Auto industry's challenges in U.S., Europe impacted new deal closures: Tata Elxsi

The automotive industry has seen significant business challenges in the past few months, with original equipment manufacturers (OEMs) especially in the U.S. and Europe reporting sales and growth challenges in their major markets. This has impacted new deal closures, according to Tata Elxsi.

Tata Elxsi reported a 3% year-on-year drop in its net profit for the quarter ended December 31, 2024, triggering cuts in share target price by several brokerages. The company’s net profit declined to ₹199 crore in Q3 FY25 compared to ₹206 crore in the corresponding quarter of FY24.

Reacting to the development, shares of Tata Elxsi fell 8% in intraday trade today to hit a 52-week low of ₹5,924 on the BSE. The Tata Group company’s market cap fell to ₹37,000 crore.

Tata Elxsi’s revenue from operations grew 3% year-on-year to ₹939 crore for the third quarter compared with ₹914 crore in the year-ago period. During the quarter, EBITDA margin stood at 26.3%.

“We continue to see positive outcomes of our strategic business focus on Japan, emerging markets and capitalising on the India opportunity. During the quarter, our revenue from India has grown by 21.9% YoY, while Japan and emerging markets grew at 66.8% YoY. This will serve us well over the next few quarters even as we navigate geopolitical uncertainty, currency volatility and industry specific challenges in Europe and US,” says Manoj Raghavan, CEO and managing director, Tata Elxsi.

“Amidst this business environment, Tata Elxsi continues to do well to win and execute on the large deals won over this year and demonstrate differentiated value to customers, to protect and grow revenues in a difficult quarter for the entire automotive industry,” says Raghavan.

During the quarter, the company announced an Offshore Development Centre for Suzuki Corporation, Japan to support their global technology, software and engineering development.

Tata Elxsi will launch its AVENIR SDV software suite at the CES 2025 Conference in Las Vegas. AVENIR encompasses a cloud-native virtual development platform and a hybrid global validation platform, and is powered by the Snapdragon Digital Chassis platform, in partnership with Qualcomm.

The company’s Media & Communication business reported quarter-on-quarter constant currency growth in a quarter that is typically soft and affected by furloughs. “We are positioned well to help customers in the media, entertainment and telecom industry on all three levers of growth, efficiency, and innovation,” says Raghavan.

Its Healthcare & Lifesciences business reported growth of 1.1% QoQ. “We continue to win new marquee healthcare customers, and our Gen AI powered regulatory, digital engineering and sustainability offerings are seeing significant traction in the market,” the company’s CEO says.