Tata Technologies sees mid-teen FY27 growth, services revenue to exceed 20%: CEO Warren Harris

Pune-based Tata Technologies expects to deliver mid-teen revenue growth for the full financial year, supported by continued momentum in its services business, which is projected to grow by more than 20%, Chief Executive Officer and Managing Director Warren Harris said.

The global product engineering and digital services company and a subsidiary of Tata Motors also expects operating margins to improve through the rest of the year and finish above 17%, despite near-term challenges in its technology solutions business.

After declaring the September quarter earnings, Harris said more than 80% of Tata Technologies' business now comes from services, which continues to outperform. The company expects the services segment to offset delays in technology solutions, where revenue recognition has been pushed back because of project execution timelines.

Harris said the technology solutions business continues to see demand, but some education-related projects are facing delays because construction sites being developed by state governments are not yet ready. He clarified that the issue affects the timing of revenue recognition rather than order inflows.

Tata Technologies absorbed an over 100-basis-point impact from annual salary hikes during the quarter but maintained margins through operational efficiency. It is targeting operating margins of more than 17% by the end of the financial year while building further momentum into the next year.

Tata Technologies shares were trading at ₹747.90 as of 9:41 am on the NSE. The company has a market capitalisation of ₹30,494.49 crore, and its stock has gained more than 7% over the past year.

[faq type="interview" title="This is an edited transcript of the interview."][ques][/ques][ans][/ans][/faq] [faq type="interview"][ques]Overall, your guidance is strong—you are guiding for strong double-digit growth for the full year. But you are flagging near-term challenges within certain customer segments and geographies. Could you specify which ones are slowing down and why?[/ques][ans]We've signalled challenges in terms of the seasonality of our technology solutions business. That's a business that sits outside of our core services business, and there's always some lumpiness associated with that business. But over 80% of our business is services, and that continues to go from strength to strength. We delivered 4.5% sequential growth in services in the second quarter. Most of the growth this year will come from services, and so we fully stand by the claim that we've made in the past that this is industry-leading growth. It's really reinforced by our value proposition. We think the industry is bifurcating between those service providers that just provide services and those like ourselves that can own outcomes. Increasingly, those that can take ownership of product outcomes, like ourselves, are the beneficiaries of the inflection point in the industry.[/ans][/faq] [faq type="interview"][ques]Just one more to close the loop on technology solutions. Other than seasonality, is the technology solutions business seeing headwinds? And for the full year, what can this business deliver?[/ques][ans]Technology solutions should continue to grow, but one of the things that is central to our education proposition is the readiness of the construction sites being built by the state governments that we are supporting. There are some issues with a number of the programmes that we are executing at the moment in terms of the readiness of those sites. Now, that doesn't mean that we lose those orders. It just means that the timing of revenue recognition is somewhat staggered. But we are working very hard to ensure that, again, the strong double-digit growth of our services business more than compensates for that. That's what the team and the company are primarily focused on at the moment.[/ans][/faq] [faq type="interview"][ques]Let's get to the services business, which is doing so well for you. When you say the full company growth will be in the strong double digits, what kind of number are we looking at? Is it going to be in the low double digits or mid-teens? And for services, which are driving growth, can you push above 20%?[/ques][ans]We grew our services business by 34% in Indian rupees during the second quarter. In constant currency, that was about 26%. So, we are pushing hard on continuing to deliver growth that exceeds what we expect from the rest of the industry. In terms of the aggregate position, we think it will be strong. We think it'll be in and around the mid-teens for the entire company, but services will exceed 20%. So again, that's the vector around which we are scaling the business. And to the point I made before, there's an inflection point right now. Despite the fact that the OEMs in Europe, specifically, are reducing costs and implementing headcount reduction plans, they're globalising their footprint, and we've very much been the beneficiary of that.[/ans][/faq] [faq type="interview"][ques]On margins, you managed to maintain margins this quarter despite the wage hike impact. Can you give us the push and pull on margins in the current quarter? And going ahead into Q3 and Q4, can margins inch higher?[/ques][ans]It was a quarter in which we rolled out our salary increments, and there was an over 100-basis-point impact from that. So, the fact that we're really executing efficiently has more than compensated for that. We expect margins to continue to improve from here, even in the third quarter, which is traditionally soft for services companies. We expect to finish the year with margins in excess of 17%. So, we are building momentum as we scale, and we're very ambitious about not only finishing the year well but also building from there into next year.[/ans][/faq]

For the full interview, watch the accompanying video



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