Design and technology services company Tata Elxsi Ltd posted a 2.5% decline in its net profit for the first quarter of the financial year 2025 on a year-on-year basis despite an improvement in revenue.
The drop in profit from the previous year can be primarily attributed to an increase in the effective tax rate with the change in special economic zone benefits for one of its facilities. The company also saw a contraction in its margins amid higher employee expenses.
The technology company clocked a net profit of Rs 184.1 crore during the quarter, against Rs 188.9 crore in the year-ago period. Revenue from operations rose 9% on year to Rs 926.5 crore.
Tata Elxsi generates 97% of its revenue from software development and services, while the rest comes from software integration and support. In the software development and services segment, the transportation division accounts for more than half of the business, followed by media and communications, and healthcare and life sciences.
Earnings before interest, tax, depreciation and amortisation (EBITDA), or operating profit, improved marginally to Rs 252.3 crore from Rs 251.5 crore in the first quarter of last year. EBITDA margin, however, fell to 27.2% from 29.6%.
The contraction in margins reflects a 13.1% on-year increase in its total expenses to Rs 706.1 crore, primarily on account of higher employee benefit expenses. Employee headcount rose to 13,142 in the quarter from 12,286 in the year-ago quarter. The attrition rate also came down to 12.3% from 12.3%.
On a sequential basis, Tata Elxsi’s net profit saw a decline of 6.5%. This is on account of weak operating performance amid muted revenue growth and a drop in margins.
Revenue from operations increased by just 2.3%, while EBITDA fell 3.5% from the fourth quarter of the previous financial year. The operating profit margin shrunk to 27.2% from 28.8%. Total expenses grew at a rate of 4.3%.
“We executed very well on operational excellence and fiscal discipline in this quarter towards bottom-line performance, despite the impact of an exceptional one-off expense in the quarter and an increase in the effective tax rate with the change in SEZ benefits for one of our facilities,” CEO and MD Manoj Raghavan said.
He also noted that the company’s transportation business reported a strong growth of 5.3% on a sequential basis and 20.3% on a year-on-year business in constant currency.