but is currently navigating
financial headwinds.

KPIT Technologies

KPIT specializes in automotive IT solutions, focusing on engineering software for electric,


autonomous, and connected vehicles. With its deep expertise in this niche, KPIT is driving innovation
in a fast-evolving market. Its targeted approach has resulted in rapid growth, particularly as the
automotive industry shifts towards sustainable and connected mobility solutions.
Financial Insights
1. Revenue and Profitability

Tech Mahindra:

Revenue dropped by 2%, highlighting challenges in sustaining growth in a competitive market.

Net profit fell sharply by 51%, signaling reduced efficiency in converting revenue into profit.

Operating profit decreased by 42%, reflecting cost management issues and declining demand in
certain segments.

KPIT Technologies:

Revenue surged by 45%, driven by its focus on high-demand sectors like EVs and autonomous
driving.

Operating profit rose by 57%, demonstrating efficient cost control and operational scalability.

Net profit grew by 56%, affirming the company’s ability to capitalize on its niche expertise.

Reserves and Borrowings


Tech Mahindra:

Reserves declined by 5%, indicating reduced profitability and retained earnings.

Borrowings fell by 7%, reflecting conservative financial management but limited investment capacity.

KPIT Technologies:

Reserves increased significantly by 35.73%, showcasing strong retained earnings and profitability.

Borrowings rose by 14.74%, suggesting leveraged growth for expansion and R&D.

Return on Equity (ROE)


Tech Mahindra: Dropped from 17% to 9%, reflecting reduced shareholder returns.

KPIT Technologies: Improved from 23% to 28%, indicating better profitability and capital utilization.

Working Capital Management


Tech Mahindra: A 2% decrease in working capital, combined with declining debtor days, signals
operational inefficiencies.
KPIT Technologies: Significant growth in working capital, supported by effective management of
short-term assets and liabilities.

Operational Performance
Tech Mahindra

Tech Mahindra’s operational challenges are evident in its declining profitability. The drop in debtor
days and inventory turnover indicates inefficiencies in receivables and supply chain management.
Additionally, its reliance on traditional IT services is becoming a liability in an era dominated by
niche-focused and innovative solutions.

KPIT Technologies

KPIT’s operations align well with industry trends, particularly in automotive software. The company’s
ability to adapt to evolving demands in electric and autonomous vehicles reflects strong strategic
foresight. Its emphasis on innovation and R&D is driving sustained operational efficiency and growth.

Cash Flow Analysis


Tech Mahindra

Cash from Operating Activities: Increased by 14% to ₹6,376.40 million, a positive sign of operational
stability despite profitability challenges.

Cash from Investing Activities: Significant outflow (-₹1,318.40 million), indicating a heavier focus on
capital investments.

Net Cash Flow: Increased by 9%, but remains relatively low, limiting flexibility for future investments.

KPIT Technologies

Cash from Operating Activities: Surged by 117%, reflecting robust operational performance.

Cash from Investing Activities: Reduced outflows indicate more efficient investment strategies.

Net Cash Flow: Decreased by 79%, but the overall financial health supports continued investment in
growth.

Strategic Insights
Tech Mahindra

Telecom Expertise: Continue leveraging telecom strength but integrate AI and IoT solutions to
differentiate from competitors.

Diversification Needed: Relying on broad industry coverage without a niche focus might dilute
impact. Prioritize specific high-growth sectors.

Cost Optimization: Address inefficiencies in operations to boost ROE and profitability.


KPIT Technologies

Niche Focus: Maintain its dominance in automotive IT by expanding into complementary


technologies like AI-driven vehicle software.

Global Expansion: Enter emerging markets to capitalize on growing EV and autonomous vehicle
adoption.

Debt Strategy: Manage borrowings to maintain a healthy balance between growth and financial
stability.

Suggestions for Improvement


For Tech Mahindra

Revisit Strategic Vision: Focus on fewer, high-growth areas like AI, IoT, and sustainable tech solutions.

Upskill Workforce: Invest in employee training for advanced technologies to meet modern client
demands.

Mergers and Acquisitions: Acquire or partner with startups specializing in innovative solutions to
reinvigorate offerings.

Improve Operational Efficiency: Automate processes to reduce costs and enhance delivery speed.

For KPIT Technologies

R&D Investment: Double down on research in futuristic automotive technologies to stay ahead of
competitors.

Sustainability Focus: Develop green initiatives to align with global sustainability trends.

Strengthen Client Relationships: Broaden services offered to existing clients in the automotive sector
to secure long-term contracts.

Capitalize on Reputation: Use its leadership in automotive IT to enter adjacent fields like aerospace
engineering.

Tech Mahindra and KPIT Technologies exemplify contrasting strategies in the IT sector. While Tech
Mahindra struggles with financial setbacks and operational inefficiencies, KPIT’s focused approach
has propelled it into a leadership position in its niche. The road ahead demands Tech Mahindra to
reinvent and refine its operations, while KPIT must consolidate its gains and maintain momentum.

By adapting their strategies to the dynamic IT landscape, both companies have opportunities to
thrive. The success of their transformations will hinge on innovation, operational efficiency, and their
ability to anticipate market needs.

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