Tata Technologies Ltd

NSE:TATATECH

Earnings Call Transcript

[Operator]

Ladies and gentlemen, good day, and welcome to Tata Technologies Q4 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vijay Lohia, Head of Investor Relations at Tata Technologies. Thank you, and over to you, Lohia.

[Vijay Lohia, executive]

Thank you, operator. Hello, everyone, and welcome to Tata Technologies Fourth Quarter of Fiscal '25 Results Call. With me today are Mr. Warren Harris, CEO and MD, Tata Technologies; Ms. Sukanya Sadasivan, COO of Tata Technologies; and Ms. Savitha Balachandran, CFO, Tata Technologies.

Our management team will give a brief overview of the company's performance, followed by a Q&A session. As you are aware, we do not provide specific revenue or earnings guidance, and anything said on the call, which reflects our outlook for the future or which could be construed as a forward-looking statement must be reviewed in conjunction with the risks that the company faces. We've outlined these risks in the second slide of the quarterly investor deck available on our website. Our press release and earnings deck have been filed with the stock exchanges and are also available on our website, www.tatatechnologies.com. I hope you've had a chance to look at them.

Let me now turn over the call to Warren.

[Warren Harris, executive]

Thank you, Vijay, and thank you, everyone, for joining us on today's earnings call. Let me start by reflecting on FY '25 and sharing our strategic perspective on how Tata Technologies is positioning itself amid ongoing global macroeconomic volatility, including intensifying trade tensions, tariff-related disruptions and the transformative shift driven by AI-led innovation. Despite navigating a challenging geopolitical environment marked by shifting trade alliances, rising protectionism, tightening export controls and the ongoing reconfiguration of global supply chain, we've delivered a resilient set of results in FY '25.

Our full year revenue grew by 1% year-over-year in Indian rupees. However, this headline figure masks a stronger underlying growth of 12% year-on-year when adjusted for the large VinFast fast project that concluded in FY '24. We ended the year with a robust EBITDA margin of 18.1% reflecting our continued operational discipline.

During the year, we secured a total of 17 large deals, including 1 marquee engagement exceeding $500 million, 2 deals of over $50 million, 1 of over $20 million and 13 in the $5 million to $20 million range. These wins underscore a growing role as a trusted engineering and digital services partner across the manufacturing sector. Our customer base continued to strengthen with 44 clients now contributing over $1 million annually, up from 41 in FY '24. This growth reflects the deepening of our relationships and the increasing trust our customers are placing in ours.

In Q4, our Services business, which accounted for 80% of our total revenue, grew by 1.1% sequentially in Indian rupees, demonstrating strong resilience in a challenging environment. In a constant currency U.S. dollar terms, the business held steady quarter-over-quarter. On the other hand, our Technology Solutions business saw a 14% sequential contraction in Q4. This decline was primarily due to a slight reduction in discretionary spend that impacted our products business and infrastructure readiness challenges within several state ITIs in India, which impacted our ability to execute against the growing education order book.

Margins remained strong, the EBITDA improving 50 -- 40 basis points sequentially to 18.2%. Profit before tax rose however, by 14% quarter-on-quarter, while net income during the same period grew 12%. Notably, we recorded a net benefit of INR 12 crore from our BMW joint venture in Q4. This accounted for 4.6% of our pretax profits. We anticipate that this JV will play an increasingly significant role in driving our net profit and associated earnings per share in FY '26.

The global ER&D sector is currently navigating a dynamic landscape marked by both growth opportunities and geopolitical challenges, particularly as it pertains to ongoing tariff and trade tensions among major economies. Whilst the situation remains fluid, and various outcomes are possible over the coming years. The strategic positioning of key nations is poised to reshape manufacturing hubs, disrupt global supply chains and raise input costs for some manufacturers while simultaneously creating new opportunities for others.

In response, we expect manufacturing companies to accelerate strategic moves towards regional diversification and cost-efficient innovation. Despite short-term uncertainties, the ER&D industry continues to demonstrate strong resilience and adaptability. We believe that this environment favors agile engineering service providers like Tata Technologies, who can help clients pivot quickly and effectively. Although we anticipate continued uncertainty over the next couple of months, leading to short-term delays in customer decision-making we believe that companies will maintain investment in new products and manufacturing capacity to secure their long-term competitiveness. We are proactively positioning ourselves to be the trusted partner that the manufacturing sector will need in this evolving environment.

In support of this, specifically in March, we announced organizational changes to strengthen customer collaboration and accelerate innovation and growth. These changes included a new customer-centric organizational structure and dedicated account teams for our top 20 accounts. The appointment of a new executive leader to manage our strategic partnership with Tata Motors and JLR. We strengthened our leadership of our embedded electronics and software business to ensure end-to-end ownership of sales, solutioning and delivery.

We implemented dedicated leadership for our Aerospace and Industrial Heavy Machinery verticals to improve focus and the relevance of our sector offerings. And we also invested in a series of IP that included AI, IP-led solutions and smart manufacturing platforms. These changes will allow us to act faster, innovate deeper and scale smarter in response to the changes that are likely to define the manufacturing sector in the future.

Let me provide an overview of demand trends across the 3 industry verticals in which we operate. As I said before, in the Automotive sector, the macroeconomic environment remains dynamic, shaped by ongoing geopolitical shifts and evolving regulatory landscapes. In the U.S. OEMs are increasingly embracing a more balanced propulsion strategy, sustaining investments across internal combustion engines, hybrids and electric vehicles, as consumer preferences and policy signals remain mixed. In Europe, uncertainty surrounding tariffs and evolving industrial policies, especially in response to competition from China has led to delays in key investment decisions.

However, we are beginning to see the early signs of foundational investments and the green shoots of improvement. While near-term caution persists, we remain optimistic about medium- to long-term ER&D investment in the automotive industry. Continued innovation in electric, autonomous and sustainable mobility is expected to be a key growth driver. Our strong domain expertise, expanded software-defined vehicle offerings and AI-led solutions across the product life cycle position us well to support OEMs and suppliers as they recalibrate for the next phase of mobility transformation.

In contrast, demand in the Aerospace and Industrial Heavy Machinery sectors remains robust. Our Aerospace business posted 8% sequential growth in Q4 and nearly doubled its revenues in FY '25 compared to FY '24, supported by a healthy order book and strong execution. We are confident that this momentum will carry forward into FY '26. On the deal signings front, we closed 3 large deals in Q4, including 1 exceeding $50 million. Our overall deal pipeline remains strong, and we expect conversion rates to improve once near-term market uncertainties begin to ease.

Let me share a few highlights from our Q4 wins. A prominent North American electric vehicle manufacturer has engaged us to modernize their enterprise resource planning systems. This digital transformation initiative is focused upon improving operational efficiency, boosting supply chain transparency and enabling scalable growth in line with their rapid expansion.

We are also collaborating with a leading global Tier 1 automotive supplier to develop advanced application software that optimizes energy flow across multiple battery packs in commercial electric vehicles. This solution enhances battery performance reliability and life cycle, delivering measurable efficiency gains for fleet operators.

A global automotive OEM has entrusted us with establishing an offshore development center to support product engineering, embedded software and digital enterprise solutions. We're also helping them drive significant cost optimization across product development and their IT operations.

For an Asian OEM, we are leading the complete design and development of interior and exterior trims as part of a facelift vehicle program, along with managing the simultaneous engineering engagement to support speed to market.

In Aerospace, we were selected by a North American Tier 1 supplier to design and develop a hydraulic test bench and power pack for landing gear component testing, additionally, for supporting the upgrade and optimization of their product life cycle management systems.

In the Education sector, we continue to scale our impact. We're partnering with the government of Uttar Pradesh to upgrade 62 ITIs across the state. We also signed an MOU with RB College of Engineering to establish a center for invention, innovation, incubation and training, further deepening our commitment to skilling the next generation of engineers.

We're proud to see the real-world impact of our investments in AI and generative AI. Since delivering our proprietary AI framework last year, we've moved decisively from experimentation to execution. Today, we're deploying AI across the product value chain, enabling solutions like predictive maintenance and manufacturing and AI-enhanced object detection in autonomous driving systems to help clients drive greater efficiency and unlock competitive advantage.

A standout example of this in action is our work with the North American Tier 1 manufacturer, where we are deploying our proprietary AI framework across multiple brownfield plants. The solution is already delivering measurable outcomes, reducing scrap rates, improving uptime of legacy equipment and accelerating overall manufacturing throughput. We remain deeply committed to embedding AI-driven intelligence across our entire services portfolio, from product engineering to manufacturing, engineering and customer experience solutions. This approach is helping us not just to improve outcomes for clients, but also to redefine the future of engineering services.

Other technologies is also evolving into an IP-driven the platform-led organization focused upon building proprietary tool sets and vertical solutions that deliver faster time to market in the software-defined vehicle space, we're expanding our capabilities in embedded software, digital cockpit solutions, battery management and vehicle architecture, supporting OEMs and navigating growing complexity and accelerating their product development cycles.

Our partnerships reflect this strategic shift. The BMW joint venture launched in November with an initial team of 100 professionals is scaling faster than we expected. We're now approaching the 4-digit headcount milestone originally projected for calendar year-end and anticipate continued growth throughout FY '26. Our share of profit from the JV has seen a significant uplift in Q4, and we expect this momentum to continue.

Moreover, our collaborations with most of our leading customers are increasingly focused on software, electrification and digital product development, underscoring our expanding role as a transformation partner in an evolving automotive and industrial landscape.

FY '25 has been a pivotal year for Tata Technologies, from scaling strategic partnerships, such as our expanding relationship with BMW, the delivering engineering excellence in Aerospace through programs with companies like Airbus and Air India and advancing upstream battery design and integration capabilities with Agrats. We're consistently demonstrating our ability to create value and earn the trust of our customers.

We're extremely proud to share that we've achieved our highest-ever customer Net Promoter Score in FY '25, a clear reflection of the deepening confidence our customers place in us. Additionally, our work was recognized with 2 industry innovation awards, reinforcing our leadership in AI and technology-led innovation within the manufacturing sector.

As we look ahead to FY '26, our priorities are clear. Scaling our software and AI capabilities, deepening our investments in IP and software defined everything and executing with precision on our strategy to become the most trusted partner for engineering and digital transformation in a world increasingly shaped by AI software, systems thinking and speed.

With that, I'd now like to invite Savitha to walk you through our financial performance for the year.

[Savitha Balachandran, executive]

Thank you, Warren. Good day, everyone, and thank you for joining us on this call today. Let me now walk you through the financial performance of the fourth quarter and the full fiscal year of 2025. Our revenue from operations for the quarter stood at INR 1,286 crores, reflecting a 2.4% sequential decline. This includes a sequential revenue growth of 1.1% in our services business, amounting to INR 1,024 crores, demonstrating resilience despite the challenging operating investment.

On a U.S. dollar constant currency terms, our services business remained flat sequentially. The reduction in the headline revenue, therefore, was entirely driven by the contraction in our Technology Solutions business, which recorded a degrowth of 14.1% during the quarter, with the product services decreasing by 7.7%, and the education business experiencing a much sharper drop of 20%.

You may recall that our products business traditionally experiences a stronger performance in the third quarter. This success creates a challenging sequential comparison for Q4. Meanwhile, our education business encountered hurdles due to delay in infrastructure readiness from our customers in the public sector. The digital edtech approach depends on fully functional labs within the academic institutions that we collaborate with. And the construction delays that we saw in Q3 continued into this quarter as well which negatively impacted the bookings for Q4. However, we do anticipate a gradual recovery once these projects resume with the momentum building into fiscal '26.

As far as the full fiscal year of 2025 is concerned, our revenue from operations grew 1% year-on-year, reaching a number of INR 5,169 crores. The Services segment accounting for 78% of the total revenues witnessed a similar 1.1% year-on-year growth, reaching a total of INR 4,027 crores. It is important to note that this fiscal year faced a challenging year-on-year comparison, primarily due to the completion of the major full vehicle programs for our Southeast Asian clients in fiscal '24.

In the previous fiscal year, this account contributed over 14% of our services revenue, while in fiscal '25, the contribution declined to a low single digit. Excluding this impact, the core services business demonstrated resilient performance, recording a 16% year-on-year growth in rupee terms, reaffirming the strong underlying health of our operations in this fiscal year. This was fueled by strong growth amongst both anchor as well as our non-anchor customers.

Our Technology Solutions segment saw a revenue growth of 0.6% year-on-year to INR 1,141 crores and despite the Q4 lumpiness, the Education segment was up 6.8% for the full year. In contrast, the product business experienced a 7.6% year-on-year decline.

I am, however, extremely pleased with the operational discipline our teams have demonstrated throughout the quarter, resulting in a sequential improvement of 40 basis points in the EBITDA margin bringing it to 18.2%. This achievement was driven by a reduction in employee costs, supported by factors, including an improved offshore delivery ratio, a decrease in the number of contractual employees some favorable currency movements as well as continued optimization of our pyramid. We concluded the year with an 18.1% EBITDA margin, fully aligned with our margin preservation objective. As we step into the next fiscal, we remain committed to maintaining strong operational rigor to drive sustainable growth and profitability.

Our operating profit or EBIT increased by 1.1% sequentially, reaching INR 214 crores, and this growth was aided by a significant surge in our profit share from our joint venture with BMW, which rose sevenfold from a low base of INR 50 lakhs in the previous quarter when it started operations to INR 3.6 crores in Q4. This partnership continues to scale up steadily, aligning well with our expectations.

In addition, the other income included a deferred income of INR 8.3 crores reflects the fair value gain on the actions relating to our investment in the company, and this deferred income, as I have said before, is a recurring element in the foreseeable future.

I'd like to emphasize that this partnership represents a long-term strategically significant deal for us and therefore, an extension of our core operations. And accordingly, we represent this as part of our operating profit.

We recognized another income of INR 57 crores in this quarter, marking a significant increase from INR 27.6 crores of Q3. This sharp growth was primarily driven by 4 factors: interest income increased by INR 7.5 crores, largely attributable to the higher cash balances as well as improved yield from our investments. We had about INR 8.8 crores of gain from the fair value adjustment of the investments that we've made. Foreign currencies gave us about INR 8.1 crores compared to a loss of INR 2.8 crores in the previous quarter and we also recorded an R&D expense credit of about INR 2.3 crores as per the applicable rules against the work that qualifies for the same. As a result, our profit before tax experienced a robust 14.1% quarter-on-quarter growth to INR 258 crores.

In Q4, we had a net benefit of INR 12 crores of 4.6% of profit before tax from our joint venture with BMW. This included the INR 3.6 crores from share of profit as well as the INR 8.3 crores of the other income referenced about.

Our effective tax rate increased 140 basis points sequentially to 26.8% in this quarter, leading to a 12% quarter-on-quarter increase in profit after tax that reached INR 189 crores.

Our Board has recommended a final dividend of 8.35 per share for the fiscal year 2025, representing a dividend payout of 50%. Furthermore, the Board has also proposed a special dividend of INR 3.35 per share and both these dividend payments are subject to shareholder approval at the upcoming Annual General Meeting.

Our balance sheet reflects strong financial health with a solid cash position, robust liquidity and a favorable DSO levels. At the end of the quarter, the net cash position stood at $174.7 million compared to $154.1 million at the end of Q3. We continue to maintain robust collection efficiency with the total DSO, both billed and unbilled coming in at 81 days at the end of March, an improvement from the 90 days that we reported at the end of December. Our billed DSO improved from 63 to 54 days while the unbilled DSO were at 27 compared with 26, while our free cash flow for the fiscal year 2025 stood at over INR 900 crores.

Let me now share with you some color on the operational metrics. Our headcount was almost flat, up 12,644 employees at the end of the quarter, reflecting a prudent cost control and a commitment to sustainable profitability given the current macroeconomic and geopolitical conditions. Our employee utilization levels stood at 87.5% for the quarter, a modest decline from 88% in the prior quarter.

Meanwhile, our offshore revenue mix saw a sequential improvement of over 100 basis points, reaching 43% as we continue to optimize our delivery model. We saw a small uptick in the last 12 months voluntary attrition that touched a level of 13.2% from 12.9% of the previous quarter, and this comes after nearly 12 consecutive quarters of improved attrition levels and we remain committed to enhancing our employee engagement and strengthening retention efforts moving into fiscal 2026.

We also continue to prioritize strengthening of our organic talent development initiatives to address the dynamic needs of our workforce and build a robust pipeline of skilled professionals.

In the last fiscal year, our in-house technical learning platform, TechVarsity achieved a remarkable milestone by delivering over 750 technical modules. These modules reached more than 9,500 unique employees, representing 75% of our workforce to accelerate expertise in the critical next-generation competencies that are essential for our growth. We introduced specialized learning initiatives focused on generative AI, software-defined vehicles and cybersecurity. And I'm proud to share that over 60% of our engineering talent is now equipped with AI readiness paving the way for innovation and excellence in the evolving technological landscape.

In conclusion, I'm pleased with our unwavering commitment to rigorous execution, which enabled us to preserve our margins despite operating demanding environment. This quarter, we achieved strong profitability and a solid cash flow performance. And for fiscal '25, we sustained margins exceeding 18% for the fourth consecutive year and achieved the highest cash flows in the company's history.

Moving forward, we remain committed to maintaining this operational discipline while making thoughtful and required investments in talent and capabilities to drive our long-term value for all our stakeholders.

With that, I thank you for your time and we can now open the floor for questions.

[Operator]

[Operator Instructions]. The first question comes from the line of Abhishek Kumar with JM Financial.

[Abhishek Kumar, analyst]

Good evening. Why are you sounded optimistic despite the obvious challenges facing the industry? I just want to understand whether there are tangible signs that some of these global OEMs are looking at increasingly doing more offshoring? Are there any deal RFP, et cetera, which we are pursuing? Just wanted to understand what's driving the optimism that you shared.

[Warren Harris, executive]

Good to hear from you, Abhishek. The sentiment, the positive sentiment that I said was really informed by the interactions that we're having with our customers. I think I shared in the Q3 earnings call that last year had really been impacted by the uncertainty around the administration in the United States given the elections in November and also the regulatory uncertainty in Europe. I think with clarity at the end of the calendar year, many of our customers that had delayed investments in new product, where we're starting to get ready to execute. And we were very encouraged by the interactions with customers in both regions, and we're anticipating a very strong start to this fiscal year.

I think the tariff announcements have certainly complicated that situation. And many of the customers that we're looking to launch projects and programs in the March, April time frame have delayed the decision-making. But the commitment is there. And I think what everybody is looking for right now is just certainty. And I think if we can achieve that in the next month to 6 weeks as the trade negotiations are progressing then I think that we will tee ourselves up for a strong finish for the year -- for the half year, and we'll take momentum into the second half of the year.

So that's where the sentiment is coming from. But I would just qualify those comments with we were surprised by the tariff announcements, we may be surprised again if the negotiations do not drive the type of consistency and clarity that I think everybody is looking for.

[Abhishek Kumar, analyst]

Okay. That's clear. In that context, you know what explains better-than-expected ramp-up in BMW, right, that also in OEM which is facing these issues. Logically, one would imagine that they will also pause. So any color on why you think that JV is scaling faster than expectation?

[Warren Harris, executive]

Yes. I think there's 2 reasons. I think outside of the investment that Mercedes made in India, some 20, 25 years ago. I think the German market as a whole has been slow to take advantage and to invest in the capabilities that we've got here in India. I think that is starting to change. And I think the commitment that BMW have made to the joint venture and so the partnership that we are building is a strategic commitment. It's a strategic commitment that is very central to their ambitions in both the automotive software area, the AI area and then the enterprise digital solutions.

And I think one of the things that we continue to be impressed about with BMW is they -- like the Tata are patient capitalists. They are investing for the long term. And I think unlike many organizations, they seem to stay the course even during very difficult economic conditions. And so I think the scale -- the accelerated scale of headcount and business that we're seeing with the JV is really a testament to those things.

[Abhishek Kumar, analyst]

One last comment. Could that be a precursor to other German OEMs taking advantage of India scale -- skill and cost?

[Warren Harris, executive]

The answer is very much a yes. I think one of the things that we are seeing from many of our German customers right now is that they are requiring a BCC component to the services that they procure. Traditionally, the majority of the work that they've outsourced has been outsourced to onshore companies in Germany. And so we're seeing opportunity both directly with customers because of that prioritization in and around BCC. But we're also seeing those onshore engineering services companies also look for an offshore play. And so we are seeing opportunity, both directly with customers and also with organizations that traditionally we've competed with.

[Abhishek Kumar, analyst]

Great. Thank you and good luck in the current type of environment.

[Operator]

Next question comes from the line of Chandramouli Muthiah with Goldman Sachs.

[Chandramouli Muthiah, analyst]

My first question is just around, I think a couple of quarters back, you had shared that there was some postponement of demand because of the uncertain macro. And the size of deals that we're closing might have been smaller deals than what was originally envisioned in the pipeline?

So just trying to understand, based on some of the conversations you've had recently with clients that you highlighted. Are you getting the impression that once there is clarity on the regulatory environment and the tariff environment globally, the trade environment globally, these deal sizes might start bouncing back up? Or is that something which is a little more of a medium-term kind of journey based on the tone of conversations you're having?

[Warren Harris, executive]

I think that you've interpreted the comments that I've made in exactly the way that we see it. We certainly saw towards the end of the last fiscal year, conversations and planning that gave us confidence that the deal size would increase and behind that momentum would build. Obviously, that's been somewhat tapered by the recent announcements from the United States. But again, I think after the initial shock, there is growing confidence that clarity will be brought to bear in the next month or so. And those plans that we were expecting to close in March and April will likely be close towards the end of Q1 and as we move into Q2.

[Chandramouli Muthiah, analyst]

Got it, that's helpful. Just to build on that. There's also been this theme of potential cost-cutting related spending, which some of the Indian IT services and the ER&D companies might benefit from in this sort of uncertain macro, maybe slower growth environment temporarily. So is that also a theme which you're seeing some additional business opportunity in beyond sort of the traditional services that you cater to?

[Warren Harris, executive]

Yes, I think so. And I think the example that I just provided about Germany is really a testament to that. I think the fact that they are looking for a BCC component to the services that they procure is that they want to bring down the unit cost of what they have traditionally positioned with the German engineering service providers. So we do not expect headcount increases within our customers. I've commented before that as the clock speed of technology change accelerates, we're expecting our customers to concentrate on what is core to the DNA of their brand and their competitive position and more and more will be outsourced to organizations that have a nexus and a footprint in territories like India.

So we think we're incredibly well positioned. We're obviously doing our best to navigate the short-term context in which we're operating, but we remain quite bullish for the medium term and very bullish in terms of the long term.

[Chandramouli Muthiah, analyst]

Got it. That's helpful. And just last question is around your anchor versus non-anchor customers. So you have done a great job of reducing dependency on your anchor customers over the past 4 to 5 years. So just trying to understand in this sort of macro environment, some of your anchor customers have more domestic exposure, which might not be as impacted as maybe the globally exposed business. So if you could just share some color on anchor versus non-anchor, what the sort of growth opportunities that could be on a relative basis, that will also be helpful.

[Warren Harris, executive]

Again, I think you have understood the circumstance extremely well. We're seeing Tata Motors continue to invest and accelerate their commitment to expanding their product portfolio that is providing tailwinds, which we are intersecting with. JLR sits outside of India and is exposed like everybody else to the uncertainties in Europe and the United States, which is the largest market. So they are impacted in the same way that everybody else is. But Tata Motors has demonstrated resilience through the uncertainties that we've been grappling with over the last 6 to 9 months.

[Chandramouli Muthiah, analyst]

Got it, that's helpful. Thank you very much and all best.

[Operator]

Thank you. Next question comes from the line of Rajiv Berlia with Citigroup.

[Rajiv Berlia, analyst]

Can you discuss the thoughts on demand from the Aerospace vertical? And is it fair to assume that the Aerospace vertical will do well versus Automotive in FY '26? Also, you talked about 3 large deals in 4Q. Can you tell me from which verticals are these large deals? And when will they ramp up? And will that help 1Q?

[Warren Harris, executive]

Sure. If we look at Aerospace, I mentioned in my opening comments that we had almost doubled the Aerospace business in FY '24 -- FY '25. That reflects the growing momentum around the partnership that we've got with Airbus, but it also reflects the investments that we are making in growing the aerospace business outside of that. And in North America, we have -- we've secured business with 2 large propulsion manufacturing players. And that business has grown at a very healthy clip over the course of the last 12 months, and we expect momentum to continue.

So our Aerospace business today has certainly not been impacted as Automotive has by the issues that relate to regulatory uncertainty and the policies from various governments in different parts of the world. And one of the things that we are seeing in Aerospace is that the sponsorship and the credibility that we're building with organizations like Airbus is now precipitating in terms of introductions to organizations within their supply chain.

One of the big challenges within certainly Airbus and Boeing is that they cannot satisfy the demand at the moment. So manufacturing throughput is a major issue and we're addressing that through work that we're doing directly with Airbus. But we're also now starting to leverage, again, the credibility, the understanding and the capability that we're building within the supply chain. And we won a couple of large deals in FY '24 that are directly related to the sponsorship that we've received from Airbus.

As far as the large deals that we have won and I cited in my opening comments. We are deploying an AI solution for a Tier 1 automotive company that has the potential to extend to more than 100 plants up for that Tier 1 automotive supplier. We are at the moment going through the discovery exercise to identify the opportunities for improvement where we can deploy sensors, how we can leverage our AI framework to identify insights that will improve manufacturing uptime, again, improve and accelerate manufacturing throughput and also address things like scrap rates. So that engagement is right at the initial stages, and we expect that to scale.

We won a complete package here in Asia for interior and exterior trims. It's a mid-cycle refresh activity. Again, that business was one at the end of Q4. We're just in the initial stages, and so we're expecting that to ramp. And we also have made a number of comments about the challenges that we've had in the Education sector, given the readiness that we've had with regard to labs and the infrastructure that's required for our digital proposition. But we are continuing to win large deals, and our order book continues to expand. And so these infrastructure issues that we expect to be addressed in the next couple of months should see the Education business scale as we move through the year.

[Rajiv Berlia, analyst]

Last question from my side. At this 50 million deal, which you announced in 4Q, is it in the education sector?

[Warren Harris, executive]

Sorry, could you repeat that?

[Rajiv Berlia, analyst]

The 50 million deal, which you had announced in 4Q, is it in the education vertical?

[Warren Harris, executive]

No, it is not in the education.

[Operator]

Next question comes from the line of Chirag Kachhadiya with Ashika Institutional Equities.

[Chirag Kachhadiya, analyst]

Hello. I have a couple of questions. So one of our top clients, yesterday in their earnings call mentioned that they are focusing on Asian market and considering India and Indonesia for their assembly plants and also news articles referring that from June this year, the India plant is going to start the production. So how would this benefit us in terms of margin and getting the business in more wine, like getting more volume from this account, and they are actually considering Asia for their volume target, which they have mentioned yesterday in their earning's call?

[Warren Harris, executive]

Yes. We continue to work hard to protect and evolve the relationship with that organization. We're very proud of the work that we have done for them. We're very proud of the impact to the products that we have had with the markets that they are selling that product into. We are continuing to explore new ways of being able to help them execute their strategy. That includes new products. It also includes the investments that they expect to make in adding to manufacturing capacity.

I think at this stage, there is no definitive plan that they have as far as manufacturing capacity is concerned, I think there's a number of things that are teed up. But I think they will be waiting for market conditions to before commitments of capital are on made.

[Chirag Kachhadiya, analyst]

And second, on the -- our parent, I mean the Tata Group -- the Tata Motors [indiscernible] they are facing some competition from other players in the category and they're considering more this IC based cost. So does that anyway impact our volume with them also?

[Warren Harris, executive]

I think if you look at the Tata Motors strategy, I think it will obviously be a strategy that will flex and adjust to market conditions and the evolving regulatory framework in which they operate. Having said that, if you pick up on the public statements that Tata Motors have made, they are continuing to commit themselves to maintaining a market leadership position in EVs.

They are looking to expand their portfolio. They are looking to go upmarket in terms of some of the segments that they support. All of those things will provide opportunity for Tata Technologies, both in terms of product engineering, in terms of helping them bring on additional manufacturing capacity and in terms of helping them digitize their entire enterprise.

So we are very proud to be a partner of Tata Motors and very proud of the performance that we have delivered in support of the breakout performance that we've seen from that organization over the last 3 to 5 years.

[Operator]

Next question comes from the line of Bhavik Mehta with JPMorgan.

[Bhavik Mehta, analyst]

Warren, can you talk about how the demand headwinds are playing out across different geographies in terms of U.S., Europe and Asia, how is it different? And based on client conversations right now, where do you expect the recovery to be the fastest over the 6 to 9 months?

[Warren Harris, executive]

I think if we take the U.S. first, I think that there was a fair amount of positivity in the U.S. at the beginning of the calendar year and the distraction that organizations like Stellantis had given the change of Chief Exec last year, that was starting to settle down, and we were starting to see clarity in and around a renewed commitment to a regional approach to growing their business. That has obviously been shaken by the tariff announcements, not just in the context of the response of markets outside of the United States to the tariffs that have been announced by the U.S. government, but also there's a lot of concern in and around the impact of tariffs across the global supply chains of those organizations and particularly the impact of Naphtha.

So there's a pent-up demand for investment. There was a lot of uncertainty last year during the election process. So these organizations are ready to deploy capital in support of new products. But they need some level of certainty. And so we expect that the United States to take another month, 6 weeks, 8 weeks before we really start to understand the full impact of the announcements that have been made.

I think Europe is a little different. I think Europe is starting to recognize that they have to build resilience into their supply chains. And so we're seeing some repatriation of manufacturing support within supply chains as far as Europe is concerned. And we're also seeing some progress as far as incentives and the regulatory response to both the threat from China and the tariffs from the United States. And so we're starting to see some green shoots of improvement there, but it is, again, tempered by the fact that everybody is still waiting for the tariff situation to play out.

I was in China at the beginning of this week that for the first day of the auto show, and the Chinese market seems to be immune to what's happening in the rest of the world. Everybody is pressing ahead and investing as if there is no uncertainty about the future. And I think if there's a topic that is top of mind for Chinese OEMs, it's how do they internationalize both their products and their IP, given the constraints as far as regulations are concerned.

So different sentiments in different parts of the world, but everybody right now is waiting for clarity on the tariff front. And for all of us, as soon as that comes, the better.

[Operator]

Next question comes from the line of [ Kunal ] with Bank of America.

[Unknown Analyst]

A couple of questions from me. The first one is in one of the scenarios you're considering that the uncertainty comes to an end in about 6 to 8 weeks, what would be your thought process on the eventual shape of demand? Do you think it will essentially be a case of one last quarter and then things go back to how they were at the start of the year? Or could this end in being a net new demand creation in the meanwhile or is that negative?

[Warren Harris, executive]

I think if I had to call it today, and the fact that I'm kind of qualifying that statement, I think it speaks to the genuine uncertainty that is out there. But if I had to call it today, I would suggest that we will get clarity in the next 6 to 8 weeks, and we would return to the type of environment that we anticipated at the beginning of the fiscal year. So we expect improvement from Q2 to Q3 into Q4. We are still optimistic about our prospects for this fiscal year.

Now we were surprised by the tariff announcements and surprised by the magnitude the announcements that were confirmed. And it wouldn't be too much of a shock if we were surprised again. But I think given the reaction of the financial markets, given the balance that we're now starting to see from multiple stakeholders, my view would be that common sense would prevail and we'll see some certainty at the end of the first quarter.

[Unknown Analyst]

Right. And meanwhile, on your large deal pipeline, do you still have enough in late stages where we could sort of see more conversions like the one you got towards within Q4? Or do you think that further closures of deal sizes like that would be contingent on more clarity or certainty returning to the market?

[Warren Harris, executive]

We have a lot of big deals lined up. A lot of large deals that we anticipated that we would close at the beginning of the calendar year. We've seen those decisions get pushed out. We would anticipate if there's clarity that those deals would get closed. Now with any type of deals, time is always something that you worry about when deals get pushed out, there is always the opportunity that the customer has to go in a different direction. So again, we are hoping that we will get clarity in the short term and that those deals that were teed up, will get converted.

[Unknown Analyst]

Got that. And then the final one for me. Are you happy to be flexible on pricing until you have demand uncertainty? Or that's something that you would rather want to hold at the level you already are at?

[Warren Harris, executive]

I'm sitting next to my CFO, and so I'll qualify my comments. But no, I think one of the reasons that we've managed to maintain margins throughout the choppiness and the volatility of FY '25 is the fact that we've been very disciplined on the pricing front. And worst, there are situations where we've used pricing as an entry strategy into different customers. I think for the most part, the discipline and the rigor that has surrounded our pricing approach is something that we're committed to and something that we expect to maintain.

[Operator]

Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to hand the conference over to [ Prateek Rampuria ] for closing comments.

[Prateek Rampuria, executive]

Thank you all for joining us on today's call. We hope we've addressed most of your questions. If you have any additional queries, please feel free to reach out to our Investor Relations team, and we'll be glad to assist you. Wishing you all the best, and goodbye here from all of us. Thank you.

[Operator]

Thank you. On behalf of Tata Technologies, that concludes this conference. Thank you for joining us. You may now disconnect your lines.