1. At a Glance
Tata Elxsi reported Q1FY26 revenue of ₹892 Cr, down 3.7% QoQ, with Net Profit at ₹144 Cr, crashing -21.6% QoQ. OPM hit a new low at 21%, as growth engines sputtered and high-cost hiring caught up with them.
2. Introduction with Hook
Once hailed as the poster child of ER&D tech, Tata Elxsi rode the EV + Autotech + OTT wave straight into investor hearts. But now? That fairy tale is feeling more like a slow-burn Shyamalan movie — dramatic, twisty, and maybe… overhyped?
3. Business Model (WTF Do They Even Do?)
Tata Elxsi = R&D-as-a-service 🧪
- 🚗 Transportation (~53%): Embedded software + design for OEMs & EVs
- 📺 Media & Communication (~33%): OTT, UI/UX, IPTV platforms
- 🏥 Healthcare (~13%): MedTech device design, compliance
- 🧠 Mix of embedded systems, AI/ML, and industrial design
Pretty niche and high-value — but also vulnerable to budget freezes in slowdown cycles.
4. Financials Overview – Profit, Margins, ROE, Growth
| Metric | Value |
|---|---|
| Revenue (Q1FY26) | ₹892 Cr |
| Net Profit | ₹144 Cr |
| OPM | 21% 🔻 (all-time low in recent years) |
| ROE (TTM) | 29.3% |
| ROCE | 36.3% |
| TTM Sales Growth | 2% 😑 |
| TTM PAT Growth | -5% ❌ |
Translation: High quality business, yes. But momentum? Fading.
5. Valuation – Is It Cheap, Meh, or Crack?
| Metric | Value |
|---|---|
| CMP | ₹6,138 |
| P/E (TTM) | 51.3x 😬 |
| P/B | 13.4x (ouch) |
| Book Value | ₹459 |
| Market Cap | ₹38,245 Cr |
🧮 Fair Value Range (EduEstimate):
Assume FY26E EPS = ₹130
Fair P/E = 30–35x → FV Range = ₹3,900 – ₹4,550
Currently trading way above fundamentals, unless growth picks up sharply.
6. What’s Cooking – News, Triggers, Drama
- 🆕 EBITDA margin drops to 20.9% — lowest in over 3 years
- 📉 PAT margin slips to 16%
- 🔁 Transportation clients holding back spends
- 💡 Management says growth will resume from Q2 onwards
- 🧪 Healthcare biz still growing, but media vertical facing delays
- 🥲 No major deal wins or buybacks announced
- 📦 Cost pressures due to new hiring and infra investments
7. Balance Sheet – How Much Debt, How Many Dreams?
| Item | Value |
|---|---|
| Total Assets | ₹3,586 Cr |
| Net Cash Position | ~₹1,500 Cr (estimated) |
| Debt | ₹196 Cr |
| Reserves | ₹2,798 Cr |
| Equity | ₹62 Cr |
Still clean, lean, and self-funded. Tata-level governance remains untouched 👑
8. Cash Flow – Sab Number Game Hai
| FY25 CFO | ₹812 Cr ✅
| Capex | ₹311 Cr
| FCF | ~₹500 Cr
| Dividends Paid | ₹499 Cr
| Net Cash Flow FY25 | ₹+2 Cr
So they spent, earned, and gave it all back.
But low reinvestment in IP is not great for a “design tech” firm.
9. Ratios – Sexy or Stressy?
| Ratio | Value |
|---|---|
| OPM | 21% 🔻 |
| ROE | 29.3% ✅ |
| ROCE | 36.3% ✅ |
| Tax Rate | ~26% |
| Debtor Days | 95 (improved slightly) |
| CCC | 95 days (fine for ER&D) |
Margin compression is the main pain point. Otherwise, ratios still solid.
10. P&L Breakdown – Show Me the Money
| Quarter | Revenue | PAT | OPM |
|---|---|---|---|
| Q1 FY26 | ₹892 Cr | ₹144 Cr | 21% |
| Q4 FY25 | ₹908 Cr | ₹172 Cr | 23% |
| Q3 FY25 | ₹939 Cr | ₹199 Cr | 26% |
| Q2 FY25 | ₹955 Cr | ₹229 Cr | 28% |
That’s 3 quarters of declining profits, folks. The re-rating was bound to get reversed.
11. Peer Comparison – Who Else in the Game?
| Company | Sales | PAT | P/E | OPM | ROE |
|---|---|---|---|---|---|
| Tata Elxsi | ₹3,695 Cr | ₹745 Cr | 51x | 21% | 29.3% |
| Persistent | ₹11,939 Cr | ₹1,358 Cr | 65x | 17% | 24% |
| LTIMindtree | ₹38,008 Cr | ₹4,599 Cr | 34x | 17% | 21.5% |
| TCS | ₹2,56,148 Cr | ₹49,511 Cr | 25x | 27% | 52.4% |
Tata Elxsi’s margin is still industry-leading, but premium valuation isn’t justifiable if growth slows.
12. Miscellaneous – Shareholding, Promoters
| Stakeholder | % |
|---|---|
| Promoters | 43.91% (Tata Sons) |
| FIIs | 12.73% ↓ |
| DIIs | 8.54% ↑ |
| Public | 34.82% |
| Retail Investors | Increasing — maybe misreading signals? |
👀 FII exits + rising DII interest = the slow transition to “stable long-term hold” mode
13. EduInvesting Verdict™
“Design-led. Margin-bled. Premium-priced.”
Tata Elxsi is still a niche IT leader — but the slowdown in client spends, coupled with rising costs, has squeezed margins down to earth. The P/E still thinks it’s 2021, but the numbers say otherwise.
If they bounce back in Q2, investors might forgive the recent slip. But at 51x earnings, it better be a blockbuster sequel, not a boring reboot.
🧮 Tags: Tata Elxsi Q1 FY26, ER&D tech, Tata Group, design services, engineering R&D, tech stock India, OPM drop, margin pressure, EduInvesting
✍️ Written by Prashant | 📅 July 10, 2025
