KPIT Technologies Limited (KPITTECH.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to KPIT Technologies Q3 FY '26 Earnings Conference Call, hosted by Dolat Capital. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Jain from Dolat Capital. Thank you, and over to you, sir.

Thank you, Sagar. Good evening, everyone. On behalf of Dolat Capital, I would like to thank KPIT Technologies for giving us the opportunity to host this Earnings Call. And now I would like to hand the conference over to Mr. Sunil Phansalkar who is Vice President, CF&G and Head of Investor Relations at KPIT to do the management introductions. Over to you, Sunil.

Thank you, Rahul. Good evening, and a very warm welcome to everyone on the Q3 FY '26 Earnings Call of KPIT Technologies Limited. Since we are still in the first month of the year, I take this opportunity to wish all of you a great 2026 and beyond. On the call today, we have Kishor Patil, Co-Founder, CEO and MD; Mr. Sachin Tikekar, President and Joint MD, Anup Sable, Board member and CEO; Priya Hardikar, CFO; and [indiscernible] Investor Relations. As we always do, we will have the comments about the performance on the quarter and the way forward in the opening, and then we will shift into question-and-answer mode. So once again, a very warm welcome to you, and I hand this over to Mr. Kishor Patil.

Welcome to quarter 3 Earnings Call. Today, the way I would do is I will go through some of the highlights of the quarter. And then I would hand it over to Anup whom you know you are aware, he is now the Chief Operating Officer. He used to be the CTO before this. So to explain what transformation we are doing in terms of business, specifically, how -- what we have been talking about the solutions, and there have been many queries about what does it actually mean? So he would like to take a couple of examples and explain so that you may get some clarity. So I think I'll start with the financials. So quarter FY '26 year-on-year growth in terms rupee 9.4%, in terms of dollar 3%; quarter 3 CC 1.5%, EBITDA growth of 6.8%, post absorbing increments -- partial increments. Organic growth is negative under 1% for the quarter. Overall, in the growth, if you really look at, growth was contributed -- the business, which was -- which has grown during the quarter is Europe and off-highway, off-highway commercial, that is the business which has grown. Overall, the net profit, excluding the onetime labor code impact is INR 1.53 billion against INR 1.53 billion last quarter. The labor charge, we had the charge against the labor code is INR 469 million post-tax. We also paid the interim dividend during the quarter. The cash is about INR 9 billion after payment of INR 6.3 billion against the payouts of Caresoft & N-Dream during the quarter. The TCV value during the quarter is INR 202 million, largely, it is across the geographies, Europe, the highest, followed by U.S.A. and also something from China again this year from a Chinese OEM. As I mentioned earlier, that we have been -- we believe that the business is changing. The OEMs are changing. Their challenges are different. So overall, the overall business will change overall for the industry in coming years. While we continue to grow our existing way, existing business and B2C, we have a -- we do see those opportunities. We would like to move forward and make -- change the business ahead of time, and that's why we are moving to the solutions-based transformation. Now there a couple of indications there. The fixed price -- is our revenue is 66% against 59% last year. Per person revenue is up. We have continued the investment in this business, which is more than INR 3.8 million during the quarter. This does not include the AI investments we are making, especially in addition to this, plus this does not make -- include the investments which we have made earlier in certain acquisitions and like Technica or the recent acquisitions like N-Dream & [ Carrier ]. So while we are here, I would like to mention that overall, the way we look at forward, we see many positives out of this quarter and last 6 months. The first thing is the focus on AI, and we are -- we have 2 projects or wins, which are in AI area, which we are working on, in the production programs we are using. The second thing is we announced our -- also on AI, we announced the partnership with Microsoft and which is -- actually, Microsoft also made an announcement in terms of recognizing KPIT as a frontier partner of technologies. Similarly, another leading CRM companies has also signed an agreement for our agentic solutions on their platform. In terms of micro mobility, we have done a partnership with the Hero Group, HMC HIVE. That was the recent announcement we did about a month back. We do believe that we see that overall Commercial and off-highway, we continue to see traction, which is based on the back of Caresoft acquisition and our other offerings. In terms of geographies, overall, we see positive discussions in U.S.A. positive discussion in Europe, positive discussion, of course, in India, China, Middle East and Southeast Asia, and in certain pockets of Japan and Korea. In order to really manage this transformation as well as the readiness for growth in future. We are -- we have added a lot of leadership. The first one, of course, as I mentioned to you, Anup is now designated as Chief Operating Officer and key managerial person. Anup has been with the company for 31 years and has played multiple roles. We also have added multiple technology leaders in AI also in certain domains, architecture, et cetera. Also, we have promoted some internal people in terms of dispositions in addition to hiring from outside. In the geos, also some of the practice teams we have -- at a senior level, we have had from the industry in view of our momentum towards solution-based business and readiness. On the geo side, we have continued to add people again from the purpose that the people can really handle the complex cells, both in case of AI as well as the solution, and we will continue to do that. This is where we are. And I would now request Anup to really take a few examples about the solution business.

Thank you, Kishor. Hello, everybody. Good evening. I would first like to sort of demystify what is the solution because many terminologies or definitions of solution could exist. You can imagine something like an iPhone is actually a product. That means you can literally pull it out of a box. And with a minimum configuration, that means if you have an older iPhone you can scan a bar code and eventually the new iPhone can get configured to your -- all context et cetera, information that is there, and you can start using it literally within 10 minutes of buying it. That's a product usually sort of -- the most important attribute is it's mostly shrink-wrapped. It has a little bit of configuration to be done like we spoke in terms of iPhone. When we talk about the solution, large part of the work that is required to be done for a solution is already ready with somebody like us. But there is some part of the work that has to be customized based on the customers' requirement, and these requirements could be different. These requirements could be more and less in certain cases of customers. These requirements could actually address certain internal complexity in terms of customer setup and the customer's product. And hence, there is a definite amount of work in terms of software development in terms of validation that needs to be done to be -- make the solution ready for the customer. I will give you two examples of what we mean by solution. So when we talk about, let's say, something that is pre-AI as a solution is there is an advanced feature inside the cars now where you can use the phone as a key. Now technically, from a user's perspective sorry before technical from a user perspective, what it means that you can use the phone and not have a key with you. The car detects the phone at a particular distance, unlocks the car. Car also detects that the phone is inside the car and the door is locked and then allows the vehicle to go in an ignition-ready state, so you can switch on the ignition and then start driving the car. And similarly, when you get out of the car, it can switch off, you move away from the car, it locks the car. Now there are different technologies technically required, and it's a very complex system in terms of implementation. So you have multiple technologies like Bluetooth, ultra-wideband, WiFi 5G all involved, then you have challenges inside the car in terms of how many different computers does this particular system interact in terms of making the use cases work. Now for -- and of course, when you actually develop something like this, you need to make sure that you have integration with Apple iPhone, but it also then works with Android phones and then it works with in Android, specifically with Samsung and then specifically with other Android phones that are there. So all of this large part of it is testable, reusable, but a significant part of it is customized to what the OEM would like to have. And for this KPIT as a solution, which is a combination of the test platform, and then the number of test cases that are required for certain certification requirements. There is a Consortium called CCC Consortium that certifies the solution for this. So all this is ready. So when we go to the customer, we can actually present a full-fledged readiness in terms of getting the customer to a stage where a new phone or a new vehicle launch can be supported. Now what is the advantage? There are a couple of advantages that happened because of this. One is things are more or less ready. That means the time required for this particular activity is less. Second, because you have done this for multiple instances. There is already a know-how domain know-how that is captured inside, which gives an advantage both in terms of quality and again, in terms of time. And of course, the overall cost for the customer is lower because most of the things are ready. And as a result, the profitability for KPIT would also be higher. So this is one example of a solution. Now I would take another example of a fully AI-based solution because in every solution, you can always have a certain amount of AI to improve the efficiency, improve the performance, but I'm talking about a fully AI-based solution. Now for this, I will give you an example of how software development happens, especially in large teams. So when you want to develop a software, say, for example, what you see inside your vehicle for a digital cockpit, which is a combination of your central touchscreen, the cluster, the colorful cluster that you have and then certain lighting that is inside ambient lighting that is there inside the car. Now when you write the software for such a thing, the software is a combination of written software by OEM, written software by the Tier 1 and then the various third-party suppliers sometimes as good as 20 different suppliers. For example, Apple CarPlay, Android Auto comes from Google. So all these systems have to be combined together and validated. And when the software development is complete and the integration starts happening, there are a large number of bugs or issues that come out, which are integration issues. Now when you look at a complex system, significantly large software, the most critical operation that happens very close to the software or the vehicle getting launched is fixing all of these issues. And sometimes these issues could be in numbers of thousands, if not hundreds, right? So the most bottleneck operation in such a case becomes who actually decides where the problem originated from because the software has been written by 20 different players. It is residing on 4 different computers. So where is the effect originating from and how to go about fixing this problem. This is called a triaging problem. It is a very complex thing because not only you have to deal with complexity, but the number of people who can handle this in terms of understanding what the problem is and where the problem originated are limited and hence this operation gets bottlenecked. Now this is a problem that we are solving by triaging as an AI-infused solution. So when we get into the customer, and we have gone into the customer, we have understood what the source code is, we have understood what the architecture of the vehicle is. We have understood what the defect is. And then we have created an AI-based engine that allows what this one or two bottleneck resources used to do to immediately be done by the AI. And as a result, again, significantly reduced the time to fix the problem also the duration for which this bottleneck has happened, that also is significantly reduced. And of course, at the end, the customer gets quality as an output and the vehicle launch happened on time. So I give you two examples. One, which is very specific to a complex system the iPhone case that I talked about the phone as a key. And the second example, I talked about software development life cycle where we are actually solving a complex bottleneck choked problem using AI, AI as the primary engine or tool to fix it. This is -- so there are multiple such solutions that are -- we are going to focus on this year in terms of going behind the customers. These have been validated. These have been working with the customers in the last few years. And we feel confident that now we can actually go to more and more customers and allow them to leverage what we have.

Thank you, Anup. So basically, we believe that this is the direction in which the clients are going where they would like to have a solution ahead of time and can make it available to their customers in a shorter duration. And the full ownership is taken so that there are no delays over it, which is from the client side. We do believe that this may take -- I mean a large part of our business to convert into this part, it may take between 12 to 18 months. But naturally, specifically AI and some of the few solutions, which we believe high potential would start in the next 3 to 4 months. So this is what I just wanted to mention today. I think we will be happy to take any questions.

[Operator Instructions] Our first question comes from the line of Karan Uppal from PhillipCapital India.

A couple of questions from my side. Firstly, on the pivot to solutions-led offerings versus service-led model which we used to have. So do we expect to gain market share from our peers given our solutions? Or you expect that could the outsourcing of work increased from OEMs versus the work which they used to do internally? That is part one. And secondly, with this solutions-led model, do you expect any cannibalization of the existing revenue? If yes, if you can quantify it?

Thanks for the question. This is Sachin Tikekar. So let me answer the first part. Obviously, the solutions, when you look at solving the client's problem, and Anup described two of them. What typically happens is, in the second example you saw that there are -- there is a hardware setup involved. There are tools involved. There is a workflow and then there are many companies that are actually providing different kind of software. So if you have to provide a holistic solution in order to leverage the solution have the maximum benefit, you have to look at it holistically. So our first effort is to take a broader view of the problem and provide a comprehensive solution to solve the problem. Now in this case, what happens is we end up cannibalizing someone else's business. That means we'll be able to do it cheaper, better, faster for the client. If you are doing -- if there is an existing business, a part of the business has been done by KPIT, then obviously, that part gets cannibalized. But the thing is when we provide the holistic solution, we get a much bigger wallet share. So that's the model that we are applying across the OEMs, and the whole purpose is twofold. One is to solve the problem of the OEMs more comprehensively and help them get their vehicles in the production program cheaper, better, faster, at the same time, increase the wallet share for KPIT and also the margins. So yes, the simple answer is yes. This will lead to increase in a wallet share. I think that's the answer to your first question. What was the second question?

Will it cannibalize our revenues as well? You answered...

Yes. I think I answered that to some extent. And in some cases, we'll do it proactively in the interest of the client, but we always want to solve the bigger question. So we will not just cannibalize our own revenue. We'll end up cannibalizing something much bigger. So net-net, there is a wallet share gain.

Okay. Second, on the geopolitical environment with the new tariffs being announced by U.S. for new nations and new U.S. trade deal in question. How are OEMs reacting to it? Are they comfortable to spend on their new age R&D programs or they may again pause before some clarity emerges?

I will talk about European OEMs, if you look at it. They actually are -- I think we have been saying that and you must have seen that they want to move towards a different supply chain in this case. And that's why basically even though there may not be a new spend, they are moving their spend from the local vendors to India. So that is certainly a clear trade, and that happens. The second thing there, they are trying to find out how they can get some new technologies. Some of the solutions we talked about, specific solutions. I think that they would like to go for. So I think -- the way we're looking at it, they are saving some money. They're investing cautiously in certain areas. Naturally, they are not spending all the money. But that is what is happening in the Europe. In U.S.A., we believe that the speed is very important because most of the OEMs in U.S.A. have -- are delayed on their vehicle programs significantly. And I think that is where they are looking for solutions. And some of the solution, as Anup mentioned, really reduces time to the production program significantly, and at least also with the quality because I think the biggest issue, if you have studied that I think that most of the U.S. companies, they have a higher warranty cost overall. And so basically, having it better quality and faster is important to them. But this is in pockets. Overall, it is also some specific OEMs. Some OEMs are not spending, and they're really not strategically taking a view, but a few of them are doing it in U.S. And also off-highway commercial are at this point of time are positively looking at making a change towards this.

Just to add to Kishor's point, the macro reading that we have from different OEMs is I think this has been going on for the last 1 year. They have figured out ways to -- this is -- this may continue for a while. Every day, things are changing, especially coming from the U.S. And hence, I think different alliances are getting formed. But I think the OEMs have figured out a way that this is going to be way of life. And then they are prioritizing certain technologies and certain investments. At the same time, they're de-prioritizing many others so that they have enough money to respond to these changes and meet the expectations of their consumers.

So there are one or two geographies which have been impacted because of the uncertainty, which is Japan. Basically, if you look at their overall market has shrunk. Most of them were having a good share in U.S., which is under [indiscernible]. Many of them were investing into U.S. or Canada or Mexico. Now many of them have kept their plan on hold or that is not helping them. So that's the one reason and they are getting impacted to [ substitute ].

Okay. Just last thing on the TCV, Kishor sir, TCV was a bit muted this quarter. How is the pipeline looking? And what's the overall outlook for FY '27, if you can elaborate?

The first thing is that -- during this time, I think you get the orders, nobody is ready to sign a very long-term deals, most of the time, but they will still have few. But the point is this is the last quarter, and it really depends upon what the budgets which are remaining with a particular OEM. So this -- I would not read too much into it. But you know that we give any understanding about next year at around April. But if I had to give you some understanding. I will make only two statements. One is we believe that our last quarter, we will improve -- our growth will be higher. It will be the highest growth in anyway, we did not have much growth, but there's still be the higher growth in the Q4. That will be the highest growth quarter from this year. And our profitability will improve from what we have in Q3 in spite of our investment. This is one statement. The second thing is we feel reasonable -- I mean -- and please take me that we'll continue to tell you at Q3, but I'm just giving you my feel right now is us -- we will -- will for sure grow next year higher than this year. And that we believe, we will be in a position to do it. Now some of these transitions, which we talked about exactly how much when time difference, we are a little bit not sure. So we're not putting exact number right now or we'll see what we can do by April, what we can talk about these. But this is at a high level color I can give.

The next question comes from the line of Nitin Padmanabhan from Investec India.

Wishing you all a very happy New Year. I had a couple of questions. So one is, see, on the solutioning, I think when we listed in 2019, we actually, at that time, spoke about maybe having prebuild 15% to 35% or 40% of whatever customer seeks to build, and that's tested to be error-free code and thereby we accelerate for clients. I think this is more or less similar, but I think you're doubling down. So if you could give some context on what the doubling down is? And the second is a more conceptual question. Is that considering that we are able to sort of up the ante on this and maybe prebuild a lot more. Shouldn't it mean and basically at lower cost, right, time to market is shorter shouldn't it mean that your deal velocity should be higher, right, logically, because market share gains would reflect in higher deal velocity. So just wanted your thoughts there? And do you think that is something that we should start seeing soon or that will sort of evolve over a period of time? How should we sort of think about this broadly. And lastly, if you could just give some sense in terms of, let's say, if you look at U.S., Europe and maybe Japan, broadly, how are conversations or spends from our perspective, maybe within the top 3 or 4 customers within each of those geographies? Is it -- just some color that you could give qualitatively would be very helpful.

Yes. So first thing is thank you for reminding what we said in 2019. So I think at that point of time, if you remember, we were moving towards the domains, which was electrification, autonomous, infotainment that type, then we moved to digital cockpit that kind of a thing. So in order to, basically, we had about we had created a certain, what I would say, solutions or not solution, visible demonstrations of what the client will get ultimately, and I can say that actual usage of those into the actual delivery was not more than 5% to 7%. Actual program, when we deliver, it was not more than 5% to 7% overall. So it was more towards understanding the requirement, the client understanding what could be the functionality. What are the additional functionality, what we could deliver, our ability skills and this is what we could do. Actually, I'm talking about the actual numbers and this is what it is. Now more and more, as Anup mentioned, this is not about the project. This is not about -- this is a full solution, which you are giving to the client. And this includes people from clients who are working on this with the people from us, there may be some people from other vendors, including some Tier 1s or this. So this is a more holistic solution, which we are giving. So there is a huge difference. And this -- we are expecting -- I mean, I don't know what over the period will happen. But at least 50%, 60% kind of usability benefit in most of the solution. I mean -- and this will get, as I mentioned, we have just setting -- set up the -- this about 2, 3 months back, we started changing the -- making the changes. And that's why Anup has a clear goal of bringing this transition. So next 6 months, I think we should give here. And after that, we'll be in a better position to say. But of course, this we are doing because we expect that this will drive high-quality growth for KPIT in the midterm.

Nitin, I think there was an external factor as well, which was -- if you remember, in 2019, this was the first time all the OEMs wanted to build software on their own. They started their own software companies, and they had the money and the time to do it. And the thing was -- everything was built ground up. That was the approach that was taken, especially in all the SDV programs, if you think about it. Times have changed now. Nobody has the time and the money to do this and plus there is a lot of learning from all the programs that have been delivered. So the expectation is all of this will get cheaper but done cheaper, better, faster. That's why we think that the adoption of our solutions in the -- in today's time is it's likely to have much bigger impact.

Yes. There was one last question, Nitin, which was about the spend on our clients from U.S., Europe and Japan and their spend. So as you know, the pressure continues on everybody on -- but they have done a re-prioritization. And from our perspective, we see an opportunity for us to grow. One is digital cockpit. That is true across the 3 geographies. The second is, obviously, as you get more and more connected vehicles with the OTA in them, cybersecurity becomes a bigger concern. So we are seeing a lot of spend in cybersecurity. Third is, given different countries have different approaches towards powertrain. So multiple powertrains, you cannot just have battery electric the consumers want to have options. So we see investment also in ICE now as far as the powertrains are concerned. In many -- in countries like China, navigation on autopilot has become a default. You cannot sell an electric vehicle unless you have a navigation on autopilot in China, its going to the U.S. as well as to Europe. So that's another area. So these are the 3, 4 areas where we have strength, and we believe that the spend is going to get prioritized from the OEM's perspective. Last but not the least, the cost reduction, the vehicle cost reduction from mechanical, electrical, electronics and also software perspective is becoming more critical. And with the acquisition of Caresoft business, we are also ready to help the OEMs. So these are the areas where we think there is going to be a lot more traction as we get into FY '27, Nitin.

Got it. So just one last one as a follow-up. So when you think about what has changed from then to now, as you said, obviously, right now their ability to spend is lower, and we're actually, from whatever we are doing, we are helping them do it at a lower price quicker. Do you think that what we will see is maybe better margins because of the way we are approaching this, but lower growth versus historicals? Or do you think we will be able to get both because we'll get higher market share? So how are you thinking on this as you look at it going forward versus how it was in the past?

See I think we are looking at 2, 3 different ways. We certainly believe that we can increase our market share in a medium term. I cannot say next quarter or quarter after, but in the medium term, but we also believe we will be in a position to have a better backed with the AI as well as the other normal solution. We've talked about other adjacencies we are talking about. And we do believe that both the commercial off-highway and micro mobility could really bring more revenues. So this is what we believe overall. So this is our growth strategy. And from that perspective, we do believe that our -- we will be making significant investments, and that's why I talked about also earlier what investment we are making. We will be in a position to be in the ballpark of the margins we have little here and there, but the similar margins in spite of the investment. But in the midterm, we are very sure that the margins will improve.

On the growth side, do you believe it is directionally how are you thinking? You think...

I did mention earlier.

Increased market share in the medium term. Got it. Got it.

Your next question comes from the line of CA Garvit Goyal from Serene Alpha.

Sir, first question is on this change in strategy. A few quarters back, we were speaking about a different strategy where we were speaking about getting the learnings from China and providing services to the European OEMs, right? So I'm just trying to understand now we are speaking about different -- altogether different strategy, bringing some solutions. So first question is, when we are speaking about the solution, is it applicable to the existing order book or existing pipeline that we are having? Or is it for the newer areas, newer upcoming pipeline that will be getting in future, sir?

I think it is both. And as you have seen that -- and I think Sachin mentioned about that people prioritize what is required for actually that. So many times, there is a requirement, but they believe that certain features, they want to put it in a car, they will prioritize it over some other things. So that's why I think there have been many questions I keep on saying, I don't know what we call, whether it we call cannibalization or changing in the priority of OEM so far. But that's why the decision happens on -- at that point of time from the OEMs. We are not saying anything else China remains important. We talked about it. I think Chinese companies are very -- the reason the Chinese companies have been successful is they understand the consumers very well. And they created many solutions or which features, which can go into the car very quickly. So that remains our learning and also the technology aspects. So we continue to do that. You might have seen this time. This is the second OEM we have won from Chinese, Chinese OEM, which we are very proud of. I mean it's not very difficult to win Chinese the OEM. So I think -- It's not easy to win. And so I think channel strategy is there, and it will take some time, but we do believe that we will be successful over the period. .

So solution strategy is not a replacement to the adjacencies we talked about the defense China, the European part of it. This is in addition to that. Does that answer your question?

Yes, sir. And secondly, the indications that we provided last time in Q2 regarding H2 this year, they have not yet reflected in Q3 as far as margins are concerned. And last time, we also spoke on FY '27 to be a promising growth year. This time, we are sounding a bit bearish while still guiding for a better FY '27. So I just wanted to understand from you, like how to interpret this means what has changed over the last quarter? And are we like still confident for a very good Q4 that we guided last time and very promising FY '27. So how to interpret it, sir?

So the first thing is nobody was -- labor code was being discussed for last 3, 4 years, and it came in the last 3, 4 months. So nobody knows. It has a onetime impact, and it has an ongoing impact specifically for this industry. So that is the point number one. Point number two, I would say that -- I mentioned to you about the overall investments which we will continue to make. And I think we believe that it is very important from the company's strategy to continue to do that and actually double down on that. We have -- we will do that. Certainly, I would say that quarter 3, I have said that it will be -- I think quarter 3, we have got a big shot about INR 1 million or so in organic growth. But that happens in this kind of environment by even some movement of projects from now to next quarter or so. So this kind of changes happen in this kind of environment. And quarter 4, I mentioned that based on what we think it will be better than all the 3 quarters we had. It doesn't say much, but it will just says that there will be a positive growth organically and our profitability will be still, including this cost will be higher than what it is. So the quality of revenue should be better. And we also mentioned that the next year will be better than this year. Now this is what we are saying based on the what we are taking in terms of solutions and this. As you know, that we are a company which will take a leadership first and start working on that. And it has generally given a better result in the past. We have positioned ourselves and taken -- created 4, 5 years back, we took a bet and we worked on it, which was very difficult for many people to understand, and we delivered on that. We do believe that this will be a bit similar, it may take some time, but this will be an important pivot for us.

Your next question comes from the line of Rishab Rathi from Goldman Sachs.

I was just trying to understand on businesses which we have already won over the past 12 months. In your view, what are some of the milestones which need to be crossed before we can see some of these revenues -- some of these businesses accelerating into revenues? And just secondly, can you share any early learnings post the Caresoft acquisitions? What are the amount or magnitude of synergies you see from this asset.

So I may say that the pipeline, what we have won, we have won, I just said that the prioritization sometimes changes, so it gets slowed down. But many of these deals are over 3 to 4 years. So I think these revenues will convert. I mentioned last time, we had given a number also that how much cannibalization has happened last year because of the drop. So it doesn't reflect exactly like what has been won from that perspective. On the Caresoft perspective, I think the integration, et cetera, we are already in the market. We are doing quite moving forward, as Mr. Tikekar mentioned, I think we are also adding to their capabilities and adding 1 plus 1 is more than 3. That's basically the potential. Also off-highway commercial, we see as a growth area. I mentioned that. And Caresoft gives us some good leads into that part. I would say that this is where we are. Also on N-Dream which is a small acquisition relatively, we see a high potential in that, specifically both in terms of growth and profitability. And it is already in 2 million vehicles, and we expect it to be about 3 million vehicles next year. So this is how we start. And we are trying to see that whether we can move -- we can really leverage that platform for adding more services on back of this engine.

Your next question comes from the line of Vimal Jamnadas Gohil from Alchemy Capital Management.

Sir, I just had a question on the transition that we are making or the transformation that we're making. If you could take us internally, what are the metrics you're tracking to gauge the progress of this transition? And as investors, how should we look at what metrics should we track, which you disclosed in order to gauge how -- what's the progress been over the next 12 to 18 months? The related question over there would be ultimately, what are we looking at? What are the outcomes we are looking at? Maybe slightly lower in numbers?

No. Okay. Can you repeat the second part? So first is in the transition from services to solutions, what are the key parameters we'll look at?

Internally, what are we tracking? And what is investors, how should we [indiscernible] probably more assured on the progress. And the second related question, sir, over there would be how should we then -- what's the end-end outcome over here? Are we looking at stickier customers? Are we looking at accelerated revenue growth, maybe a few years down the line or maybe better margins what's the end outcome?

So from the services to solutions, the one metric that completely changes is what becomes most important to us is the revenue per employee. That's something that we started to also write in our reports. That's one of the key measures that not only we track internally, but that's something that makes sense for the analysts and investors also to look at. I think this becomes the most important. Other than that, I think there are many others that we have listed out that basically changed related to the progress that we are making in terms of building up the solutions, getting the market ready for that. And we have to also look at our CRM with a different lens given the transition. So these are...

Yes. So I think what we will do is, at the end of the year, we will come out with a more detailed conversation on this, and we will share more details about it. Right now, we have some idea. But in the next 3 to 6 months, we will have a better idea. In 3 to 4 months, we will share something, but I guess, in 6 months, we will be very sure about the criteria. And as you know, in the last 3 to 4 years, we start sharing as many things as possible as soon as we have a better handle on. But we will share more at the end of the year.

The second question is what is the outcome. I think Mr. Patil already what to expect, obviously, increased wallet share from KPIT's perspective, and of course, in the midterm profitable growth. I think these are the two outcomes that we really expect in the midterm, as we transition from being primarily a services company to primarily a solutions company.

Your next question comes from the line of Ankit Agrawal from Yellowstone Equity.

My question is related to QORIX as well as the solution-based shift. It sounds like what we are doing in QORIX is also solution-driven, although we are packaging it as a product. So I just want to understand what is the difference? And also what is the traction we are getting on QORIX.

Our QORIX is both a product and a solution. When typically, the complexity of a middleware software is you can never really take it shrink-wrapped, but the attempt is to make it as shrink-wrapped as possible. But whatever you deliver to the customer, there is always going to be an effort in terms of integration, the application software for that. So that is the explanation on whether the QORIX is actually a product or a solution. So it's a combination of both.

So I think as you can see, some quarters, this quarter, we have got a good profit. I don't know about the next quarter. So it is based on the licenses. I think one thing I can tell you is there are, again, multiple changes which are happening. One is the vehicle -- new vehicle programs have been pushed out because of the problems OEMs faced in the existing program as well as keeping the spending. I mean, I would say, postponing the spending on the new programs. So because of that, the middleware and operating system spend went ahead. That's the reason it doesn't have as much traction as we had expected till now. But we believe this will be, as you probably know that this has become the part of a European Union software partnership, which the European companies have made. And there are very significant OEMs who are a part of that. So we do believe that this is something, again, which will be a -- this is very unique, and we feel that this will have its fair share in some time.

Okay. So is it fair to say that QORIX is mostly focusing on middleware and architecture whereas our solutions business approach is granular across so many different group?

Yes. Actually, QORIX is less than architecture, it's mostly middleware. Architecture is a much more comprehensive subject, which KPIT is handling. It's not a part of the QORIX activity. Whereas KPIT is handling maybe across all the domains now the -- including -- because architecture is also a domain for us now, including architectural domain, KPIT is handling solutions across multiple domains.

Next question comes from the line of Sandeep Shah from Equirus Securities.

In this pivot to solution-driven business, is it fair to assume as we have taken a yield in [indiscernible] ahead versus peers. In terms of solution-based delivery method, we are planning to receive the same thing, which will help us in terms of winning the further wallet share and may help some of the Western OEMs, both in the U.S. and Europe to launch the new model as fast as Chinese EV players or the OEMs are launching and taking the wallet share.