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    Tata Technolog.

    TATATECHGood
    Information Technology·17 Oct 2025
    Management Summary

    Tata Technologies returned to sequential growth in Q2 FY26, driven by strong performance in aerospace and a rebound in technology solutions. While the company faced a one-off ₹10 crore expense related to a prior cyber incident, underlying margins showed steady improvement. Management signaled a cautious outlook for Q3 due to seasonal factors and IT system restoration at JLR, but remains confident in a sharp recovery for Q4.

    Highlights

    8

    • Total revenue reached ₹1,323 crores, representing a 6.4% sequential growth in INR terms.

    • Services business delivered 5.1% sequential growth (3% in constant currency) to ₹1,013 crores.

    • Normalized EBITDA margin improved to 16.4%, up 30 basis points QoQ, excluding one-off cyber incident expenses.

    • Aerospace and Industrial Heavy Machinery segments delivered 14% sequential revenue growth in USD terms.

    • Technology Solutions business grew 10.6% QoQ, driven by a rebound in the Education segment.

    • Signed a definitive agreement to acquire ES-TEC, adding 300 engineers and direct access to Volkswagen.

    • DSO increased significantly to 109 days from 87 days in June due to temporary customer-specific situations.

    • Net cash position stood at $123 million at the end of September, down from $159 million in June.

    Concerns

    1

    • JLR IT System Restoration

    Key financials

    Single quarter

    06 metrics
    1. 01Revenue₹1,323 Cr+6.4%QoQ
    2. 02Normalized EBITDA Margin16.4%
    3. 03Profit Before Tax₹226 Cr+3.9%YoY
    4. 04Profit After Tax₹165 Cr+5%YoY
    5. 05EBIT₹190 Cr+4.6%QoQ

    Segment breakdown

    Services
    ₹1,013 Cr Revenue5.1% Sequential Growth (INR)3% Sequential Growth (CC)
    Technology Solutions
    23% Revenue Contribution10.6% Sequential Growth
    List

    Guidance & targets

    4
    CategoryTargetPriority
    Revenue
    Q3 Revenue Momentum
    Moderation
    		Medium
    Revenue
    Q4 Revenue Recovery
    Sharp Recovery
    		Medium
    Other
    ES-TEC Acquisition Closing
    Q3 FY26
    		High
    Margin
    Q3 Margin Pressure
    Pressure from salary revisions
    		Medium

    Risks & concerns

    6
    RiskSeverity

    JLR IT System Restoration

    JLR's IT systems are being restored after an attack, causing temporary headwinds and potential impact on Tata Tech's services in Q3. — Management acknowledged

    high

    DSO Spike

    DSO jumped from 87 to 109 days due to 'customer-specific temporary situations' impacting payment timelines. — Both acknowledged

    medium

    Attrition Uptick

    Attrition rose from 13.8% to 15.1%, which management claims is in line with industry trends and due to talent loss to GCCs. — Analyst downplayed

    low

    Areas of Evasion(3)

    • Quantifying JLR impact in Q3
    • Specific margins for ES-TEC
    • Quantifying the 'lumpiness' of the education deal

    Q&A highlights

    3

    “Those centers have now come online and so we have been able to play some level of catch-up in Q2... we expect continued momentum in technology solutions and specifically in education in the coming quarters.”

    Investors were concerned if the 11% QoQ growth in Technology Solutions was a one-time catch-up or sustainable; management suggests it's a mix of both.

    asked by Chandramouli Muthiah, Goldman Sachs

    1 min read5 chapters

    Detailed Narrative

    01

    Return to Growth Led by Aerospace

    After several soft quarters, Tata Technologies delivered 5.1% sequential growth in its services business. This was primarily driven by the Aerospace and Industrial Heavy Machinery verticals, which surged 14% in USD terms. Management highlighted consistent execution across MRO, PLM, and digital transformation as the key drivers for this outperformance.

    02

    Strategic Pivot to Volkswagen via ES-TEC

    The acquisition of ES-TEC marks a major milestone, providing direct access to Volkswagen, the world's leading automotive R&D spender. With over 300 engineers specializing in ADAS and Embedded Software, the deal is expected to close in Q3. Management believes this will allow them to cross-sell their broader portfolio into the VW ecosystem.

    03

    JLR IT Restoration Clouds Q3 Outlook

    Management warned of 'moderation' in Q3, largely due to ongoing efforts to restore JLR's IT systems following a cyber attack. While Tata Tech is assisting in the restoration, the short-term priorities of the client remain fluid. CEO Warren Harris declined to quantify the impact but stressed it could affect the next 2-3 months of operations.

    04

    Margin Resilience Despite Cyber Costs

    Reported EBITDA margin was 15.7%, but this included a one-time📎 consulting expense of over ₹10 crores related to a cyber incident. On a normalized basis, margins improved to 16.4% from 16.1% in Q1. However, Q3 is expected to face pressure from salary revisions covering 88% of the employee base.

    05

    Operational Metrics and Talent Strategy

    Headcount remained stable at 12,402, while the BMW joint venture successfully scaled to over 1,000 employees ahead of schedule. Attrition saw a modest uptick to 15.1%, which the CHRO attributed to competition from Global Capability Centers (GCCs). The company continues to invest in upskilling, training over 1,200 employees in generative and agentic AI this quarter.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.