Summary
Tata Technologies Limited - Q3 FY26 Earnings Call Summary Friday, January 16, 2026, 5:00 PM IST
Event Participants
Executives 5 Geena Binoy, Sukanya Sadasivan, Uttam Gujrati, Vijay Lohia, Warren Harris
Analysts 5 Ankur Pant, Karan Uppal, Manik Taneja, Pankaj Agrawal, Puneet Lineswala
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue from Operations | ₹1,366 crores | +3.2% QoQ; includes one month of ES-Tec contribution post-acquisition. |
| Services Revenue | ₹1,060 crores | +4.7% QoQ; organic CC growth of 1% despite cybersecurity disruption at a major client. |
| Technology Solutions Revenue | ₹306 crores | Driven by 30% sequential growth in Products (seasonal renewals) offset by 22% decline in Education. |
| EBITDA Margin | 14.1% | -230 bps vs normalized Q2 (16.4%) due to annual wage hikes and temporary revenue loss at a large account. |
| Net Income (Adjusted) | ₹135 crores | Adjusted for ₹164 crores in one-time exceptional items (Labor codes and M&A costs). |
| Exceptional Items | ₹164 crores | ₹140 crores for New Labour Code employee benefit provisions; ₹24 crores for ES-Tec acquisition costs. |
| DSO | 111 days | +2 days QoQ; driven by Education/Products segments, partially offset by Services efficiency. |
| Net Cash | $58 million | Decreased from $123 million in Q2 primarily due to the ES-Tec acquisition payout. |
| Headcount | 12,580 | Net increase of 178; organic headcount down 144 as the firm prioritizes strategic hiring over backfilling. |
Geographic & Segment Commentary
- Aerospace & IHM: Delivered 10% QoQ growth in USD terms, with Aerospace alone up 19% QoQ. Momentum is driven by MRO, AI-enabled inspection, and the Airbus EMES3 program, with FY26 Aerospace revenue guided to reach $40 million.
- Automotive: Remained the largest segment at 80% of revenue, down from 90% a year ago. Management noted “green shoots” with the first full vehicle program (FVP) win in 18 months, indicating a return to product investment cycles.
- Europe & North America: Seeing broad demand recovery as regulatory and geopolitical uncertainty clears. The ES-Tec acquisition significantly deepens the European footprint, specifically with the Volkswagen Group in SDV and embedded electronics.
Company-Specific & Strategic Commentary
- ES-Tec Integration: The acquisition was completed in November, making the associated account the company’s third-largest relationship. It shifts revenue mix toward recurring SDV and embedded software work rather than cyclical turnkey programs.
- BMW Joint Venture: Scaled to over 1,500 engineers with a 37% sequential increase in share of profit to ₹7.3 crores. The JV is acts as a bridge to secure direct framework agreements with BMW in Europe.
- Aerospace Certification: Eight engineers achieved Airbus Design Organisation Approval (DOA) certification. This allows the company to sign off on safety-critical engineering work, moving up the value chain from generic ER&D to mission-critical industrialization.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Q4 Revenue Growth | >10% QoQ | Driven by FVP wins, recovery of the Education business, and full-quarter ES-Tec contribution. |
| Q4 EBITDA Margin | >16.4% (Q2 run-rate) | Expected expansion as wage hike impacts are absorbed and high-margin services revenue scales. |
| FY27 Revenue Growth | Double-digit (Organic) | Grounded in secured pipeline, recovery in automotive OEMs, and scaling of the Aerospace pillar. |
| Aerospace Revenue | ~$40 million (FY26) | Expects to maintain the trend of doubling revenue for several consecutive years. |
Risks & Constraints
| Risk | Context |
|---|---|
| Client Concentration | While reducing, 80% of revenue remains automotive-dependent. Management is mitigating this by aggressive expansion into Aerospace and Industrial Heavy Machinery. |
| Regulatory Uncertainty | Changes in government/tariffs in North America have shifted interest from EVs back to ICE/Hybrid. The company remains agnostic to propulsion, but shifting OEM budgets can delay program starts. |
| Talent Attrition | TTM attrition increased slightly to 15.8% from 15.1%. Management is addressing this through targeted hiring in SDV/AI and internal upskilling rather than mass recruitment. |
Q&A Highlights
Growth Drivers & Guidance
- Question: What drives the 10% sequential growth guidance for Q4 given seasonal product declines? (Ankur Pant)
- Answer: Growth is broad-based across Services and a bounce-back in Education. It includes organic momentum from recent deal wins and the full-quarter contribution of ES-Tec (Warren Harris).
Automotive Recovery
- Question: Are automotive headwinds like tariffs and Chinese competition behind us? (Karan Uppal)
- Answer: Market conditions are becoming more predictable, precipitating “catch-up” investments. Winning a major FVP after 18 months is “proof positive” that OEMs are recommitting to multi-year cycles (Warren Harris).
Aerospace Strategy
- Question: Is the company transitioning into an Aerospace-tech firm? (Puneet Lineswala)
- Answer: Automotive concentration has dropped from 90% to 80% in one year. Aerospace is doubling annually and benefits from Tata Group credibility and the Airbus EMES3 partnership (Warren Harris).
Impact of JLR Cybersecurity Incident
- Question: How much did the JLR cybersecurity incident impact Q3? (Ankur Pant)
- Answer: We do not disclose individual client numbers, but the October billing loss was recovered in November/December. This recovery contributes to Q4 but is not the primary driver of the 10% guidance (Warren Harris).
Key Takeaway
Tata Technologies delivered a resilient Q3 FY26, navigating a cybersecurity disruption at a major client and seasonal holidays to post a 4.7% sequential growth in Services revenue. Profitability was temporarily impacted by annual wage increments and ₹164 crores in one-time exceptional charges related to new labor codes and the ES-Tec acquisition, resulting in an EBITDA margin of 14.1%. Strategically, the company is successfully diversifying its portfolio; Aerospace revenue is on track for $40 million in FY26, and the ES-Tec integration has solidified a top-tier relationship with the Volkswagen Group in the SDV domain. Management issued strong guidance for Q4, expecting sequential revenue growth exceeding 10% and a return to margins above Q2 levels. This optimism is underpinned by a recovering automotive cycle, a record order book, and an organic double-digit growth target for FY27.
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