Tata Tech | Tata Tech margin: Tata Tech hopes to achieve 20-21% margin in next 2-3 years: Warren Harris


Warren Harris, CEO & MD, Tata Tech, says they have driven the business around over the last four to five years and transitioned from 16-16.5% to 18.4% this year. This year is predominantly going to be about margin preservation. Harris expects incremental improvement in margins towards the end of the fiscal year. But their goal is 20-21% margin and for the next two to three years, they will be driving the business towards that.

Where are you in the EV transition cycle and more importantly, do you expect the pace of investment and spending that we are seeing from the auto companies in the ER&D spending, to continue at the current pace?
Warren Harris: We are certainly expecting the investments to continue. With any sort of technological wave, there will be periods of accelerated momentum and then there will be periods of consolidation. Despite EV sales having tapered in terms of growth, there is still growth and the momentum in the industry is very much towards a future that is dedicated and predicated upon the electric propulsion system. Last year, 14 million units were sold globally, EVs. This year it is going to be about 17 million. So, almost one in five vehicles that are sold today are electric vehicles. By the mid-2030s, we expect more than half of the vehicles sold globally to be electric vehicles.

How is Tata Tech different from its peers? In your recent analysts’ meet, analysts were very impressed by a full stack ICE to EV transition capabilities.
Warren Harris: Yes, it is a great question. If we look at the transformation that is going on in the mobility sector, several vectors are driving that transformation. One is the move to alternative propulsion systems, specifically electric vehicles. There is a whole investment being made in connected solutions. There is also the investment in ADAS and autonomous solutions and also investments in shared mobility.

The thing that is different about Tata Technologies is our ability to be able to support our customers through the entire value chain associated with the delivery of products to customers. Not only can we provide discrete services in very specific areas, but we can package those capabilities in a turnkey way to deliver the entire product to our customers. Concept through detailed engineering, through advanced manufacturing, and the build of the product before it is sold again to the consumers that our customers support. So, it is that end-to-end proposition, that turnkey proposition, that represents the difference that matters that we represent.

An extension to that full stack capability is also the end-to-end solution, which is the battery JV that you had signed with Agratas. What is the potential of that, how is the scale-up for that JV turning out to be?
Warren Harris: We are excited about the partnership with Agratas because it allows us to bring upstream the coverage of the EV value chain. Traditionally, the work that we have done with batteries is focused on systems integration, but the partnership with Agratas includes cell chemistry and design that we will deliver to Agratas as they support the customers that they are partnering with.

We are also working with Agratas to help them digitise the enterprise. Agratas is a new company with two giga factories, one in Gujarat, and one in the southwest of the UK. The industrialisation of those giga factories will also be enabled by Tata Technologies. So, it is an important relationship in terms of business volumes, but it is also an important relationship in terms of the demonstration of the capabilities that we represent.You have been focusing on client expansion, but will that be enough to offset the VinFast ramp-down that we have been seeing? Should we expect some recovery to kick in from Q2 or Q3 onwards?
Warren Harris: We have demonstrated our ability to be able to do that. If you look at growth in FY2024, outside of VinFast, we grew the business by 30%. And despite material runoff at VinFast in the second half of last year, we still grew the business both sequentially and year-on-year. We expect it to continue in FY25. We had a relatively modest start to the fiscal year, but this quarter and beyond, we expect to return the business to sequential and year-on-year growth.What about that guiding beacon of the margins of 20-21%? Is it likely to happen this year or will it take a couple of years for you to hit that mark?
Warren Harris: If you look at the trajectory from a margin perspective, we have driven the business around over the last four to five years, we have transitioned from 16-16.5% to 18.4% this year. This year is predominantly going to be about margin preservation. I think we will see incremental improvement in margins towards the end of the fiscal year. But our North Star is still somewhere in the region of 20% to 21%. So, in the next two to three years, that is the goal that we will be driving the business against. The consistency of performance that we have delivered over the last three or four years should give everybody confidence that we can achieve that goal.Are you all geared up for the BMW ramp-up in H2? And also, if I could add to it, what about the European market deepening strategy? Is it bearing fruits for the company?
Warren Harris: One of the areas of focus has been Germany for us. The success of our strategy in Germany is informed by what we have achieved at BMW. We are very excited by the partnership with BMW. BMW evaluated almost every single engineering service provider in India. Many of the service providers had incumbent relationships with BMW and yet they decided to partner with Tata Technologies, which I think is a tremendous testament to our capabilities and also the culture inside of our company and inside of the group.

We are certainly gearing up to launch the joint venture in the second half of this fiscal year. We are very advanced in terms of assembling the leadership team and the seed capabilities that will provide the team that we will build around in the coming years. I think the contribution that the JV will make to future BMW and MINI and Rolls-Royce products is very exciting. We are very proud of the endorsement we received from BMW and we are very much looking forward to the capabilities that we will invest and grow inside of that new entity.

Related Posts