KPIT Technologies - GS

5 January 2022 | 9:09PM IST
KPIT Technologies (KPIE.BO)

CL
Coding the global acceleration towards EVs, initiate at Buy (on CL)
Buy
KPIE.BO 12m Price Target: Rs1,040.00 Price: Rs594.70 Upside: 74.9%

Chandramouli Muthiah
+91(22)6616-9344 | [email protected]
Goldman Sachs India SPL
As the auto industry shifts focus towards electric powertrains, our Kota Yuzawa
+81(3)6437-9863 | [email protected]
bottom up work with our global analyst teams indicates that R&D Goldman Sachs Japan Co., Ltd.
spending on CASE (connected, autonomous, shared, electric) Rupanshi Bajaj

+1(212)934-7036 | [email protected]
technologies at the top 10 global auto R&D spenders is poised to Goldman Sachs India SPL
triple over FY21-FY26 to ~US$61bn. Europe’s CY35 ban on ICE

vehicle sales has accelerated this shift. Amid this backdrop, we
initiate on KPIT Technologies with a Buy rating (add to Asia ex-Japan Key Data __________________________________
Conviction List). KPIT is uniquely positioned as a 100% automotive Market cap: Rs162.0bn / $2.2bn
Enterprise value: Rs158.5bn / $2.1bn
software integrator helping large OEMs accelerate their R&D 3m ADTV: NA
India
projects in CASE related production platforms. We believe KPIT’s India Automobiles
M&A Rank: 2
expertise in (1) high entry barrier areas like L3-L5 autonomous Leases incl. in net debt & EV?: Yes
Asia ex. Japan Conviction List
driving, vehicle to anywhere connectivity, digital clusters and battery
management system enhancement; combined with (2) a strong GS Forecast ________________________________
3/21 3/22E 3/23E 3/24E
talent pool (3rd largest auto tech talent pool globally), position it Revenue (Rs mn) 20,357.4 24,129.7 29,306.5 35,434.7
EBITDA (Rs mn) 3,045.4 4,268.1 5,421.7 6,821.2
well to gain wallet share in the rapidly growing CASE R&D arena. EPS (Rs) 5.37 9.66 12.60 16.37
P/E (X) 18.0 61.5 47.2 36.3
P/B (X) 2.2 11.3 9.5 7.8
We expect KPIT to grow sales / EBITDA / EPS by +21% / +26% / Dividend yield (%) 1.5 0.4 0.5 0.7
+29% annually over FY22 to FY25 driven by (1) potential addition of N debt/EBITDA (ex lease,X) (1.6) (1.3) (1.1) (1.3)
CROCI (%) 43.4 29.7 29.7 31.3
semiconductor and EV disruptor companies to the client base; FCF yield (%) 21.5 1.3 1.3 2.5
(2) further inflection in CASE R&D spending to support rising EV

9/21 12/21E 3/22E 6/22E
sales ratio targets; (3) margin potential led by increasing share of EPS (Rs) 2.39 2.38 2.69 2.95
work in newer technology areas. GS Factor Profile ____________________________

Growth
Valuation: We value KPIT using an 85:15 DCF:M&A methodology. Financial Returns
Our blended 12-m TP of Rs1,040 implies +75% upside. KPIT trades

Multiple
at 51x fwd P/E vs its closest Indian peer Tata Elxsi at 75x and global
Integrated
peer group at ~63x for a similar long term growth profile in the high
20% EPS growth range. Our FY24 EPS is 11% above consensus. Percentile 20th 40th 60th 80th 100th
Key risks: Challenges to our thesis could stem from (1) Attrition in
KPIE.BO relative to Asia ex. Japan Coverage
skilled talent pool; (2) Slowdown in auto tech outsourcing; (3) Vendor KPIE.BO relative to India Automobiles
consolidation by OEMs; (4) Revival in onshoring; (5) Obsolescence Source: Company data, Goldman Sachs Research estimates.
See disclosures for details.
of domain expertise; and (6) INR appreciation.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
Goldman Sachs KPIT Technologies (KPIE.BO)
KPIT Technologies (KPIE.BO) Income Statement (Rs mn) _________________________________

Buy CL Rating since Jan 5, 2022 Total revenue
3/21
20,357.4
3/22E
24,129.7
3/23E
29,306.5
3/24E
35,434.7
Cost of goods sold (0.5) 0.0 0.0 0.0
SG&A (3,896.9) (3,821.1) (4,689.0) (5,492.4)
Ratios & Valuation _______________________________________ R&D -- -- -- --
3/21 3/22E 3/23E 3/24E Other operating inc./(exp.) -- -- -- --
P/E (X) 18.0 61.5 47.2 36.3 EBITDA 3,045.4 4,268.1 5,421.7 6,821.2
P/B (X) 2.2 11.3 9.5 7.8 Depreciation & amortization (1,331.7) (1,181.3) (1,301.0) (1,436.0)
FCF yield (%) 21.5 1.3 1.3 2.5 EBIT 1,713.6 3,086.9 4,120.7 5,385.1
EV/EBITDAR (X) 7.7 37.1 29.1 22.7 Net interest inc./(exp.) (172.5) (152.9) (137.7) (124.4)
EV/EBITDA (excl. leases) (X) 7.1 36.7 28.7 22.5 Income/(loss) from associates -- -- -- --
CROCI (%) 43.4 29.7 29.7 31.3 Pre-tax profit 1,736.2 3,376.9 4,458.0 5,792.2
ROE (%) 12.6 20.0 21.9 23.6 Provision for taxes (305.2) (744.7) (1,025.3) (1,332.2)
Net debt/equity (%) (23.4) (24.0) (25.3) (33.4) Minority interest (9.7) -- -- --
Net debt/equity (excl. leases) (%) (39.1) (37.3) (36.4) (42.6) Preferred dividends -- -- -- --
Interest cover (X) 9.9 20.2 29.9 43.3 Net inc. (pre-exceptionals) 1,421.3 2,632.3 3,432.6 4,460.0
Days inventory outst, sales 1.0 0.5 1.4 1.8 Post-tax exceptionals 40.0 -- -- --
Receivable days 67.9 56.3 65.2 69.4 Net inc. (post-exceptionals) 1,461.4 2,632.3 3,432.6 4,460.0
Days payable outstanding 771,820.6 NM NM NM EPS (basic, pre-except) (Rs) 5.22 9.66 12.60 16.37
DuPont ROE (%) 11.7 18.4 20.1 21.5 EPS (diluted, pre-except) (Rs) 5.22 9.66 12.60 16.37
Turnover (X) 1.0 1.1 1.2 1.3 EPS (basic, post-except) (Rs) 5.37 9.66 12.60 16.37
Leverage (X) 1.6 1.5 1.4 1.4 EPS (diluted, post-except) (Rs) 5.37 9.66 12.60 16.37
Gross cash invested (ex cash) (Rs) 12,347.3 15,141.3 18,338.8 20,785.3 DPS (Rs) 1.48 2.42 3.15 4.09
Average capital employed (Rs) 8,606.5 10,077.1 11,831.7 13,285.2 Div. payout ratio (%) 28.4 25.0 25.0 25.0
BVPS (Rs) 44.31 52.49 62.68 75.90
Balance Sheet (Rs mn) ____________________________________
Growth & Margins (%) ____________________________________ 3/21 3/22E 3/23E 3/24E
3/21 3/22E 3/23E 3/24E Cash & cash equivalents 2,857.7 3,473.8 4,351.8 6,943.2
Total revenue growth (5.6) 18.5 21.5 20.9 Accounts receivable 3,083.5 4,361.7 6,102.1 7,369.3
EBITDA growth 3.1 40.2 27.0 25.8 Inventory -- 64.7 156.8 189.3
EPS growth (0.3) 80.1 30.4 29.9 Other current assets 7,016.0 7,016.0 7,016.0 7,016.0
DPS growth 50.0 63.1 30.4 29.9 Total current assets 12,957.2 14,916.2 17,626.7 21,517.9
EBIT margin 8.4 12.8 14.1 15.2 Net PP&E 2,086.0 1,666.8 1,325.8 995.7
EBITDA margin 15.0 17.7 18.5 19.3 Net intangibles 1,298.6 1,919.1 2,191.8 2,471.7
Net income margin 7.0 10.9 11.7 12.6 Total investments 0.0 0.0 0.0 0.0
Other long-term assets 3,333.6 3,333.6 3,333.6 3,333.6
Price Performance _______________________________________ Total assets 19,675.4 21,835.8 24,477.9 28,318.9
KPIE.BO (Rs) India BSE30 Sensex Accounts payable 1,352.4 1,284.0 1,151.6 1,390.7
Short-term debt 7.3 7.3 7.3 7.3
1,000 70,000
Short-term lease liabilities -- -- -- --
800 65,000 Other current liabilities 3,917.0 3,917.0 3,917.0 3,917.0
Total current liabilities 5,276.7 5,208.3 5,075.8 5,315.0
600 60,000
Long-term debt 24.0 24.0 24.0 24.0
400 55,000 Long-term lease liabilities 1,900.6 1,900.6 1,900.6 1,900.6
200 50,000 Other long-term liabilities 377.0 377.0 377.0 377.0
Total long-term liabilities 2,301.6 2,301.6 2,301.6 2,301.6
0 45,000 Total liabilities 7,578.2 7,509.8 7,377.4 7,616.5
Preferred shares -- -- -- --
Apr-21 Jul-21 Oct-21 Jan-22
Total common equity 12,068.4 14,297.2 17,071.7 20,673.6
3m 6m 12m Minority interest 28.7 28.7 28.7 28.7
Absolute 74.0% 129.9% 313.0% Total liabilities & equity 19,675.4 21,835.8 24,477.9 28,318.9
Rel. to the India BSE30 Sensex 72.6% 101.9% 232.2% Net debt, adjusted (2,826.4) (3,442.4) (4,320.5) (6,911.9)
Source: FactSet. Price as of 5 Jan 2022 close.
Cash Flow (Rs mn) _______________________________________
3/21 3/22E 3/23E 3/24E
Net income 1,421.3 2,632.3 3,432.6 4,460.0
D&A add-back 1,331.7 1,181.3 1,301.0 1,436.0
Minority interest add-back -- -- -- --
Net (inc)/dec working capital 1,678.9 (1,411.4) (1,964.8) (1,060.6)
Other operating cash flow 1,844.1 152.9 137.7 124.4
Cash flow from operations 6,276.0 2,555.1 2,906.5 4,959.8
Capital expenditures (599.8) (482.6) (732.7) (885.9)

Acquisitions (225.6) (900.0) (500.0) (500.0)
Divestitures -- -- -- --
Others (4,183.1) -- -- --
Cash flow from investing (5,008.4) (1,382.6) (1,232.7) (1,385.9)
Repayment of lease liabilities -- -- -- --

Dividends paid (common & pref) -- (403.5) (658.1) (858.2)
Inc/(dec) in debt (727.2) -- -- --
Other financing cash flows (441.5) (152.9) (137.7) (124.4)
Cash flow from financing (1,168.8) (556.4) (795.8) (982.6)
Total cash flow 98.8 616.1 878.0 2,591.4
Free cash flow 5,676.3 2,072.5 2,173.8 4,074.0
Source: Company data, Goldman Sachs Research estimates.
5 January 2022 2
Table of Contents
Executive Summary: Well positioned to execute on CASE R&D inflection 4
Inflection in CASE R&D spending at large global automakers 7
New tech focus and offshoring to support margins 14
Favorable positioning; 100% Auto tech focus, Top 3 in headcount 16
Long runway for growth in traditional customer base 19
Hiring ambitions indicate underlying business strength 23
Financial snapshot 24
Valuation: Sustainable high 20% EPS CAGR at discount to peers 29
Catalysts 35
Key downside risks 36
+75%/+114%/-26% return potential in Base/Bull/Bear cases 37
M&A Framework: Rank of 2 (15%-30% probability of acquisition) 38
KPIT 3Q22 Preview - GSe vs consensus 40
Appendix 41
Disclosure Appendix 46
5 January 2022 3
Executive Summary: Well positioned to execute on CASE R&D inflection
We initiate on KPIT Technologies with a Buy rating implying +75% upside to our 12-month TP of Rs1,040.
Our recommendation is based on:
1. CASE R&D spending at top 10 automakers to triple over FY21 to FY26E: On ground feedback from
our global analyst teams indicates that the top 10 global automakers, many of whom are important KPIT
customers, are poised to triple CASE R&D spending from ~US$20bn in FY21 to ~US$61bn by FY26E
(+25% CAGR).
2. Next leg of customer additions to come from semiconductor makers, EV disruptors: While there is
a long runway for growth among the existing customer base, KPIT has initiated pilot programs with EV
disruptors like Lucid, Rivian and Nio, among others. KPIT is also increasingly working with semiconductor
companies to help them integrate their final products to varied operating system architectures among
OEMs.
3. Deep domain expertise and favorable positioning: Unlike many peers, As a consequence of the
100% focus on automotive software, many of KPIT’s senior leaders have developed deep expertise in high
entry barrier domains. These include L3-L5 autonomous driving, vehicle to anywhere connectivity, digital
clusters / dashboards and battery management system enhancement. These high entry barrier domains
are supportive of the future margin profile of the company, in our view.
4. Electronics becoming a larger part of vehicle cost: Electronics, which were 27% of vehicle cost in
2010, currently account for c. 40% and is poised to reach the 50% mark by 2030, according to Deloitte.
Entry level and advanced cars today have 60 and 100+ electronic control units in them and all these require
integration and middleware, areas where KPIT’s expertise is likely to find increasing demand.
5. Potential for increase in outsourcing as OEMs focus on vehicle OS architecture: Per Bertrandt,
~15%-20% of automotive R&D is outsourced today. Steady increases in outsourcing have been visible in
areas like pharmaceutical clinical trials, auto components, FMCG manufacturing and digital / cloud
services. As the role of software and electronics expands in the auto industry, we believe OEMs will resort
to more outsourcing in order to expand focus on core areas like vehicle operating system architecture.
Valuation: We expect KPIT to grow sales / EBITDA / EPS by +21% / +26% / +29% annually over FY22 to
FY25. We expect KPIT’s present valuation discount to peers to narrow given the company’s superior EPS
growth profile vs Indian competitors and comparable high 20% range of EPS growth potential vs global
peers (Bertrand, Akka, Alten, Thundersoft, Desay SV, Navinfo). Given KPIT’s high long term growth potential
and strong net cash position, we value the company using an 85:15 DCF:M&A methodology. Our blended
12-month TP of Rs1,040 implies +75% upside.
What are the key risks? (1) Attrition among a relatively scarce and skilled talent pool (2) Rapid shifts in
powertrain / battery / autonomous / connected technologies, (3) Customer in-housing of presently
outsourced auto tech functions, (4) Adverse changes in visa regulations in developed market geographies,
and (5) INR appreciation vs key customer currencies including EUR, USD, GBP and JPY.
5 January 2022 4
Exhibit 1: Summary of KPIT Technologies’ key practices
Infotainment Anti-collision Parking assist
Connected Vehicles (~10% of Autonomous Driving + ADAS

Revenue) (~20% of Revenue)
Over the Air Blindspot
Entertainment
updates detection
Driverless Cars
and Trucks
Vehicle to Vehicle
Communication Payments L1 to L5
Autonomous
Lane keep Driving
Maps Advanced Driver

Assistance
Systems
Electric powertrain
Emission reduction
efficiency
technology
Battery management Electric powertrain (~30% of

system technology Revenue) ICE powertrain (~10% of
Battery charging Fuel efficiency

efficiency improvement
In-vehicle
Servicing diagnostic
engineering &
checks
Others (~30% of Revenue) design
Emerging common In-vehicle

Auto software networking
architectures
Source: Company data, Goldman Sachs Global Investment Research
5 January 2022 5
Exhibit 2: KPIT’s two decades of experience working on more than 300 vehicle production programs have positioned it well to participate in
higher entry barrier and newer technology areas in the global auto tech landscape
Higher Entry Barrier Practices Lower Entry Barrier Practices
~80% of KPIT Revenue ~20% of KPIT Revenue
L3 Autonomous Basic connectivity
L4 Autonomous Basic cloud tech
L5 Autonomous Testing
Vehicle to Vehicle Connectivity Validation
OEM Architecture Collaboration Legacy ICE tech support
Digital clusters Mechanical
Vehicle to anywhere connectivity L1 Autonomous
Multiple instrument connectivity L2 Autonomous
In vehicle design Other Basic / Legacy functions
In vehicle engineering Drivers of faster outsourcing in CASE technologies include

Off board diagnostics - Need to accelerate EV devlopment ahead of advancement in ICE vehicle sales
ban in Europe from 2040 earlier to 2035 now
Battery management system enhancement
- OEM focus on core vehicle operating system architecture
Platform acceleration
- Outsourcing comfort in middleware / integration areas
Turnaround time reduction
- Historical Automaker comfort on partnerships and alliances
Battery charging technology
- Disruptor realization that outsourcing is necessary to scale
Anti-collision
- Electric and Autonomous project development acceleration among incumbents
Semiconductor domain
- Domain expertise on specific software and integration challenges
Over the air
- Transition of automobiles to computer on wheels philosophy from mechanical
Other Domain specific new technology areas device
Source: Data compiled by Goldman Sachs Global Investment Research
5 January 2022 6
Exhibit 3: KPIT’s passenger car and commercial vehicle segments focus on faster EV transition markets of Europe and the US to support
rapid topline growth
FY21 Revenue Split by Vertical FY21 Revenue Split by Practice FY21 Revenue Split by Geography
New Mobility, 1% Others, 1%
Commercial
Vehicles, 22% Others, 29%
Powertrain, 39% Americas, 33%
Rest of the World,
33%
Passenger Cars,
77% Connected,
11%
AD-ADAS, 21% UK & Europe,

34%
Revenue CAGR (FY22E to FY25E) FY21 Revenue Split by Currency

INR, 5% Others, 4%
Consol Revenue 21%
JPY,
8%
CVs 24% GBP, 5%
USD, 43%
Passenger Cars 19%
EUR, 35%
Others 30%
0% 5% 10% 15% 20% 25% 30% 35%
Inflection in CASE R&D spending at large global automakers
Large global automakers CASE spending to grow +25% annually (FY21 - FY26E)
We would like to thank our KPIT works with majority of the top 20 global automakers: KPIT works with more
Europe Auto Analysts - than 10 of the top 15 automotive OEMs globally, providing software and technology
George Galliers, Philipp services in areas like connected vehicles, autonomous driving, shared mobility, vehicle
Konig and Sian Keegan
diagnostics and electrification. In order to assess the underlying rate of growth of KPIT’s
US Auto Analysts - Mark TAM (total addressable market), we dug into more than 200 public filings made by the
Delaney, Bruno Dossena, top 20 global automakers over the past 5 years.
Ryan Heeb and Eleanor
Garland Top automakers to grow CASE R&D spending +25% annually over FY21 - FY26E:
Japan Auto Analyst - Kota While not all OEMs disclose exact splits between ICE (internal combustion engine) and
Yuzawa CASE (connected autonomous shared and electric), ten of the largest automotive R&D
India IT Sevices Analyst - spenders do provide disclosures and R&D spending outlooks through to CY25. CASE
Sumeet Jain R&D spending budgets among this group including Toyota, Ford, GM, Volkswagen,
for their contribution to this BMW, Stellantis, Renault, Daimler (includes Mercedes Benz), Rivian and Tesla are
section expected to increase on aggregate +25% annually (from ~US$20bn to US$61bn) over
CY20 to CY25 per our covering analyst team forecasts as well as management guidance
from these companies. This group of automakers constitutes more than 60% global car
volumes (including consortiums they participate in), offering a good bottom up indication
on the trajectory and direction of CASE R&D spending trends for the broader
5 January 2022 7
automotive industry.
Exhibit 4: Relevant TAM in CASE technologies within the top global automakers to grow +25% annually over CY20 to CY25
Top Global Auto makers CASE** R&D Spending to grow at 25% CAGR
over CY20 - CY25
70.0
Announced CASE R&D spending run rates (in US$bn)
61.3
60.0 Rivian, 4.1
Tesla, 4.0
Renault, 2.1
50.0
25% CAGR Daimler, 6.0
Stellantis, 6.5
40.0
BMW, 5.1
30.0
Volkswagen, 14.7
20.3 Rivian, 0.8
20.0 Tesla, 1.5 Renault, 0.6
Daimler, 1.3 Stellantis, 1.9 GM, 6.0
BMW, 1.4
10.0 Volkswagen, 3.6 Ford, 6.0
GM, 3.1
Ford, 3.2 Toyota, 6.8
Toyota, 3.0
0.0
CY20 CY25
** CASE R&D spend represents spending on (Connected, Autonomous, Shared and Electric) development programs at large global car
manufacturers . While these OEMs give out R&D spending targets over CY20 to CY25, these are typically on R&D plus capex basis. The
absolute annual R&D allocations towards ICE and CASE are based on Goldman Sachs analyst estimates for each of these companies and is
deduced based on total development spending guidance.
Note: CY20 to CY25 represents FY21 to FY26 for Indian companies
5 January 2022 8
Exhibit 5: R&D spending on CASE technologies among large global OEMs to triple over CY20 to CY25
European OEMs to lead the way followed by US and Japanese automakers
CY20 CY25 CY20 to CY25 CAGR
of which of which of which of which of which of which
Total R&D Total R&D Total R&D
in US$bn ICE CASE ICE CASE ICE CASE
Volkswagen 15.8 12.2 3.6 17.9 3.2 14.7 2% -23% 32%

Split 100% 77% 23% 100% 18% 82%
BMW 7.2 5.8 1.4 7.6 2.5 5.1 1% -16% 30%

Split 100% 81% 19% 100% 32% 68%
Large
European Daimler 8.4 7.1 1.3 7.7 1.7 6.0 -2% -25% 35%
OEMs Split 100% 84% 16% 100% 22% 78%
Renault 2.9 2.3 0.6 3.2 1.1 2.1 2% -14% 29%

Split 100% 80% 20% 100% 35% 65%
Stellantis 5.0 3.1 1.9 9.1 2.6 6.5 13% -4% 28%
100% 63% 37% 100% 28% 72%
R&D TAM CAGR - Large
39.3 30.5 8.8 45.5 11.1 34.4 3% -18% 31%
European OEMs
Ford 7.1 3.9 3.2 8.0 2.0 6.0 2% -13% 13%

Split 100% 55% 45% 100% 25% 75%
GM 6.2 3.1 3.1 7.5 1.5 6.0 4% -14% 14%

Large Split 100% 50% 50% 100% 20% 80%
US
OEMs Rivian 0.8 0.0 0.8 4.1 0.0 4.1 40% N/A 40%
Split 100% 0% 100% 100% 0% 100%
Tesla 1.5 0.0 1.5 4.0 0.0 4.0 22% N/A 22%
Split 100% 0% 100% 100% 0% 100%
R&D TAM CAGR - Large US
15.6 7.0 8.6 23.6 3.5 20.1 9% -13% 19%
OEMs
Toyota 9.9 6.9 3.0 11.7 4.9 6.8 3% -7% 30%

Toyota
Split 100% 70% 30% 100% 42% 58%
R&D TAM CAGR - Large

64.7 44.4 20.3 80.9 19.5 61.3 5% -15% 25%
Global OEMs
CASE R&D spend represents spending on (connected, autonomous, shared and electric) development programs at large global car manufacturers. While these OEMs give out R&D spending targets over
CY20 to CY25, these are typically on R&D plus capex basis. The absolute annual R&D allocations towards ICE and CASE are based on Goldman Sachs analyst estimates for each of these companies and
is deduced based on total development spending guidance. Note: CY20 to CY25 represents FY21 to FY26 for Indian companies
Expect inflection in CASE R&D spending over CY20 - CY25: Also encouraging is the
observable inflection in spending budgets starting CY21 catalyzed by factors such as (1)
Europe’s decision to ban sale of ICE vehicles starting 2035 (vs 2040 earlier) (2)
Increasing regulatory penalties to auto manufacturers for non-compliance with CO2
emission standards and (3) Increasing activism across industries, governments and
investors in relation to sustainability and decarbonization.
5 January 2022 9
Exhibit 6: Lower emission targets from regulators globally to further Exhibit 7: Penalties per excess gram of CO2 emitted a top of mind
accelerate R&D spending on electrification projects issue for European automakers
gCO2 / Excess emission penalty on failure to meet CO2 emission targets
Year % Reduction
km
122.3 2019 per excess gram of CO2/km Already in
95.0 2020 Actual Cars € 95
EU per vehicle force
80.8 2025 15%
Target
59.4 2030 37%
121.9 FY19 Actual per excess gram of
India € 4,250 2025 - 2029
CO2/tonne-km per vehicle
109.9 FY23 10% Target
216.9 2020 Actual CVs
United States
106.3 2026 51% Target per excess gram of 2030
€ 6,800
133.0 2020 Actual CO2/tonne-km per vehicle onwards
China
95.0 2025 29% Target
Source: EEA, ICT, Marklines, Climate Action Tracker Source: Company data, Goldman Sachs Global Investment Research
Exhibit 8: Commentary from large global car and truck makers highlights upcoming inflection in CASE R&D spending budgets
Month Comments on Electrification / Autonomous / Connected Vehicles Software outsourcing
Nov-20 Will spend more on EVs than on gasoline / diesel powered development
Nov-20 60% of development resource will be devoted to EVs and AVs
Jun-21 Will raise EV spend to US$35bn from US$27bn over 2021-2025
GM
Jul-21 25% of salaried workforce are software research engineers
Dec-21 One permit away from sort of commercialization of robotaxis and autonomous rides.
Dec-21 Expect to lead in both EVs and AVs as the company is on the cusp of opening up a massive new TAM.
Feb-21 US$22bn spend on EV from 2021 to 2025

Mar-21 The company will spend a further US$7bn in autonomous vehicles by 2025
Ford
May-21 Will increase spend in electrification to US$30bn by 2025. 40% of sales in 2030 to be EV
Sep-21 Big synergy between OEMs and suppliers on connected car and next gen software architecture
BMW Mar-20 Will invest EUR30bn in R&D by 2025
Nov-21 Will not compromise on electrification, digitalization, software development which are necessary for the future
Nov-21 Will spend EUR30bn on Premium Brands EV project & ADAS and EUR21bn on volume brands through 2025
Nov-21 Half of R&D spend to be on autonomous
VW
Nov-21 Target is to move into sphere of being software enabled car company
Mar-21 2035 - 40pc vehicles to be autonomous; 2030 - 50pc of the vehicles to be EV
Oct-21 R&D expense continues to go higher due to significant software investment
Jun-20 Future cars to be highly autonomous and far safer to drive

May-21 By 2025, vast majority of R&D is going to be on zero emission technologies
Daimler Nov-21 ADAS and software offers opportunities to increase after sale revenue, services, data as a service
Jun-20 Want to develop OS architecture in house
Jun-20 Happy to work with partners on integration and middleware
Sep-21 Battery supply system investment and R&D is expected to be approximately JPY1.5 trillion by 2030.
Toyota May-21 JPY 1.6 trillon forecast for R&D and vehicle development, carbon neutral, EV & software for connected initiatives
Nov-20 40% of 2021 R&D will be in advanced tech, research areas
Oct-21 R&D expenses are estimated to be $320mn to $330mn this year and increase to $350 mn to $400 mn next year.
Paccar Oct-21 Increased R&D spending to support clean diesel, zero-emission, autonomous and connected truck programs
Stellantis Dec-21 More than EUR 30 billion of investments through 2025 to execute software and electrifcation have been planned
Jun-21 2009 to 2020 the company spent EUR5bn on electrification - 2020 - 2025 we will spend EUR10bn on electrification
Renault
Jun-21 Will spend EUR10bn on electrification between 2020 and 2025 without counting alliance partners
* Red highlights denote key comments related to trajectory and nature of CASE and automotive software spending targets going forward
Source: Company data
These targeted outcomes require a front loading of R&D spend over CY20 to CY25,
providing further support to the ongoing inflection in TAM growth for auto tech
companies like KPIT which are favorably exposed to the global automotive electrification
theme.
We expect +21% annualized top line CAGR over FY21 - FY26

Our global CASE R&D growth exercise indicates that OEMs in Europe are likely to
increase their CASE R&D spend the fastest given the 2035 ban in the Euro area on
5 January 2022 10
sales of ICE vehicles, followed closely by Japan and the USA. We apply relevant regional
CASE R&D growth rates to KPIT’s present geographical mix of revenues (~40% each
from Europe and USA and ~7% from Japan). We also consider a slowdown in growth in
the ICE part of KPIT’s business which is ~10% of FY21 revenue. These factors are
behind our ~20% annualized revenue CAGR assumption over FY21 to FY26, and our
+21%/+21%/+20% revenue growth assumptions in FY23 / FY24 / FY25.
Commercial vehicles CASE R&D spend may have started later, but catching up fast
Driver and fuel are key variable costs for CV fleet operators: While the aggregate
global market in value terms for medium & heavy commercial vehicles is smaller than
passenger vehicles, the commercial vehicle category is especially relevant from an
autonomous driving and electrification standpoint. The key variable costs for fleet
operators in the CV arena are driver cost and fuel.
Autonomous and electrification to help boost CV fleet owner profitability:

Autonomous driving technologies and electrified powertrains help do away with both of
these costs and promise a more cost effective and profitable operation to trucking and
logistical service operators to start with in the short haul categories for BEV
technologies and eventual hydrogen fuel cell powertrain potential for long haul vehicles.
Despite a later start, the criticality of these technologies to customer profitability
indicate a faster pickup in CASE R&D spending for commercial vehicle manufacturers
going forward, albeit off a smaller base than passenger vehicles.
KPIT’s CV vertical well placed to capitalize: With established relationships at truck

makers including Volkswagen (SCANIA, MAN, Navistar, Traton brands), Daimler, Paccar
and Eaton; KPIT has been winning a lot of its recent deals in the CV arena.
Consequently, we expect the company’s CV vertical (~25% of revenue) to grow in the
low to mid 20% range annually over FY22 to FY25 vs the passenger vehicles segment
(~70%+ of revenue) where we expect ~19% growth.
Exhibit 9: Share of large global OEMs significant among top global Exhibit 10: European, Asian automakers, Tesla have been raising
automotive R&D spenders R&D spend more rapidly in most recent cycle
Share of large Global OEMs significant among Top 20 Global automotive CY11 to CY18 R&D Spending CAGR
R&D spenders
Tesla, JLR, Suzuki, 1% 35% 32%
Volvo, 2%
2% 2% Paccar, 0% 30%
SAIC, 3%
Hyundai, 3% 25%
Peugot, 3%
20%
Renault, 3% Volkswagen, 15%
Cummins, 1% 17% 15% 12%
10%10%11%
FCA, 4% 10% 6% 7% 7% 6%
4% 5% 6% 6%
Toyota, 11% 3% 4%
Panasonic, 4% 5% 1% 2%
0%
Nissan, 5% Daimler, -1% -1%
-5%
11% -4%
GM, -10%
Honda, 7% BMW,
7% Ford, 8%
8%
Source: Company data, Goldman Sachs Global Investment Research Source: Company data
5 January 2022 11
Exhibit 11: KPIT has established relationships with more than 12 of the top 20 global automotive OEMs which represent the majority of R&D
spending globally
Customer specific share in annual R&D spending of top 20 global OEMs - CY10 to CY20
CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20
Volkswagen 12% 12% 15% 18% 19% 18% 18% 16% 16% 17% 17%
Toyota 11% 10% 10% 10% 10% 11% 11% 10% 10% 10% 11%
Daimler 10% 10% 9% 8% 8% 9% 10% 11% 11% 11% 11%
BMW 5% 6% 6% 7% 7% 7% 7% 8% 8% 8% 8%
Ford 8% 8% 8% 8% 8% 8% 8% 9% 8% 8% 8%
GM 12% 12% 10% 10% 9% 9% 9% 8% 8% 7% 7%
Honda 7% 7% 7% 7% 8% 8% 6% 6% 6% 6% 7%
Nissan 6% 6% 6% 6% 6% 6% 5% 5% 5% 5% 5%
Panasonic 8% 7% 6% 6% 5% 5% 4% 4% 4% 4% 4%
FCA 2% 3% 4% 3% 3% 4% 4% 4% 4% 4% 4%
Cummins 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Renault 3% 3% 3% 3% 2% 3% 3% 3% 3% 3% 3%
Peugot 4% 4% 3% 3% 3% 3% 3% 3% 3% 3% 3%
Hyundai 2% 2% 2% 2% 2% 2% 2% 2% 2% 3% 3%
SAIC 1% 1% 1% 1% 1% 2% 2% 2% 3% 2% 3%
Volvo 4% 4% 3% 2% 3% 2% 2% 2% 2% 2% 2%
Tesla 0% 0% 0% 0% 1% 1% 1% 2% 2% 1% 2%
JLR 0% 2% 2% 2% 2% 2% 2% 3% 2% 2% 2%
Suzuki 2% 1% 2% 2% 1% 1% 1% 1% 1% 1% 1%
Paccar 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Publicly disclosed KPIT Customer
Exhibit 12: Top 20 global automakers grew their R&D spending by +6% over CY11 - CY18 (mid cycle), largely focused on ICE vehicle projects
Going forward, we expect CASE projects to take center stage in R&D spending, benefitting favorably exposed technology partners like KPIT
CY11 - CY18
R&D spending, in US$ bn CY10 CY11 CY12 CY13 CY14 CY15 CY16 CY17 CY18 CY19 CY20 CAGR
Volkswagen 7.1 8.2 10.8 13.4 15.0 15.5 15.6 15.0 15.5 16.3 15.8 10%
Toyota 6.5 6.5 6.9 7.2 8.1 8.9 9.4 9.2 9.5 9.3 9.9 6%
Daimler 5.5 6.4 6.4 6.3 6.5 7.5 8.6 9.9 10.4 11.0 9.8 7%
BMW 3.2 3.8 4.5 5.5 5.2 5.9 5.9 7.0 7.9 7.3 7.2 11%
Ford 4.7 5.3 5.5 6.2 6.7 6.7 7.3 8.0 8.2 7.4 7.1 6%
GM 7.0 8.1 7.4 7.2 7.4 7.5 8.1 7.3 7.8 6.8 6.2 -1%
Honda 4.3 4.6 5.0 5.6 6.0 6.4 5.0 5.6 6.3 6.3 6.2 4%
Nissan 3.6 3.8 4.2 4.5 4.5 4.7 4.4 4.4 4.7 4.8 4.5 3%
Panasonic 4.7 4.6 4.5 4.3 4.1 4.0 3.9 4.0 4.4 4.2 3.7 -1%
FCA 1.2 2.1 2.5 2.6 2.7 3.3 3.3 3.3 3.5 4.1 3.4 7%
Renault 2.0 2.3 2.2 2.1 2.0 2.4 2.7 3.0 3.0 3.0 2.9 4%
Peugot 2.4 2.5 2.3 2.1 2.3 2.1 2.2 2.5 2.8 3.3 2.7 2%
Hyundai 1.2 1.2 1.4 1.6 1.8 1.8 2.0 2.1 2.3 2.5 2.6 10%
SAIC 0.5 0.9 0.9 0.8 1.1 1.3 1.5 1.8 2.5 2.4 2.4 15%
Volvo 2.3 2.4 2.2 1.8 2.0 1.7 1.6 1.8 1.7 2.0 1.8 -4%
Tesla 0.1 0.2 0.3 0.2 0.5 0.7 0.8 1.4 1.5 1.3 1.5 32%
JLR 0.1 1.0 1.2 1.4 1.6 1.8 2.0 2.3 2.3 2.0 1.4 12%
Suzuki 0.9 1.0 1.1 1.1 1.1 1.2 1.2 1.2 1.4 1.3 1.3 5%
Cummins 0.5 0.7 0.8 0.8 0.9 0.8 0.7 0.9 1.0 1.1 1.0 6%
Paccar 0.2 0.3 0.3 0.3 0.3 0.2 0.2 0.3 0.3 0.3 0.3 1%
Top 20 Global Automakers R&D

57.9 66.1 70.4 74.9 79.5 84.5 86.5 90.8 96.9 97.0 91.7 6%
spend
yoy gr 14% 6% 6% 6% 6% 2% 5% 7% 0% -6%
Increasing share of R&D spending on BEVs / Hybrids / Auto Software / Digital tech
Recent long term planning exercises at Volkswagen and Mercedes Benz indicate that
(1) Battery / Hybrid powered vehicles as well software and digital features are becoming
an increasing part of the overall R&D pie
5 January 2022 12
(2) CY20 to CY25 may see a mix of R&D spend on hybrids and battery electric vehicles
(BEVs)
(3) Hybrids to take a back seat in favor of pure BEVs starting CY25 onwards
(4) Luxury automakers are spending ahead of the curve vs their entry level peers
(5) Most large global OEMs targeting ~40% or more EV sales penetration starting
CY30.
Exhibit 13: Volkswagen (maker of cars and trucks) guiding to consistent increase in development spending
on electrification, hybrids, software and digital technologies in recent 5 year planing cycles
BEV's/Electrification Hybrid powertrains Software/Digital Technology
100 ~89
(56%)
90
~73
80 (50%)
~59 ~30 (19%)
70
(40%)
60 ~44 ~27 (18%)
~8 (5%)
(30%) ~14 (10%)
50
40 ~8 (5%) ~12 (9%) ~11 (7%)

~4 (3%)
30
~52 (33%)
20
~32 (21%) ~33 (23%) ~35 (24%)
10
0
Planning Planning Planning Planning
Round 67 Round 68 Round 69 Round 70
Exhibit 14: Mercedes Benz also guiding to inflection in CASE R&D spending over 2019 to 2030
5 January 2022 13
New tech focus and offshoring to support margins
About 80% of revenue mix in new technology areas: The more price competitive
projects typically tend to be in testing, basic connectivity features, basic mechanical
work and cloud related services. These are the areas where a handful of broader market
IT service providers from India also compete with KPIT. These less specialized activities
put together constitute less than 20% of KPIT’s revenue mix as of FY21. The majority of
the company’s revenue is from more sophisticated services around electrification of
powertrains, battery efficiency, charging systems, autonomous driving, advanced driver
assistance, infotainment and invertor / motor design where skillsets required are more
advanced and margin profile is more attractive.
More sophisticated projects offer scope to add platforms, tools & accelerators: The
more sophisticated projects in areas of electrification, autonomous technology, design,
connectivity and high-end diagnostics offer potential to add platforms, tools and
accelerators in the software / middleware processes. We believe these features help
improve operating efficiency and client results on these projects and therefore also offer
further room to run on overall corporate profitability for KPIT.
Exhibit 15: KPIT pays the highest wage per employee among Exhibit 16: KPIT’s recent performance indicates more levers than
comparable Indian peers with auto tech exposure ... peers to deliver steady margin expansion
... higlighting its exposure to more skilled higher entry barrier projects in
the auto tech space
2.5
Auto Tech Peer EBITDA margin expansion (CY18 to CY20)
2.1 (in bps)
2.0 1.9 600
Average wage (INR mn)
440
400 270
210
1.5 1.4 200 70
10
0
-200 -130 -110

1.0
-400 -270
-600
0.5 -580
-800
0.0
Tata Elxsi L&T Tech KPIT
Source: Company data Source: Company data, Reuters
5 January 2022 14
Exhibit 17: Indian auto tech peers (includes LTTS, Cyient, Tata Elxsi) have been more successful than
Chinese and European peers at margin expansion since CY14
EBITDA margin progression for Auto Tech companies by region

European peers Chinese peers Indian peers
25.0%
20.8% 20.7% 21.2% 21.2%

20.1%
20.0% 19.0%
18.1% 18.4%
19.2% 18.7%
17.2% 17.2%
15.0% 13.0%
15.6%
14.1%
10.0% 11.1%
10.5% 10.9%
10.1% 10.3%
9.7% 9.6% 9.5%
5.0%
3.8%
0.0%
CY14 CY15 Y16 CY17 CY18 CY19 CY20 CY21E
Source: Company data, Reuters
More room to run on offshoring: Many of KPIT’s peers based in Europe and the US
run onshore models (staff sit on site with clients). Given that the majority of customer
OEMs are based in higher cost geographies (also in Europe and the US), this highly
onshore model has been a drag on margin potential for this group. KPIT however has
the advantage of having ~82-85% of its staff (contributing nearly 45% of revenue as of
FY21) operating out of a lower cost geography like India. Management has highlighted
that it sees further scope for offshoring among established customer projects and this
should support further momentum on profitability, in our view.
Limited supply of qualified talent could represent some drag in the margin
journey: The key area of focus for management is to build the right talent pool to
prepare the company for the rapidly changing technology landscape in the global
automotive industry. Most applicants have an electrical / software / mechanical
engineering background and are trained on multiple levels within the company. That said,
KPIT notes that the talent that it has been able to develop is in high demand and this
has resulted in a mid-teens attrition rate in recent years. While KPIT has been able to
retain senior leaders in the firm over more than a decade, a potential drag on profitability
in our view could be an increase in attrition at the mid and junior levels.
5 January 2022 15
Favorable positioning; 100% Auto tech focus, Top 3 in headcount

Exhibit 18: KPIT positioning vs auto tech peers
Data based on FY21 (year ending March 2021)
Company name Bertrandt Desay SV Akka Alten Navinfo KPIT Ricardo Thundersoft Tata Elxsi Arcsoft
Auto contribution (%) 75% 68% 33% 17% 100% 100% 29% 34% 36% 14%
Auto contribution
749 670 583 489 389 275 135 129 86 14
(absolute US$mn)
Auto Tech revenue

1 2 3 4 5 6 7 8 9 10
rank
Autonomous Infotainment Autonomous Autonomous Digital map Autonomous

Connected Auto Park Assist Connected Connected Connected Connected Autonomous Auto IoT Autonomous
Key products Electrification Driver Monitoring Electrification Electrification Autonomous Electrification Connected Middleware Connected Auto AI camera
Middleware Middleware Middleware Chipsets Middleware Electrification Autonomous Electrification
Software Software Software Software Software Software Software

Segment Autonomous Navigation Autonomous
integration integration integration integration integration integration integration
Europe / US /
US / Europe / US / Europe / US / Europe / India / Europe /
Geographic focus China Europe China + RoW China / Asia / China + RoW China
China Japan Japan US
Australia
Auto tech headcount

9,023 3,134 7,260 5,950 4,700 6,400 845 1,669 2,676 112
(GSe)
Year of establishment 1974 1986 1984 1988 2002 2003 1915 2008 1989 1994
Note: Auto tech headcount for companies (except KPIT and Navinfo) calculated by multiplying total reported headcount and auto segment revenue share. Color shading denote relative auto
exposure/headcount strength for companies.
We would like to thank our

KPIT well positioned among global peer group
China Telecom & 100% Auto end market focus offers favorable alignment with customers: The auto
Technology Analyst Verena tech space does have its own set of entry barriers in terms of domain knowledge and
Jeng for her contribution to
sales pitching capacity, due to the unique mechatronic capabilities required by service
this section
providers to get access to new business that comes up for contracting. In this context,
KPIT is one of the very few software integrators in the auto tech field which earns 100%
of its revenue from auto tech end markets. Most of its global peers have adopted a
diversified end market strategy. We believe KPIT’s 100% focus on auto end markets
underscores its focus on serving unique needs of automotive manufacturers and this
alignment, boosts the company’s capability to win incremental share of contracts in the
auto tech space going forward.
Top 3 position in auto tech headcount globally supportive of future market share
potential: Our calculation of dedicated auto tech headcount among global auto tech
companies indicates that KPIT’s dedicated auto headcount of ~6,400 is among the top 3
in comparison to the broader peer group, trailing only Bertrandt and Akka. Going
forward, we expect this strong pool of scarce talent to support KPIT’s efforts to gain
market share as the inflection in global CASE R&D spending takes shape over CY20 to
CY25.
5 January 2022 16
Exhibit 19: Our global autos research team expects a period of Exhibit 20: KPIT one of the few global engineering IT companies
rapid electrification between 2020 - 2040 led by Western Europe, with 100% autos exposure (FY2021)
USA, China
Auto software as % of Revenue

120%
100% 100%
100%
75%
80% 68%
60%
33% 34% 36%
40%
14% 15%
20%
0%
Source: Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
Outsourcing in middleware and integration likely to grow, though core OS

architectures may remain in-house: Judging from previous cycles of R&D outsourcing
observable in industries like pharmaceuticals (clinical trials outsourcing + drug
development related outsourcing), we believe that the non-core parts of technology
development are prone to more accelerated outsourcing than the core areas. For
perspective, drug manufacturers have consistently tried to shift their focus towards core
innovation and drug development and have been increasingly outsourcing non-core
functions like clinical trials management and manufacturing to more specialized and
scale players to variabilize their costs and extract more operational efficiencies from
specialized partners. In this context, only ~15-20% of auto tech functions today are
outsourced, though the rate of outsourcing in CASE R&D functions could be slightly
higher, in our view. While we are still in the early innings of electrification and
autonomous R&D spending, we believe that (1) more supporting functions in the auto
tech landscape will be outsourced in the future; and (2) more disruptors looking for a
path to operational efficiency will look to outsource parts of their auto tech spending
functions; as both sets of companies look to scale their ambitions in electrification and
autonomous driving functions. That said, we do not expect a high degree of outsourcing
in vehicle operating system architectures which are more core to OEMs’ ability to
differentiate the customer experience.
5 January 2022 17
Exhibit 21: KPIT has roughly 1% share in a fragmented space where Exhibit 22: KPIT has outgrown the auto segment revenues of most
outsourcing is likely to grow global peers over CY10 - CY18
Akka Alten, 1.4% Bertrand, 2.1%

Technologies, Thundersoft, Auto Tech Sales CAGR (CY10 - CY18)
Navinfo, 1.1% Desay
1.7% 0.4% 35%
Arcsoft, SV, 33%
0.0% 1.9%
30%
Others, 15.5% KPIT, 0.9%
25%
22%
20%
15% 15%
15%
Captive, 75%
9%
10%
5%
0%
Bertrandt Alten Navinfo KPIT Akka
Source: Company data, McKinsey, Goldman Sachs Global Investment Research Source: Company data, Reuters
Quick progress compared to peer group: KPIT which has been involved in the auto
tech space for more than a decade now, may have started later than some of its peers
(Bertrandt in the 1970s; Akka, Alten, Desay SV in the 1980s), but has been able to reach
~US$300mn (FY22 run rate) in auto tech revenue in a short space of time. The larger
peers who are on average ~2x larger have been in the business for nearly 40 years. For
more details on Chinese companies which are also part of KPIT’s global auto tech
competitive landscape, please refer China Software: Five structural Buys on rising
digitization trend.
Broad range of services: In comparison to some peers which are exclusively focused
on segments like autonomous or navigation, KPIT offers a broad range of CASE
solutions to customers including Infotainment, electrification, autonomous, mobility
solutions, vehicle diagnostics and other middleware solutions.
Geographic focus on US and Europe an advantage given faster electrification in

these markets: KPIT earns ~80% of its revenue from Europe and the US. Our global
autos team is of the view that EV penetration will pickup fastest in Europe and then the
US / China over 2020 to 2030. We believe the company’s headstart in having established
strong client relationships with large customers in these two geographies will help
accelerate medium term growth.
Next gen companies on KPIT’s radar include disruptors + chipmakers + Big tech + 5G
Telecom
KPIT’s experience in accelerating development of electrification and autonomous driving
programs at a broad range of automakers have given it the requisite domain knowledge
and expertise to now offer potentially nicher and more specialized offerings to disruptors
in this space, in our view. KPIT has highlighted that it is in the process of studying the
requirements of the disruptor set including companies like Lucid, NIO, Rivian, Tesla as
well as tech giants like Microsoft, Apple, Amazon among a broader group of close to 10
newer age companies interested in the mobility and autonomous space. Additionally,
KPIT notes that it is also working closely with semiconductor companies to help them
sharpen hardware-to-software integration with core automotive OEM clients. Given that
autonomous technology would need to be supported by a strong 5G connectivity
5 January 2022 18
backbone, we believe that telecom companies too over time would become more
interested in the CASE technology landscape.
Exhibit 23: Rapidly evolving mobility landscape could evoke interest from big tech and 5G telecom industries in addition to global mobility
disruptors and semiconductor manufacturers
KPIT - potential industries and key players
Range of future CASE technology clients can include Mobility Disruptors,

Semiconductor manufacturers, Tech giants and 5G Telecom Industry
Global Mobility disruptors

looking to scale up
profitably
Semiconductor
manufacturers looking to
integrate better with diverse 5G Leaders looking to
vehicle operating systems sharpen solutions for
Autonomous driving
technologies
Tech giants looking to

enhance cloud solutions for
connected vehicles +
increase supply chain
efficiency
Source: Company data, Data compiled by Goldman Sachs Global Investment Research
Long runway for growth in traditional customer base
Strategic approach to customer acquisition: While Electrification and Autonomous

driving have become buzzwords that have attracted interest from companies beyond
just the automotive and technology spheres, KPIT has made a conscious decision to
work with partners where there is scope for mutual value creation. On more than 90%
of its contracts, KPIT takes responsibility for development in the entire project. KPIT’s
focus has been to work with partners where both parties matter to each other, so that
both parties receive requisite mindshare in the development process. This has helped
the company avoid lower value commoditized engagements and build a strong
foundation for growth with existing customers.
Strong relationships with large OEMs: KPIT’s track record of consistent delivery in the
emerging field of electric mobility, among both automakers and T1 suppliers has helped
the company to build strong relationships with the world’s largest automakers that are
5 January 2022 19
behind the current surge in CASE R&D spending. We believe these relationships
represent (1) a strong foundation to pitch for new business in the broader ecosystem;
(2) sticky revenue potential among existing large customers.
Customers have muscle to invest through the cycle: KPIT’s customers which include
many of the top 20 Global OEMs as well as large T1 suppliers, are all longstanding
automotive manufacturers with strong balance sheets. These companies understand the
importance of investing in new product and powertrain projects through the cycle and
many have gone on record through the Covid-19 pandemic, reinforcing their intent to do
so. The balance sheet strength and regulatory as well as competitive factors behind the
ongoing switch to electric powertrains and autonomous vehicles, give us more
confidence that KPIT’s earnings prospects are relatively sticky and less prone to
disruption by short term demand variations in the event of demand peaks / trough in the
more cyclical global automotive sector.
Exhibit 24: KPIT has chosen to focus on its Top 21 strategic Exhibit 25: Auto tech companies’ topline growth has consistently
customers where the share of revenue and growth has been outpaced global OEM Sales and R&D growth indicating increasing
consistently increasing relevance of CASE spending
Strategic T21 Customer Revenue Share consistently CAGR (2010-18)

increasing (now 80%+) 25%
88%
22%
86% 20%
84% 15%
82% 15%
80%
78% 86% 86% 10%
85% 86% 85% 7%
84% 84% 84%
76% 83% 6%
80% 81%
80% 5%
74%
76% 76%
72%
0%
70% Top 20 Global Top 20 Global Auto Tech Group KPIT Technologies
OEM R&D OEMs Sales (cc gr)
Source: Company data Source: Company data
Auto tech companies including KPIT outgrowing top 20 OEM sales & R&D
spending: Our analysis of the topline and R&D spending at the top 20 global OEMs in
the pre pandemic era (CY10 to CY18) indicates the increasing importance of CASE R&D
spend as well as outsourcing in relevant functions like automotive software integration,
middleware, validation, testing and diagnostics. KPIT’s peer group of auto tech
companies (including Thundersoft, Bertrandt, Ricardo PLC, Alten, Akka and Navinfo) has
registered +14% annualized revenue growth over CY10 - CY18. Over this period, KPIT
grew its auto revenues by ~22% annually (in USD terms), indicating the company’s
relatively more rapid rise and prospects for further share gain in the auto tech space.
This compares with +7% R&D spending growth by the top 20 global OEMs and +6%
sales growth annually at these companies, suggesting the growing importance of the
shift towards CASE related spending areas in the broader R&D budgets of large
automakers.
Decade long experience supporting accelerated go to market in autonomous field:

KPIT’s experience in autonomous driving solutions for more than a decade has helped
the company establish a track record of cutting lead times between testing and
production phases of autonomous vehicle programs. For incumbents that are now
5 January 2022 20
devoting more R&D in this area, KPIT’s experience on diverse projects is supporting
faster go to market development time frames for customers in the autonomous vehicles
development field.
Recent deal wins testament to the company’s consistency in execution: KPIT has
been consistently winning a mix of both large (US$50mn+) and smaller deal wins from
the likes of Volkswagen, BMW, Honda, GM, Stellantis, Daimler (Mercedes-Benz),
Panasonic, Continental, ZF, Triumph, Paccar, Eaton and Cummins. The consistent pattern
of repetitive business wins from key customers gives us confidence in KPIT’s ability to
execute on existing client relationships offering a good foundation to pitch for new
customers in relevant focus areas.
Exhibit 26: Consistent momentum in recent deal wins a testament to KPIT’s execution capabilities
Smaller deals (#)
Deal Tenure
Quarter Customer Value (in US$ mn) (less than
(Years)
US$50mn)
2Q22 European Carmaker 1 - Electrification 52 5 5
1Q22 -
4Q21 -
3Q21 BMW - Battery charging 50+ 5 5
2Q21 5
1Q21 Global Tier 1 ADAS Supplier 60+ 5 5
4Q20 European T1 for Electrification 50+ 5 5
3Q20 5
2Q20 5
1Q20 5
4Q19 6
CV CASE spending a more recent phenomenon - KPIT to benefit

Given the more recent inflection in CV spending on electrification and autonomous
technologies in comparison to passenger vehicles where this transition in focus
occurred earlier, KPIT has been witnessing consistent deal activity in the CV space in
recent months. The company’s strong relationships with Ford, GM, Traton (Volkswagen
division that operates MAN, SCANIA, Omnibus brands), Daimler Trucks, Paccar and
Eaton represent a significant part of global pickup and long haul volumes, in our view
supports potential faster growth from commercial vehicles (presently ~24% of
revenues) over the medium term.
5 January 2022 21
Exhibit 27: We expect CV sales contribution to start increasing Exhibit 28: Commentary from global trucking majors also suggests
based on mix of recent deal wins inflection in R&D spending towards zero emission vehicle
platforms
Month Comments on CASE Technology Spending
Paccar has invested $7.3 bn in new vehicle programs, enhanced facilities and new tech
Oct-21
during past decade
CV Sales contribution to start increasing based R&D expenses are estimated to be $320mn to $330mn this year and increase to $350 mn
Paccar Oct-21
on recent contract wins to $400 mn next year
Next year's increased R&D spending will support clean diesel, zero-emissions,
Oct-21
autonomous and connected truck programs
29%
27% By 2025, the company will spend vast majority of R&D spending into zero emission
May-21
Daimler technologies
25%
Trucks Nov-21 For R&D spending, expect a slight increase coming from a low level in 2021
23% Nov-21 Expect to spend EUR 1.5bn to EUR 1.7 bn for R&D
21% 27% Jun-21 Will spend EUR1.6bn on electrification cumulatively by 2025

25% 25%
19% 23% Traton May-21 So far, have earmarked EUR1bn for e mobility investment
May-21 In 2025, will drop below EUR200mn on ICE R&D
17%
15% Eaton Mar-21
Going to spend US$3bn on developing sustainable product solutions over the next 10
years
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22E
4Q22E
1Q23E
2Q23E
3Q23E
4Q23E
1Q24E
2Q24E
3Q24E
4Q24E
1Q25E
2Q25E
3Q25E
4Q25E
Source: Company data * Red highlights denote key comments related to trajectory and nature of CASE and automotive
software spending targets going forward
Shared mobility customer set represents upside optionality in post pandemic world
The pandemic caused a slow down in this growth area for KPIT as cash flows and
investing capacity of shared mobility companies was temporarily pressured. KPIT is
planning to develop the underlying customer base in shared / micro-mobility platforms.
While it has so far worked with only a few players from this cohort and mostly in Asia to
date, we believe that in a post pandemic world as ride hailing / micro mobility volumes
collectively improve with an eventual reopening, KPIT’s focus on these customers
should start paying dividends over time. In the context of the shared mobility industry’s
push for a path to sustainable profitability, we expect experienced mobility tech
providers like KPIT to over time enjoy more success with shared mobility customers as
they continue investments to sharpen their platform technologies and optimize route
paths for their fleets.
5 January 2022 22
Exhibit 29: Pickup in global shared mobility industry revenues post Covid to support broader customer
software spend
Pickup in global shared mobility industry revenues post covid to support mobility customer
software spend (in $US bn)
UBER LYFT DASH yoy Revenue growth
80.00 60%
53% 51%
70.00 65 50%
42%
60.00 36% 40%
54
50.00 26% 30%

44
22%
20%
40.00 35 20%
30.00 25 10%
19
20.00 16 0%
14
9
10.00 -10%
-12%
0.00 -20%
CY17 CY18 CY19 CY20 CY21E CY22E CY23E CY24E CY25E
Hiring ambitions indicate underlying business strength
KPIT to be a net hirer in FY22

Company to be a net hirer in FY22: Relative to the FY21 employee headcount of
~6400 people, KPIT intends to hire ~1,000 college freshers, reinforcing the company’s
intentions to be a net hirer in FY22, providing comfort around the ongoing deal
momentum in the global EV and AV space.
Exhibit 30: KPIT is among the top 3 on dedicated auto tech Exhibit 31: KPIT to be a net hirer in FY22
headcount
Dedicated auto tech headcount at top 10 service providers (GSE) - as on
March 31, 2021
Dedicated Auto Tech Headcount (GSe) - FY21 KPIT to be a net hirer in FY22
10,000 8000
9,023 0 0
9,000 7000 0 0
1,503 1,069
8,000 7,260 6000 992 310 1,589
955
7,000 6,400 5000
5,950
6,000
4,700 4000
5,000 6614 7,125 7,000
3000 6,366
4,000 3,134
2,676 2000
3,000
1,669 1000
2,000
845 0
1,000 112
0
Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research
Top 3 position in auto tech headcount globally: We note that the company’s
5 January 2022 23
dedicated auto tech headcount (top 3) globally, trailing only Bertrandt and Akka,
positions it well going forward in the quest to pitch for and execute on new business
opportunities in this growing space. Acquiring and training qualified talent in this space
(software, mechanical and electrical expertise) is critical to the success of participants in
the CASE auto tech transition, and KPIT’s head start in building the right talent pool
should support the company’s growth objectives, in our view.
Annual attrition in ~15% range: KPIT operates in a highly skilled market which
requires employees to be skilled in both coding and mechanical / electrical / imaging
concepts associated with electric and autonomous vehicles and battery + charging
operations. In this context, KPIT has been working behind the scenes to help its people
expand their horizons and incentivize employees to grow with the company using ESOP
schemes for both critical and senior employees.
Bottom 5% of workforce is let go every year: KPIT has in the past has stated that it
rationalizes the bottom 5% of its employee count following annual performance
reviews.
Financial snapshot
Income statement
Growth: We forecast sales to grow at a +21% CAGR (FY22E-FY25E), driven by +19%
annualized growth in the passenger vehicle vertical (c. 75% of revenues) and faster
growth in the commercial vehicles segment (+24% annualized growth and ~23% of
revenue) where the company has seen more success with recent deal wins. As vehicles
become less mechanical and more electronic and electrical, we believe automotive
software from specialists like KPIT, is expected to play a more prominent role in the
future. Electronics cost per car is expected to reach ~50% in 2050 (per Deloitte), vs
27% in 2010 and 40% in 2020. Also, outsourcing within the auto tech space is presently
in the 15%-20% range and expected to rise gradually as OEMs focus more on core
vehicle architectures and involve partners in an increasing portion of middleware and
integration activities. CASE R&D spending among the top 10 global automakers in
Europe and the USA is expected to grow +31% and +19% annually over FY21 to FY26
according to our global teams. These two geographies represent ~80% of KPIT’s FY21
revenue. Separately, KPIT earns ~10% of its revenue from ICE related R&D which we
expect to decline annually over the medium term. We expect KPIT’s strong competitive
positioning and large talent pool in this highly skilled area (CASE) to support an increase
in wallet share among incumbent OEMs and new age automakers / semiconductor
companies that are beginning to enter the client base. A combination of these factors
drives our +21%/+21%/+20% revenue growth assumptions in FY23 / FY24 / FY25.
Margin outlook: We expect KPIT to expand EBITDA margin from 15.0% in FY21 to
19.9% in FY25E, driven by (1) ~80% of revenue mix in new technology areas; (2) More
sophisticated projects offering scope to add platform tools & accelerators; (3) More
room to run on offshoring. Nearly 65% of KPIT’s revenue line is spent on employee
costs. The inflection in KPIT’s end market of CASE related R&D spending offers scope
5 January 2022 24
for increased employee utilization, productivity and realization. Separately, a revival in

offshoring and lower pricing pressure in higher entry barrier projects all support KPIT’s
margin expansion potential in our view. We expect +220bps EBITDA margin expansion
to 19.9% in FY25 from 17.7% in FY22.
Cash flow statement

Capex: KPIT’s main investments are in people, R&D and talent creation, all of which are
mostly expensed. Capex plans include investments in equipment and office space,
where the company has sufficient infrastructure to support medium term growth. We
expect capex to track at roughly 2.5% of annual sales of the company.
Dividends: We expect KPIT to pay ~25% of net profits after tax as dividends on an
annual basis, in line with previously stated management commentary.
Balance sheet
Gearing: We forecast KPIT’s net debt (cash) / equity to reduce from -0.2x to -0.5x over
FY22-FY25E, and net debt (cash) / EBITDA ratio to reduce from -0.9x to -1.4x over the
same period as the company builds is cash balance for potential bolt-on transactions in
emerging auto tech areas, in our view.
Returns: As per our forecasts, ROE is expected to increase to 25% in FY25E vs 14% in
FY20. This improvement is largely driven by (1) a higher margin profile due to evolving
mix in favor of new tech areas like CASE technology led automotive development and
(2) relatively asset light business model focused more on talent development, R&D and
technological adoption.
5 January 2022 25
Exhibit 32: KPIT Technologies - Summary financials
Profit model (Rs mn) 3/21 3/22E 3/23E 3/24E Balance sheet (Rs mn) 3/21 3/22E 3/23E 3/24E
Total revenue 20,357.4 24,129.7 29,306.5 35,434.7 Cash & equivalents 2,857.7 3,473.8 4,351.8 6,943.2
Cost of goods sold (0.5) 0.0 0.0 0.0 Accounts receivable 3,083.5 4,361.7 6,102.1 7,369.3
SG&A (3,896.9) (3,821.1) (4,689.0) (5,492.4) Inventory -- 64.7 156.8 189.3
R&D -- -- -- -- Other current assets 7,016.0 7,016.0 7,016.0 7,016.0
Other operating profit/(expense) -- -- -- -- Total current assets 12,957.2 14,916.2 17,626.7 21,517.9
EBITDA 3,045.4 4,268.1 5,421.7 6,821.2 Net PP&E 2,086.0 1,666.8 1,325.8 995.7
Depreciation & amortization (1,331.7) (1,181.3) (1,301.0) (1,436.0) Net intangibles 1,298.6 1,919.1 2,191.8 2,471.7
EBIT 1,713.6 3,086.9 4,120.7 5,385.1 Total investments 0.0 0.0 0.0 0.0
Interest income -- -- -- -- Other long-term assets 3,333.6 3,333.6 3,333.6 3,333.6
Interest expense (172.5) (152.9) (137.7) (124.4) Total assets 19,675.4 21,835.8 24,477.9 28,318.9
Income/(loss) from uncons. subs. -- -- -- --
Others 195.1 443.0 474.9 531.5 Accounts payable 1,352.4 1,284.0 1,151.6 1,390.7
Pretax profits 1,736.2 3,376.9 4,458.0 5,792.2 Short-term debt 7.3 7.3 7.3 7.3
Income tax (305.2) (744.7) (1,025.3) (1,332.2) Other current liabilities 3,917.0 3,917.0 3,917.0 3,917.0
Minorities (9.7) -- -- -- Total current liabilities 5,276.7 5,208.3 5,075.8 5,315.0
Long-term debt 24.0 24.0 24.0 24.0
Net income pre-preferred dividends 1,421.3 2,632.3 3,432.6 4,460.0 Other long-term liabilities 377.0 377.0 377.0 377.0
Preferred dividends -- -- -- -- Total long-term liabilities 2,301.6 2,301.6 2,301.6 2,301.6
Net income (pre-exceptionals) 1,421.3 2,632.3 3,432.6 4,460.0 Total liabilities 7,578.2 7,509.8 7,377.4 7,616.5
Post-tax exceptionals 40.0 -- -- --
Net income 1,461.4 2,632.3 3,432.6 4,460.0 Preferred shares -- -- -- --
Total common equity 12,068.4 14,297.2 17,071.7 20,673.6
EPS (basic, pre-except) (Rs) 5.22 9.66 12.60 16.37 Minority interest 28.7 28.7 28.7 28.7
EPS (basic, post-except) (Rs) 5.37 9.66 12.60 16.37
EPS (diluted, post-except) (Rs) 5.37 9.66 12.60 16.37 Total liabilities & equity 19,675.4 21,835.8 24,477.9 28,318.9
DPS (Rs) 1.48 2.42 3.15 4.09
Dividend payout ratio (%) 27.6 25.0 25.0 25.0 BVPS (Rs) 44.31 52.49 62.68 75.90
Free cash flow yield (%) 21.5 1.3 1.4 2.6
Growth & margins (%) 3/21 3/22E 3/23E 3/24E Ratios 3/21 3/22E 3/23E 3/24E
Sales growth (5.6) 18.5 21.5 20.9 CROCI (%) 43.4 29.7 29.7 31.3
EBITDA growth 3.1 40.2 27.0 25.8 ROE (%) 13.0 20.0 21.9 23.6
EBIT growth (8.5) 80.1 33.5 30.7 ROA (%) 8.1 12.7 14.8 16.9
Net income growth (0.3) 80.1 30.4 29.9 ROACE (%) 15.5 23.0 25.8 30.0
EPS growth (0.3) 80.1 30.4 29.9 Inventory days 40,455.3 NM NM NM
Gross margin 100.0 100.0 100.0 100.0 Receivables days 67.9 56.3 65.2 69.4
EBITDA margin 15.0 17.7 18.5 19.3 Payable days 771,820.6 NM NM NM
EBIT margin 8.4 12.8 14.1 15.2 Net debt/equity (%) (23.4) (24.0) (25.3) (33.4)
Interest cover - EBIT (X) 9.9 20.2 29.9 43.3
Cash flow statement (Rs mn) 3/21 3/22E 3/23E 3/24E Valuation 3/21 3/22E 3/23E 3/24E
Net income pre-preferred dividends 1,421.3 2,632.3 3,432.6 4,460.0
D&A add-back 1,331.7 1,181.3 1,301.0 1,436.0 P/E (analyst) (X) 18.0 58.9 45.2 34.8
Minorities interests add-back -- -- -- -- P/B (X) 2.2 10.9 9.1 7.5
Net (inc)/dec working capital 1,678.9 (1,411.4) (1,964.8) (1,060.6) EV/EBITDA (X) 7.7 35.5 27.8 21.7
Other operating cash flow 1,844.1 152.9 137.7 124.4 EV/GCI (X) 1.9 10.0 8.2 7.1
Cash flow from operations 6,276.0 2,555.1 2,906.5 4,959.8 Dividend yield (%) 1.5 0.4 0.6 0.7
Capital expenditures (599.8) (482.6) (732.7) (885.9)

Acquisitions (225.6) (900.0) (500.0) (500.0)
Divestitures -- -- -- --
Others (4,183.1) -- -- --
Cash flow from investments (5,008.4) (1,382.6) (1,232.7) (1,385.9)
Dividends paid (common & pref) -- (403.5) (658.1) (858.2)

Inc/(dec) in debt (727.2) -- -- --
Common stock issuance (repurchase) 6.6 -- -- --
Other financing cash flows (448.1) (152.9) (137.7) (124.4)
Cash flow from financing (1,168.8) (556.4) (795.8) (982.6)
Total cash flow 98.8 616.1 878.0 2,591.4 Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.
5 January 2022 26
Exhibit 33: GS KPIT Technologies FY22E to FY27E forecasts

KPIT Technologies (Cons) Actual Actual Actual Estimate Estimate Estimate Estimate Estimate Estimate
in Rs. mn FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27
Sales 19,228 21,562 20,357 24,130 29,306 35,435 42,424 50,534 59,946
yoy gr 28% 12% -6% 19% 21% 21% 20% 19% 19%
CoGS -85 -1 0 0 0 0 0 0
as % of Sales -0.4% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Gross profit 21,813 20,541 24,573 29,781 35,966 43,018 51,216 60,726
Gross margin 99.6% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Other expenses -4,236 -3,897 -3,821 -4,689 -5,492 -6,364 -7,428 -8,737
as % of Sales -19.6% -19.1% -15.6% -15.7% -15.3% -14.8% -14.5% -14.4%
yoy gr -8% -2% 23% 17% 16% 17% 18%
Wages -14,287 -13,415 -16,040 -19,196 -23,121 -27,627 -32,908 -39,038
as % of Sales -66.3% -65.9% -66.5% -65.5% -65.3% -65.1% -65.1% -65.1%
yoy gr -6% 20% 20% 20% 19% 19% 19%
EBITDA 2,954 3,045 4,268 5,422 6,821 8,434 10,197 12,171

EBITDA margin 13.7% 15.0% 17.7% 18.5% 19.3% 19.9% 20.2% 20.3%
yoy gr 9% 18% 5% 4% 3% 2% 1%
D&A -1,080 -1,332 -1,181 -1,301 -1,436 -1,585 -1,750 -1,931

as % of Sales -4.9% -6.5% -4.8% -4.4% -4.0% -3.7% -3.4% -3.2%
EBIT 1,873 1,714 3,087 4,121 5,385 6,848 8,447 10,240

EBIT margin 8.6% 8.3% 12.6% 13.8% 15.0% 15.9% 16.5% 16.9%
yoy gr -9% 80% 33% 31% 27% 23% 21%
Finance costs -198 -173 -153 -138 -124 -112 -102 -92
Other income 355 336 184 443 475 532 594 682 779
as % of Sales 1.8% 1.6% 0.9% 1.8% 1.6% 1.5% 1.4% 1.4% 1.3%
PBT post-exceptionals 1,806 1,776 3,377 4,458 5,792 7,330 9,028 10,927
margin 8.2% 8.6% 13.7% 15.0% 16.1% 17.0% 17.6% 18.0%
Tax expense (post exceptionals) -338 -305 -745 -1,025 -1,332 -1,686 -2,076 -2,513
Tax rate -17.8% -17.7% -22.1% -23.0% -23.0% -23.0% -23.0% -23.0%
Minority interest -2 -10 0 0 0 0 0 0

MI as % of PATMI -0.1% -0.7% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Net income (adj) 1,543 1,421 2,632 3,433 4,460 5,644 6,951 8,414
PAT margin (adj) 7.0% 6.9% 10.7% 11.5% 12.4% 13.1% 13.6% 13.9%
yoy gr -8% 85% 30% 30% 27% 23% 21%
Post tax exceptionals 77 -40 0 0 0 0 0 0
EPS (Basic) - pre exceptionals 5.7 5.3 9.8 12.8 16.6 21.0 25.8 31.3
EPS (Diluted) pre-exceptionals 5.7 5.2 9.7 12.6 16.4 20.7 25.5 30.9
Share count (Basic) 269 269 269 269 269 269 269 269 269
Share count (Diluted) 272 272 272 272 272 272 272 272 272
Dividends -202 -269 -404 -658 -858 -1,115 -1,411 -1,738 -2,103
Dividend Payout Ratio 17% 28% 25% 25% 25% 25% 25% 25%
5 January 2022 27
Exhibit 34: GSe Segmental forecasts for KPIT Technologies

FY22E to FY27E
KPIT Technologies Actual Actual Estimate Estimate Estimate Estimate Estimate Estimate FY22 - FY25
Segment revenues, in Rs. mn FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 CAGR
By Vertical (Sales in US$mn )
Passenger Cars 228 211 246 297 355 420 495 581 19%
yoy gr 12% -7% 17% 20% 19% 18% 18% 17%
as % of Total 75% 77% 75% 74% 73% 72% 71% 71%
Commercial Vehicles 69 60 80 102 127 156 190 232 25%
yoy gr 20% -13% 34% 26% 25% 23% 22% 22%
as % of Total 23% 22% 24% 25% 26% 27% 27% 28%
New Mobility 3 2 0 0 0 0 0 0
yoy gr 8% -24%
as % of Total 1% 1% 0% 0% 0% 0% 0% 0%
Others 4 2 3 4 5 7 9 10
yoy gr -41% -59% 93% 30% 30% 30% 25% 23%
as % of Total 1% 1% 1% 1% 1% 1% 1% 1%
Revenue from operations (in US$mn) 304 275 330 403 487 583 694 823 21%
yoy gr 12% -10% 20% 22% 21% 20% 19% 19%
USD / INR 70.97 74.09 73.14 72.79 72.79 72.79 72.79 72.79
yoy gr 0% 4% -1% 0% 0% 0% 0% 0%
By Vertical (Sales in Rs mn )
Passenger Cars 16,193 15,635 18,018 21,606 25,815 30,587 36,057 42,327 19%
yoy gr 12% -3% 15% 20% 19% 18% 18% 17%
Commercial Vehicles 4,892 4,448 5,884 7,407 9,238 11,342 13,856 16,860 24%
yoy gr 20% -9% 32% 26% 25% 23% 22% 22%
Others 280 119 227 293 381 496 620 759
yoy gr -41% -57% 91% 29% 30% 30% 25% 23%
Revenue from operations (in Rs mn) 21,561 20,358 24,129 29,306 35,435 42,424 50,534 59,946 21%
yoy gr 12% -6% 19% 21% 21% 20% 19% 19%
as % of Total
Passenger Cars 75% 77% 75% 74% 73% 72% 71% 71%
Commercial Vehicles 23% 22% 24% 25% 26% 27% 27% 28%
New Mobility 1% 1% 0% 0% 0% 0% 0% 0%
Others 1% 1% 1% 1% 1% 1% 1% 1%
GSe vs consensus
We expect KPIT to grow sales / EBITDA / EPS by +21% / +26% / +29% annually over
FY22 to FY25. Our FY24E Sales / EBITDA / EPS estimates are +4% / +14% / +11%
above consensus driven by (1) more optimistic top line forecasts resulting from our
bottoms up work around CASE R&D spends at large KPIT customers including both
incumbents and challengers; (2) our relatively higher confidence in KPIT’s margin
potential stemming from analysis of relatively higher entry barrier work, better
headcount utilization and offshoring potential; and (3) higher assumptions in scope for
use of platforms, tools and accelerators in more sophisticated practices where the
company also faces less pricing pressure.
5 January 2022 28
Exhibit 35: GSe vs Consensus

in Rs. mn GS vs Consensus GSe BBG Consensus
Year FY21 FY22 FY23 FY24 FY22 FY23 FY24 FY22 FY23 FY24
Sales 20,357 -1.4% 0.9% 3.5% 24,130 29,306 35,435 24,471 29,051 34,223
yoy gr 19% 21% 21% 20% 19% 18%
EBITDA 3,045 -1.1% 6.5% 13.6% 4,268 5,422 6,821 4,314 5,091 6,005
margin 15.0% 6 bps 98 bps 170 bps 17.7% 18.5% 19.3% 17.6% 17.5% 17.5%
yoy gr 40% 27% 26% 42% 18% 18%
EPS (in Rs.) 5.4 -1.6% 3.8% 11.0% 9.7 12.6 16.4 9.8 12.1 14.8
yoy gr 80% 30% 30% 83% 24% 21%
Source: Goldman Sachs Global Investment Research, Bloomberg
Valuation: Sustainable high 20% EPS CAGR at discount to peers
KPIT trades at 51x fwd P/E vs its closest Indian peer Tata Elxsi at 75x and the global
peer group at 63x. We expect KPIT’s valuation discount to narrow given the company’s
superior EPS growth profile vs Indian peers and comparable high 20% range of EPS
growth potential vs global peers (Bertrand, Akka, Alten, Thundersoft, Desay SV, Navinfo).
We expect KPIT to grow sales / EBITDA / EPS by +21% / +26% / +29% annually over
FY22 to FY25. Our FY24 EPS estimate is 11% above consensus. We like the longer
term growth prospects even beyond our forecast period, led by strong visibility in global
CASE R&D spending as well as KPIT’s favorable positioning vs peers in the pursuit of
more sophisticated projects within this realm. For these reasons, we initiate with a Buy
rating (add to the Asia Pacific Conviction List) with a 12-month TP of Rs1,040 implying
~75% upside.
Exhibit 36: Global auto tech comp table

2-yr fwd 2-yr fwd 2-yr fwd 1-yr fwd 1-yr fwd Fwd
USD bn Revenue EBITDA EPS EBITDA 1-yr fwd Net debt / Fwd EV /
Company Country Mkt Cap growth growth growth margin ROE EBITDA P/E EBITDA
Alten France 6.2 9% 10% 11% 12% 15% -0.7x 24.4x 12.4x
Akka Technologies Belgium 1.7 5% 17% 38% 9% 11% 3.4x 21.1x 12.5x
Bertrandt Ag Germany 0.7 5% 13% 25% 11% 8% 0.9x 13.9x 5.5x
Ricardo Plc UK 0.4 5% 8% 13% 14% 12% 1.2x 12.8x 5.5x
Europe Median 1.2 5% 12% 19% 11% 11% 1.1x 17.5x 9.0x
Desay SV China 12.2 34% 44% 40% 11% 19% -0.1x 80.5x 58.7x
Thundersoft China 9.2 39% 58% 50% 19% 19% -1.8x 65.9x 54.9x
Navinfo Company China 5.9 25% 46% 71% 11% 4% -14.3x 101.7x 70.6x
China Median 9.2 34% 46% 50% 11% 19% -1.8x 80.5x 58.7x
KPIT Technologies India 2.2 21% 26% 30% 18% 22% -0.8x 51.2x 31.9x
Tata Elxsi India 4.9 18% 13% 18% 27% 33% -1.9x 75.0x 50.7x
L&T Technology Services India 7.9 18% 17% 19% 21% 26% -0.8x 52.5x 36.2x
India Median 4.9 18% 15% 18% 24% 29% -1.3x 63.8x 43.5x
Priced as of Dec 31, 2021.
Source: Datastream, Goldman Sachs Global Investment Research
5 January 2022 29
Exhibit 37: KPIT trades at a ~20% discount on P/E vs relevant Indian Exhibit 38: KPIT trades above its own limited historical P/E as a
peers (L&T Tech, Tata Elxsi) public company ..
fwd P/E based on I/B/E/S consensus .. ahead of upcoming inflection in addressable market growth
KPIT trades at a discount to its Indian peer group KPIT P/E fwd vs own history
Indian Peer group fwd P/E KPIT fwd P/E KPIT fwd P/E Hist avg +1 SD -1 SD
70.0x 60.0x
63.8x
60.0x 50.0x 51.3x
50.0x 51.3x
40.0x
40.0x
30.0x
30.0x 27.7x
20.0x 18.8x
20.0x
10.0x 10.0x 9.9x
0.0x 0.0x
Source: Datastream Source: Company data, Goldman Sachs Global Investment Research
Exhibit 39: KPIT trades cheap relative to EPS growth opportunity vs

Indian auto tech exposed names
P/E fwd vs EPS growth comparison vs India Auto tech

exposed names
80.0x 30% 35%
70.0x 30%
60.0x 25%
19%
50.0x 18%
16% 20%
40.0x
15%
30.0x
20.0x 10%
10.0x 5%
19.0x 51.3x 52.5x 66.9x
0.0x 0%
Cyient KPIT LTTS Tata Elxsi
Fwd P/E EPS CAGR (2 yr fwd) (RHS)
Given KPIT’s high long term growth potential and strong net cash position, we value the
company using an 85:15 DCF:M&A methodology. Our M&A rank of 2 implies a
15%-30% probability of KPIT being acquired and therefore, we add a 15% weighting to
our 12-m target price from our M&A valuation for the company. Our M&A valuation is
based on the peak multiples that KPIT’s local and global peers have traded at over the
past 5 year period, applied to Q5 to Q8 EPS estimates. The remaining 85% weighting in
our 12-m TP comes from a DCF. We choose DCF given the good visibility in KPIT’s longer
term growth profile beyond the forward earnings year as well as its relatively limited
history of trading as a pure play auto tech company (since April 2019). In our DCF we
assume a WACC of 9.7% (based on 7.5% cost of debt, 0.7 beta, 11.1% expected market
return and 23% tax rate) and a terminal growth rate of 4%. Our blended 12-month TP of
Rs1,040 implies +75% upside.
5 January 2022 30
Exhibit 40: We assign a blended Rs1,040 DCF & M&A based target Exhibit 41: KPIT M&A multiple of 75x in TP methodology is based on
price for KPIT Technologies past 5 year peak fwd P/E of global peers
GS target price methodology - KPIT Technologies
KPIT Technologies Valuation Methodology Fwd P/E Fwd P/E
Implied Weighted 5 year
Valuation components Weight
value value
Company Region Current
peak
DCF Valuation 85% 1,010 860
Bertrant Europe 20x 16x
M&A Valuation 15% 1,230 180
Target price per share (Rs) 100% 63.5x 1,040 Alten Europe 25x 24x
Implied Q5 to Q8 Akka Europe 53x 28x

M&A valuation P/E
Valuation EPS
DCF implied value 1,010 61.7x 16.4 Tata Elxsi India 75x 68x
M&A Implied multiple 1,230 75.0x 16.4
Desay SV China 89x 73x
Navinfo China 98x 82x
Thundersoft China 114x 63x
Median fwd P/E of

75x
KPIT's Global Peers
Source: Goldman Sachs Global Investment Research Source: Datastream, Goldman Sachs Global Investment Research
5 January 2022 31
Exhibit 42: We use a DCF on 85% of our TP valuation weighting for KPIT
DCF implied value of Rs1,010 per share
Discount rate
Implied valuation sensitivity on WACC vs Terminal growth
Cost of Debt 7.5% WACC ------------------------------------------------------->
Tax rate 23.0% 1,010 9.00% 9.25% 9.50% 9.75% 10.00% 10.25%
Post tax Cost of Debt 5.8% 4.25% 630 600 570 540 510 490
Weight of Debt 0% 4.50% 650 610 580 550 520 500
4.75% 670 630 590 560 530 500
Cost of Equity 5.00% 690 640 610 570 540 510
Risk free rate 6.5% 5.25% 710 660 620 590 550 520
Beta 0.7 5.50% 730 680 640 600 570 530
Equity risk premium 4.6%
Cost of equity 9.7%
Weight of Equity 100%
WACC 9.7%
Terminal growth 4.0%
Free Cash Flow to the Firm

in Rs mn
Year 0 1 2 3 4 5 6 7 8 13 19 23 24 25 Terminal
Fiscal years 2020 2023 2024 2025 2026 2027 2028 2029 2030 2035 2041 2045 2046 2047 Value
Sales 26,440 29,306 35,435 42,424 50,534 59,946 70,812 83,294 97,559 199,861 411,422 523,563 556,897 579,173
Growth (yoy) 634% 21.5% 20.9% 19.7% 19.1% 18.6% 18.1% 17.6% 17.1% 14.4% 10.9% 6.4% 5.4% 4.0%
EBIT 3,391 4,596 5,917 7,442 9,130 11,019 13,370 15,935 18,762 37,037 71,305 85,767 89,835 92,270
EBIT margin 12.8% 15.7% 16.7% 17.5% 18.1% 18.4% 18.9% 19.1% 19.2% 18.5% 17.3% 16.4% 16.1% 15.9%
(1-tax) 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77% 77%
NOPAT 2,611 3,539 4,556 5,731 7,030 8,485 10,295 12,270 14,447 28,518 54,905 66,040 69,173 71,048
Depreciation 1,301 1,436 1,585 1,750 1,931 1,770 2,082 2,439 4,997 10,286 13,089 13,922 14,479
as a % of sales 4.4% 4.1% 3.7% 3.5% 3.2% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
Capex -733 -886 -1,061 -1,263 -1,499 -1,770 -2,082 -2,439 -4,997 -10,286 -13,089 -13,922 -14,479
as a % of sales -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5% -2.5%
Working Capital changes -1,965 -1,061 -1,209 -1,406 -1,631 -1,926 -2,266 -2,654 -5,437 -11,193 -14,243 -15,150 -15,756
as a % of sales -6.7% -3.0% -2.9% -2.8% -2.7% -2.7% -2.7% -2.7% -2.7% -2.7% -2.7% -2.7% -2.7%
FCFF 2,611 2,142 4,045 5,046 6,110 7,286 8,369 10,004 11,793 23,081 43,712 51,797 54,023 55,292 1,002,792
Discount rate multiplier 100% 100% 91% 83% 76% 69% 63% 57% 52% 33% 19% 13% 12% 11% 11%
Discounted FCFF 2,611 2,142 3,687 4,190 4,624 5,025 5,260 5,730 6,155 7,571 8,212 6,711 6,378 5,949 107,892
Total discounted FCFF 271,316

Net debt / (cash) -4,320
Minorities interest 29
Equity value 275,607
# of shares (mn) 272.4
Implied share price (Rs.) 1,010
Source: Goldman Sachs Global Investment Research
Local and global case studies indicate upward valuation re-rating potential for similar
growth stories
Given our bullish view of KPIT’s longer term growth prospects, we compare the
company’s valuation profile vs other longer term growth stories that have played out in
the past decade. We look more closely at large TAM stories where initially fragmented
market share structures were exploited by successful companies that were able to
execute consistently. Specifically in India, companies like Avenue Supermarts, Bajaj
Finance, Titan, Jubilant Foodworks, Mindtree Limited and Dr Lal PathLabs have been
particularly successful over the past decade. The median EPS growth for this basket has
been +27% annualized over FY11 to FY21 and these stocks presently trade at a P/E fwd
of ~75x. We expect KPIT to deliver similar EPS growth over the next 3 to 5 years, and
relative to the company’s present P/E fwd multiple of ~51x, we therefore see scope for
re-rating upwards if the company is able to deliver consistently on its large addressable
market opportunity.
5 January 2022 32
Exhibit 43: KPIT trades cheaper than similar underpenetrated fast growth and large TAM stories in India
which have played out in the past decade
Valuation discount for KPIT understandable given smaller size earlier phase of evolution
FY11 to FY21 FY11 to FY21 Fwd P/E Fwd P/E Rerating
Indian Companies Sales growth EPS growth FY11** Current %
Avenue Supermarts 28% 33% 61.0x 128.3x 110%
Bajaj Finance 34% 27% 9.3x 44.2x 373%
Titan 16% 19% 32.3x 87.1x 169%
Jubilant Foodworks 25% 23% 45.0x 75.7x 68%
Mindtree Ltd 18% 27% 12.6x 46.7x 271%
Dr Lal PathLabs 21% 27% 52.4x 73.7x 41%
Median (Fast Growth &

23% 27% 38.7x 74.7x 169%
Large TAM Basket)
FY22E to FY25E FY22E to FY25E Fwd P/E

Sales growth EPS growth Current
KPIT Technologies 21% 29% 51.3x
** or at time of listing
2011 to 2020 2011 to 2020 Fwd P/E Fwd P/E Rerating

Global Companies Sales growth EPS growth 2011** Current %
Globant 28% 16% 15.0x 67.8x 352%
EPAM 23% 23% 14.7x 60.1x 309%
Median (Fast Growth &

26% 20% 14.9x 64.0x 330%
Large TAM Basket)
We also looked more closely at global companies like EPAM and Globant which have
been involved for nearly two decades in the broader engineering services and
digitization areas. Both companies have been able to deliver consistent 20%+
annualized top line and EPS growth over the previous decade and this has supported
steady upward re-rating in their valuation multiples over this time frame.
5 January 2022 33
Exhibit 44: EPAM - a US based engineering services and software solutions company has benefitted from upward re-rating in valuation
following consistent execution with 20%+ topline and EPS growth over a long timeframe
5 January 2022 34
Exhibit 45: Globant - a Latin America based digitization company (not entirely engineering services) has also benefitted from upward
re-rating in valuation due to its consistent 20%+ toline growth exectution
Catalysts
Going forward, we see the following events as potential key catalysts for the stock; (1)
Potential above consensus growth in EV sales momentum in various parts of the globe
as decorbonization and electrification themes gain momentum; (2) Evolution of
partnerships with EV disruptors from the current pilot stage to more full fledged projects
as disruptors look to scale profitably; (3) Further regulatory updates incentivising EV and
autonomous vehicle platforms in more countries; (4) Deal wins in excess of US$50mn
with specific customers tend to boost medium term revenue visibility for a company of
KPIT’s present size; (5) Pace of progress in lead up to US$500mn revenue watermark
which was revenue level of the company pre-demerger in 2019.
5 January 2022 35
Exhibit 46: KPIT Technologies - Key catalysts to watch out for

Timeframe Event Description
Global automakers are becoming more active in planning EV sales forecast for
Increase in EV sales / R&D spending 2030 and beyond. Any guidance raises by key customers on EV sales penetration
FY22-FY23
targets or volume targets for future planning periods would support CASE R&D spending
for key projects in which KPIT can participate
While KPIT has thus far worked mostly with large incumbents in the global auto
industry, the company is incubating plans to onboard some of the well funded
FY23 Potential partnerships with disruptors disruptors including names like Lucid, NIO, Rivian and Tesla. Onboarding any of
these clients or similar companies represents an additional stream of revenues
over and above what is already a strong TAM among the incumbent group
Following the lead taken by Europe to ban ICE vehicle sale starting 2035, it is
Potential advancement of ICE ban
possible that more developed countries might think of advancing their own ICE
FY23 announcements by more developed
vehicle sales bans which would represent a catalyst for electrification exposed
countries
stocks
Probability of large deal wins (US$50mn+) remains fairly high in our view given
FY23 Large deal wins KPIT's headstart in this field over competitors and the ongoing inflection among
customers in CASE R&D spending
KPIT management took a hard call to demerge the Auto Tech business into the
present listed entity shrinking the business size from a legacy size of ~US$500mn,
though focus on the Auto tech vertical became sharper. We believe the point at
FY24-FY25 US$500mn revenue watermark
which the company gets back to this US$500mn revenue benchmark (potentially a
5 year period post demerger) would represent market validation of the broader
strategy of the company
Key downside risks
Attrition among skilled workforce: KPIT’s operations require recruitment, training and
development of highly skilled manpower with knowledge of electrical, mechanical and
software domains. Qualified talent in this field is in scarce supply. If attrition (currently
~15% per annum) picks up due to competitive forces both from clients and peers in the
industry, this could represent some disruption to KPIT’s revenue and margin trajectory,
in our view.
Rapid shifts in powertrain technologies: The auto tech space is witnessing rapid
technological shifts notably in battery chemistry used for electric powertrains,
autonomous imaging technologies, advances in vehicle to vehicle connectivity and new
evolving powertrains based on hydrogen fuel cells and solid state batteries. Failure to
keep up with these rapidly evolving technologies could represent a risk to the growth of
the company.
In-housing of technological functions by customers: If customer OEMs decide to

increase their fixed cost spending on technology and build larger in-house teams to
develop electrification and autonomous driving projects, or consolidate tech activities
5 January 2022 36
among a smaller group of technology vendors, any consequent impact on outsourcing

could represent a drag on revenue growth for KPIT.
Visa regulations at customer locations: Nearly 55% of KPIT’s revenue comes from
the ~15-18% of total staff, who are located onsite at client offices across the globe.
While the onsite headcount is more revenue accretive, they are margin dilutive vs the
offshore headcount. Drastic visa regulations that force higher onshore headcount could
therefore represent a drag on KPIT’s profitability.
Vendor consolidation by OEMs: If OEMs decide to consolidate a large part of their

software projects among a smaller list of technology vendors, KPIT being a relatively
smaller player in the broader global technology landscape, might face some headwinds
in the relatively less sophisticated project domains (testing, validation, cloud, basic
connectivity).
Obsolescence of domain knowledge: A rapid change in powertrain or autonomous

technology, if it catches KPIT’s technical teams off guard could represent some risk to
deal wins and partnership dynamics, should KPIT be unable to evolve itself in line with
the updated domain knowledge requirements.
INR appreciation vs USD: Nearly 95% of KPIT’s revenue is from non INR currencies.
~40% of revenue is denominated in USD. Appreciation of the INR against major
currencies of key geographies including the EUR, GBP and JPY would therefore
represent revenue and margin pressure for the company as majority of the cost is
contracted in INR terms.
+75%/+114%/-26% return potential in Base/Bull/Bear cases
We model potential divergences from our base case assumptions and assess
consequent benefit / impact to KPIT’s earnings potential and valuation in our Bull / Bear
and Base case scenarios.
Base case (75% upside): We assume 20.9% sales growth in the Q5 to Q8 period,
19.3% EBITDA margin and a 63.5x blended P/E multiple. This scenario incorporates
19%/25% yoy growth in passenger cars / commercial vehicles in FY24E. The 19.3%
EBITDA margin for the Q5 to Q8 period is based on an assumption that current levels of
~15% attrition continues. We also expect that KPIT continues to make progress on
higher entry barrier projects which have less price competition and gradually increases
offshoring where the company sees more room for utilization and efficiency.
Bear case (26% downside): We assume 15.9% sales growth in the Q5 to Q8 period,
EBITDA margin for the Q5 to Q8 period is based on an assumption that attrition levels
accelerate to ~20% and this has its own set of negative implications to pace of project
delivery and operating leverage potential. We also factor in a scenario where KPIT’s
share of higher entry barrier projects slows down and a reversal in offshoring impacts
5 January 2022 37
the room for utilization and efficiency improvements. Our Bear case assumes a 35%
lower P/E multiple in line with the lower end of recent trading multiples for KPIT’s peers.
Bull case (114% upside): We assume 23.9% sales growth in the Q5 to Q8 period,
EBITDA margin for the Q5 to Q8 period is based on an assumption that attrition levels
decelerate to below 10% and this has its own set of positive implications to pace of
project delivery and operating leverage potential. We also factor in a scenario where
KPIT’s share of higher entry barrier projects increases and any further improvement in
offshoring enhances the room for utilization and efficiency improvements. Our Bull case
assumes a 10% higher P/E multiple in line with the higher end of recent trading
multiples for KPIT’s peers.
Exhibit 47: KPIT Technologies scenario analysis

Historical
Bear Base Bull
Context
FY11 to
Q5 to Q8 Q5 to Q8 Q5 to Q8 Remarks
FY20
Sales 33,969 35,435 36,314

yoy gr 15.9% 20.9% 23.9% 27.5% Base case: Assumes that KPIT gets +21%
topline growth compared to large Global
Assumptions Automaker CASE R&D spending growth of
+25% and attrition levels remain around 15%
PAT 2,917 4,460 4,934 range.
margin 8.6% 12.6% 13.6% 7.0%
Bear case: Assumes that KPIT witnesses 500
EBITDA 4,841 6,821 7,354 bps slower topline growth vs base case and
margin 14.3% 19.3% 20.3% 13.7% margins are impacted by operating delevrage
and workforce attrition beyond 20%. Apply 35%
Applied P/E 41.3x 63.5x 69.9x 18.4x lower P/E in Bear case.
Premium / Discount -35% 0% 10%
Bull case: Assumes that KPIT gets 300bps
Equity Value 120,421 283,280 344,711 faster topline growth vs Base case and margins
# shares 272 272 272 benefit from operating leverage and attrition
levels below 10%. Apply 10% higher P/E in Bull
Implied valuation 440 1,040 1,270 case.
Upside / Downside -26% 75% 114%
M&A Framework: Rank of 2 (15%-30% probability of acquisition)
Across our coverage universe, we examine stocks using an M&A framework,

considering both qualitative and quantitative factors to incorporate the potential that
certain companies could be acquired at a premium to current share prices. We then
assign an M&A rank as a means of scoring companies under our rated coverage from 1
to 3, with 1 representing high (30%-50%) probability of the company becoming an
acquisition target, 2 representing medium (15%-30%) probability and 3 representing low
(0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A
rank of 3 is considered immaterial and therefore does not factor into our price target,
and may or may not be discussed in research.
5 January 2022 38
We consider mostly quantitative factors to evaluate the M&A probability for each
company such as market cap, free float, ownership structure, financial strength, returns,
top-line growth and valuation. We then allocate scores between 1 and 3 (relative to the
broader India Autos industry), 1 being a favorable M&A input score on the factor and 3
being an unfavorable M&A input on the factor. The individual factor scores are then
averaged out to obtain a final M&A score between 1 and 3. Within this context, KPIT
Technologies scores favorably as an M&A target especially on metrics like growth,
financial strength and size though at a relatively higher valuation compared to the
average listed stock in India.
Exhibit 48: KPIT Technologies - M&A rank of 2 (15% to 30% probability of being acquired)
Company M&A Promoter ownership Free Float Mkt Cap Sales (FY22E-FY25E) EBITDA (FY22E-FY25E)
name Rank % Score % Score USD mn Score CAGR Score CAGR Score
KPIT Technologies 2 40% 3 43% 3 2,231 1 21% 1 25% 1
Company M&A EPS (FY22E-FY25E) CROCI (FY23E) PE (FY23E) Net debt / EBITDA FCF Yield (FY23E)
name Rank CAGR Score % Score x Score x Score % Score
KPIT Technologies 2 29% 1 30% 1 48.3x 3 -0.8x 2 1% 2
Promoter ownership: We believe a higher strategic holding by founder promoters

(score of 1 for a below 20% stake held, score of 2 for 20%-30%, and score of 3 for 30%
or above) implies a lower M&A probability.
Free float: We believe a relatively lower free float (score of 1 for above 60%, score of 2
for 50%-50%, and score of 3 for below 50%) implies a lower M&A probability.
Market cap: We believe a relatively lower market cap (score of 1 for below US$3bn,
score of 2 for US$3bn-US$5bn and score of 3 from US$5bn and above) implies a high
M&A probability.
Sales growth: We believe a relatively high sales growth (score of 1 for above 20%,
score of 2 for 15%-20% and score of 3 for below 15%) implies a high M&A probability.
EBITDA growth: We believe a relatively high EBITDA growth (score of 1 for above 20%,
score of 2 for 15%-20% and score of 3 for below 15%) implies a high M&A probability.
EPS growth: We believe a relatively high EPS growth (score of 1 for above 20%, score
of 2 for 15%-20% and score of 3 for below 15%) implies a high M&A probability.
CROCI: We believe a relatively high CROCI (score of 1 for above 25%, score of 2 for
20%-25% and score of 3 for below 20%) implies a high M&A probability.
P/E: We believe a relatively high P/E (score of 1 for below 5x, score of 2 for 5x to 10x
and score of 3 for 10x and above) implies a low M&A probability.
Net debt / EBITDA: We believe a relatively low net debt / EBITDA position (score of 1
for below -2.0x, score of 2 for -2.0x to 0.0x and score of 3 for 0.0x and above) implies a
moderate M&A probability.
FCF yield: We believe a relatively good moderate cash flow yield (score of 1 for below
5% and above, score of 2 for 1% to 5% and score of 3 for below 1%) implies a
moderate M&A probability.
5 January 2022 39
KPIT 3Q22 Preview - GSe vs consensus
Since 2Q results reported on Nov 1, 2021, KPIT shares have rallied ~103% due to a
combination of (1) FY22 revenue growth guidance increase to 18% to 20% from mid
teens; (2) FY22 EBITDA margin guidance increase to 17.5%+ from 16.5% to 17.0%; (3)
Two more significant deal win announcements with European carmakers and T1
suppliers; and (4) Successful fundraising by prospective clients like Rivian; and (5)
Further increase in EV sales penetration / R&D spending targets for 2030 among large
global automakers like Toyota, Hyundai, Nissan, Volvo and Volkswagen.
Exhibit 49: KPIT Technologies - GSe vs BBG Consensus

in Rs. mn 3Q22E
KPIE.BO 3Q21 2Q22 GSe BBG Cons Variance yoy qoq
Sales 5,172 5,909 6,067 6,172 -2% 17% 3%
EBITDA 829 1,041 1,080 1,036 4% 30% 4%
EBITDA margin 16.0% 17.6% 17.8% 16.8% 101 bps 177 bps 19 bps
Net income (adj) 402 651 647 598 8% 61% -1%
Source: Bloomberg, Goldman Sachs Global Investment Research
Exhibit 50: The INR has appreciated relative to EUR, JPY, GBP though
slightly depreciated vs the USD in the Dec 2021 quarter
0.0%
-0.3%
Currency moves vs the USD
-1.0%
-1.2%
-2.0% -1.5%
-1.9%
-3.0% -2.3%
-2.6%
-4.0%
-5.0%
-6.0%
-6.0%
-7.0%
-7.0%
-8.0%
Source: Goldman Sachs Global Investment Research, Datastream
Heading into the 3Q22 print, expected in the last week of January 2022, in addition to
favorable updates in KPIT’s end market, we note KPIT’s recent closure of its PathPartner
Technology acquisition is likely to contribute marginally to overall topline revenue
growth. That said, the INR’s relative strength vs key KPIT revenue currencies like the
EUR, GBP and JPY may represent a minor offset to sequential revenue growth. Net-net,
we expect yoy / seq revenue growth of +17%/+3% in 3Q22 and yoy / qoq margin
expansion of ~180bps/20bps. Consequently, our 3Q22 net income estimate is ~8%
above BBG consensus.
5 January 2022 40
Appendix
What does the company do ?

KPIT is an independent automotive and mobility software developer / integrator helping
large global auto makers transition towards future ready technologies including (1)
electrification of powertrains, (2) autonomous driving and (3) connected vehicles.
For instance, if BMW is using a battery supplied by Panasonic or an electric motor that
is supplied by ZF, in this situation KPIT writes the software that integrates the supplier
electronics to BMW’s vehicle operating system. KPIT is also involved in the design and
development of new technology associated with new powertrain, connectivity and
autonomous driving projects that clients operate.
The company’s headcount of ~6,500 people is among the largest globally in the field of
automotive technology solutions.
Incumbent passenger car and commercial vehicle customers contributed the majority of
the company’s FY21 revenue though forward targets include more focus on EV
disruptors and automotive semiconductor suppliers.
Management background
Ravi Pandit (Co-Founder and Chairman)
Mr. S. B. (Ravi) Pandit is the Co-founder and Chairman of KPIT Technologies Limited. He
has been instrumental in shaping KPIT’s vertical focus strategy around automotive
technologies. Having run a chartered accountancy firm for close to a decade after
finishing his master’s studies, Mr. Pandit decided to venture into IT consulting and
services, thus setting up KPIT, with his cofounders, in 1990. Mr. Pandit is a gold medalist
and fellow member of the Institute of Chartered Accountants of India, an associate
member of the Institute of Cost Accountants of India, and holds masters from Sloan
School of Management, MIT, Cambridge, USA.
Kishor Patil (CEO & Managing Director)

Mr. Patil is the Co-founder, Managing Director and CEO of KPIT Technologies. Under his
leadership, KPIT has filed more than 50 patents, has developed over 100 IPs in
cutting-edge technology in its focus areas. In 2014, Mr. Patil was honored with the CA
Business Leader Award – Corporate award, by the Institute of Chartered Accountants of
India (ICAI). Mr. Patil is a fellow member of the Institute of Chartered Accountants of
India, and a member of the Institute of Cost Accountants of India.
Sachin Tikrekar (Whole time director)

Mr. Tikrekar is the Co-Founder and President of KPIT. He has been with the company
since the beginning and has lead and guided the company in different areas. In his
current role, he is responsible for growing & nurturing strategic relationships with
customers and partners. Mr. Tikekar has served the company in a number of capacities.
5 January 2022 41
He has been the Executive Sponsor for Europe. He was the Chief People & Operations
Officer with responsibility for imbibing KPIT culture in the organization. He was also the
Chief Operating Officer for KPIT in the US. He established the company’s now deeply
rooted presence in the US. Over the years, he has spearheaded the successful
integration of acquired entities within KPIT. Before joining KPIT, Sachin worked with US
Sprint and Strategic Positioning Group. He attended Temple University for Masters in
Strategic Management and International Finance.
Anup Sable (Chief Technology Officer)

Anup is a member of the executive board and CTO for KPIT. He has been instrumental in
blending technology trends and customer challenges for KPIT to formulate a range of
solutions and products which bring value to the global automotive ecosystem. Anup has
been associated with KPIT since 1994. He has held a position on the Board of Directors
of GENIVI® Alliance, contributing towards driving open innovation and collaboration in
the automotive industry. He was also a part of the NASSCOM® engineering council,
where he supported the council’s vision of making more and more companies in India
achieve the ‘Engineered in India’ dream. He has additionally carried out board
responsibilities for KPIT GmbH Germany. Anup has lead the global team that made
innovative solutions and products for the automotive industry, which include
electrification of vehicles, digital cockpit, autonomous driving, AutoSAR and diagnostics.
Anup began his career at the Automotive Research Association of India (ARAI) as a
research assistant in the powertrain domain. He is a co-inventor of 4 patents in the
areas of electric vehicle technology and automotive safety.
Company profile and history

KPIT is an independent software development and integration partner helping
automotive and mobility companies move towards a clean, smart, and safe powertrain
and autonomous technologies. With ~6,500+ staff across the globe specializing in
embedded software, AI, and digital solutions, KPIT accelerates clients’ implementation
of next-generation technologies for the future mobility road map. With engineering
centers in Europe, the USA, Japan, China, Thailand, and India, KPIT works with leaders
in automotive and mobility and is present where the ecosystem is transforming. In April
2019, KPIT Technologies demerged as a 100% auto tech focused company after merging
its non auto technology businesses with Birlasoft.
5 January 2022 42
Exhibit 51: KPIT Technologies was formed as a result of a merger - demerger process with Birlasoft executed in April 2019
Summary of KPIT-Birlasoft Merger-Demerger process which created the Auto tech focused
listed entity (KPIT Technologies) in April 2019
KPIT Tech (Old

entity)
(USD 568 mn)
39% ERD / 61% IT
services
Enterprise app / SAP
Birlasoft IT KPIT IT KPIT ERD

(USD 125 mn) Services (USD 220 mn)
ADM/Digital (USD 350 mn) Auto
SAP/Enterprise
KPIT Tech
Birlasoft (New listed
(USD 475 mn)
ADM/Digital/SAP/Enterpris entity)
e (USD 220 mn)
Auto
** Revenue line at time of merger - demerger process in brackets
Exhibit 52: Summary of CASE Technologies (Connected Autonomous Shared Electric)
Connected mobility allows various means of Autonomous vehicles use Advanced Driver
transport to be connected to a seamless platform, Assistance Systems (ADAS) – group of electronic
share internet, Wi-Fi and data and talk to each technologies to assist driver to drive and park the
other. vehicle.
Connected Mobility Autonomous Vehicles
Instead of an internal-combustion engine that Shared mobility refer to shared use of vehicles by
generates power by combustion of fuel, an electric commuters for transportation without actually
vehicle is powered by one or more electric motors. owning the vehicle – making it a pocket friendly
Electric vehicles have low running cost and are and eco friendly solution.
more environmentally friendly
Electric Vehicle Shared Mobility
Source: Data compiled by Goldman Sachs Global Investment Research
5 January 2022 43
Exhibit 53: Key parts in an electric or hybrid electric vehicle
Exhibit 54: Features of 5 Levels of Autonomous Driving
5 January 2022 44
Exhibit 55: Think Tank Everest Group’s assessment of KPIT and competitor landscape in the auto tech space
Source: Everest Group
Exhibit 56: KPIT’s net cash positions to grow over forecast period Exhibit 57: KPIT Technologies shareholding pattern as of Sepember
offering optionality for M&A activity 2021
Net debt / Equity and Net debt / EBITDA

KPIT Technologies Shareholding Pattern
FY20 FY21 FY22E FY23E FY24E FY25E
0.0x
-0.2x -0.1x
-0.1x -0.2x
-0.2x
-0.4x -0.3x Retail /
-0.3x Corporate,
-0.4x 24%
-0.6x -0.5x
-0.6x Insurance cos / Promoter, 42%
-0.8x -0.7x FI / Bank, 1%
FPI, 10%
-1.0x
-1.0x
-1.2x DMF, 24%
-1.4x -1.3x
Net debt / Equity Net debt / EBITDA
Source: Company data, Goldman Sachs Global Investment Research Source: Bombay Stock Exchange
5 January 2022 45
Disclosure Appendix
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We, Chandramouli Muthiah, Kota Yuzawa and Rupanshi Bajaj, hereby certify that all of the views expressed in this report accurately reflect our personal
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5 January 2022 46
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5 January 2022 | 9:09PM IST

KPIT Technologies (KPIE.BO)

KPIE.BO 12m Price Target: Rs1,040.00 Price: Rs594.70 Upside: 74.9%

spending on CASE (connected, autonomous, shared, electric) Rupanshi Bajaj

triple over FY21-FY26 to ~US$61bn. Europe’s CY35 ban on ICE

(2) further inﬂection in CASE R&D spending to support rising EV

work in newer technology areas. GS Factor Proﬁle ____________________________

Valuation: We value KPIT using an 85:15 DCF:M&A methodology. Financial Returns

Our blended 12-m TP of Rs1,040 implies +75% upside. KPIT trades

KPIT Technologies (KPIE.BO) Income Statement (Rs mn) _________________________________

Capital expenditures (599.8) (482.6) (732.7) (885.9)

Repayment of lease liabilities -- -- -- --

Source: Company data, Goldman Sachs Research estimates.

Inﬂection in CASE R&D spending at large global automakers 7

New tech focus and offshoring to support margins 14

Favorable positioning; 100% Auto tech focus, Top 3 in headcount 16

Long runway for growth in traditional customer base 19

Hiring ambitions indicate underlying business strength 23

Valuation: Sustainable high 20% EPS CAGR at discount to peers 29

Key downside risks 36

+75%/+114%/-26% return potential in Base/Bull/Bear cases 37

M&A Framework: Rank of 2 (15%-30% probability of acquisition) 38

KPIT 3Q22 Preview - GSe vs consensus 40

Executive Summary: Well positioned to execute on CASE R&D inﬂection

Exhibit 1: Summary of KPIT Technologies’ key practices

Infotainment Anti-collision Parking assist

Connected Vehicles (~10% of Autonomous Driving + ADAS

Maps Advanced Driver

Battery management Electric powertrain (~30% of

Battery charging Fuel efficiency

Emerging common In-vehicle

Source: Company data, Goldman Sachs Global Investment Research

Higher Entry Barrier Practices Lower Entry Barrier Practices

~80% of KPIT Revenue ~20% of KPIT Revenue

L3 Autonomous Basic connectivity

L4 Autonomous Basic cloud tech

Vehicle to Vehicle Connectivity Validation

OEM Architecture Collaboration Legacy ICE tech support

Digital clusters Mechanical

Vehicle to anywhere connectivity L1 Autonomous

Multiple instrument connectivity L2 Autonomous

In vehicle design Other Basic / Legacy functions

In vehicle engineering Drivers of faster outsourcing in CASE technologies include

Source: Data compiled by Goldman Sachs Global Investment Research

AD-ADAS, 21% UK & Europe,

Revenue CAGR (FY22E to FY25E) FY21 Revenue Split by Currency

Passenger Cars 19%

0% 5% 10% 15% 20% 25% 30% 35%

Source: Company data, Goldman Sachs Global Investment Research

Inﬂection in CASE R&D spending at large global automakers

Note: CY20 to CY25 represents FY21 to FY26 for Indian companies

Source: Company data, Goldman Sachs Global Investment Research

Volkswagen 15.8 12.2 3.6 17.9 3.2 14.7 2% -23% 32%

BMW 7.2 5.8 1.4 7.6 2.5 5.1 1% -16% 30%

Renault 2.9 2.3 0.6 3.2 1.1 2.1 2% -14% 29%

Ford 7.1 3.9 3.2 8.0 2.0 6.0 2% -13% 13%

GM 6.2 3.1 3.1 7.5 1.5 6.0 4% -14% 14%

Toyota 9.9 6.9 3.0 11.7 4.9 6.8 3% -7% 30%

R&D TAM CAGR - Large

Source: Company data, Goldman Sachs Global Investment Research