Happy Diwali from all of us at The Chatter!
Thank you for reading along through another year of earnings calls, guidance revisions, and management teams promising that next quarter will be better. We're grateful you trust us to bring you what they actually said.
May your festival be bright, your diyas brighter, and may your portfolio's outlook stay as optimistic as every CEO's on a concall 😊
Welcome to the 104th edition of The Chatter — a newsletter where we dig through what India’s biggest companies are saying and bring you the most interesting bits of insight, whether about the business, its sector, or the wider economy. We read every major Indian earnings call and listen to the interviews so you don’t have to.
We’re always eager to improve—please share your ideas on how else we can innovate “The Chatter” format to better serve your needs.
In this edition, we have covered 1 Executive Interview, 1 Policy Debate, and 5 companies across 5 industries.
Executive Interview
OpenAI India
Policy Debate
Uday Kotak & Ananth Narayan Gopalakrishnan
Automobiles
Mahindra & Mahindra
Financial Services
Life Insurance Corporation Of India
Engineering & Capital Goods
Bharat Forge Limited
Software Services
Mphasis Limited
Defence
BEML Limited
Executive Interview
OpenAI India | Prabhjeet Singh | Managing Director
OpenAI is a leading artificial intelligence research and deployment company that develops advanced language models and autonomous systems. The firm focuses on creating safe AI technologies that drive productivity and innovation for businesses and individual users globally.
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India has recently become the largest market for ChatGPT by active users, showing 100% growth in early 2026. This trend demonstrates that the platform has achieved massive scale in a key emerging market, paving the way for future monetisation.
“India has become ChatGPT’s largest market globally in terms of weekly active users. The user base here has doubled since January 2026. People are increasingly finding practical and more meaningful ways to use ChatGPT.”
— Prabhjeet Singh, Head of OpenAI India
Management observed that Indian businesses are moving from testing AI pilots to implementing the technology in large-scale operations. This transition indicates a maturing market where AI is becoming a core component of business infrastructure rather than just a trial technology.
“Late last year and early this year, most businesses were still experimenting with pilots and demos. We’re now seeing a shift towards adoption at scale, with companies deploying AI in their actual operations.”
— Prabhjeet Singh, Head of OpenAI India
The company is working with government bodies to secure national infrastructure as AI tools become more powerful and independent. These efforts help reduce the risk of regulatory crackdowns and ensure the business remains compliant with evolving safety standards.
“We’re actively engaging with government agencies and enterprises to help protect critical infrastructure as AI systems become more capable and autonomous.”
— Prabhjeet Singh, Head of OpenAI India
OpenAI plans to invest more in localised products and partnerships within the Indian technology ecosystem. These strategic investments are likely to strengthen the company’s competitive position and improve long-term user retention in a crowded market.
“We expect to invest more in localisation and the Indian ecosystem. This includes improving the product experience, building partnerships, working with the government and engaging with local communities.”
— Prabhjeet Singh, Head of OpenAI India
Policy Debate
Macro & Capital Markets | Policy Special | Taxation & Financial Architecture
A specialised macroeconomic dialogue featuring Uday Kotak, Founder and Non-Executive Director of Kotak Mahindra Bank, alongside Ananth Narayan Gopalakrishnan, former Whole-Time Member of SEBI, examining the structural distortions governing Indian capital flows. The discussion addresses the mechanics behind foreign portfolio outflows, the case for OECD-aligned residence-based taxation, and how the wide tax disparity between fixed income and public equities suppresses domestic bank deposits while fueling artificial equity valuations.
Management identifies a major tax imbalance where interest income is taxed at nearly triple the rate of equity gains. This creates a structural distortion that discourages traditional savings in bank deposits and fixed income products.
“There are two distinct points we must address. The first is establishing capital gains tax parity between foreign institutional investors and Indian investors. If a distinction must be drawn, foreign investors’ capital gains tax should be assessed on a dollar-currency basis rather than a rupee basis, while Indian investors continue to be taxed in local currency. That framework preserves parity while respecting the functional currency of the respective investor. The second point concerns domestic asset allocation. While there is continuous clamour in India to lower the equity capital gains tax rate from 12.5% plus surcharge—which totals roughly 14%—the taxation on interest income stands at the highest marginal rate of 39%. The gap between a 14% tax on equities and 39% on fixed income is exceptionally wide, and that disparity needs to be narrowed.”
— Uday Kotak, Founder & Non-Executive Director
India’s practice of taxing foreign investors at the source makes the country an outlier compared to global OECD standards. Moving to a residence-based tax model would align India with major global markets and potentially reduce friction for foreign capital.
“The starting point is that the global norm for non-controlling portfolio equity investments is to tax the investor in their country of residence, not at source. This is the established OECD standard followed by virtually every major financial jurisdiction. When Indian residents invest in the United States, the United Kingdom, Germany, Japan, or Singapore, we do not pay capital gains tax in those jurisdictions. We declare our foreign earnings to the Indian tax authority and pay tax domestically. India remains an outlier by insisting that foreigners pay capital gains tax at source. This is not about exempting foreign capital while taxing domestic investors; it is about respecting global residence-based taxation.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
Existing tax treaties fail to prevent double taxation for many large global funds that are tax-exempt at home. This creates a literal cost to investing in India that cannot be recovered through tax credits in the investor’s home country.
“While the Finance Ministry often points to Double Tax Avoidance Agreements (DTAAs) to prevent double taxation, the mechanism breaks down in practice. First, many institutional pools—such as sovereign wealth funds, public pension funds, and university endowments—are tax-exempt in their home jurisdictions. When India levies a withholding tax, these funds have zero domestic tax liability to offset it against, resulting in deadweight cost. Second, while individual investors in the United States pay a 20% federal capital gains rate, those investing via pooled vehicles face funds that pay withholding tax in India. The fund provides a provision statement upon redemption, but US tax rules do not allow an individual to claim a foreign tax credit against personal liabilities for a provision made by a fund.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
Foreign investors often face tax liabilities in India even when their investments have lost value in their local currency due to rupee depreciation. The heavy administrative burden of getting tax clearances for every trade further complicates the repatriation of capital.
“Third, as Uday pointed out, India calculates capital gains on a rupee basis. Because the rupee depreciates over time, a global investor can experience a loss in dollar, euro, or sterling terms and still be forced to pay capital gains tax in India. Compounding this is the operational nightmare for global custodians and asset managers like Vanguard, who must engage local tax vendors to secure clearance certificates for every single transaction before repatriating capital. Outside of narrow exceptions like physical real estate or permanent establishments, India’s insistence on source-based withholding makes us an unnecessary outlier at a time when we require our fair share of global savings.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
Recent years have seen a sharp reversal from massive inflows to significant outflows of foreign capital, coinciding with higher capital gains taxes. Global fund managers continue to cite India’s tax structure as a primary reason for their caution despite the country’s growth potential.
“While correlation is not causation, the empirical record tells a sobering story. In FY19, India reintroduced the 10% long-term capital gains tax on equities. From FY19 to date, cumulative net FPI equity flows have turned into a net outflow of roughly $10 billion. By comparison, the previous decade from FY09 to FY18 saw net inflows of $100 billion, and the decade prior recorded positive inflows of $65 billion. Following the subsequent hike in the LTCG rate to 12.5%, net foreign portfolio outflows between FY25 and FY27 have approached $50 billion. Naturally, this is a multi-variable equation influenced by global interest rates, geopolitical tensions across Ukraine and the Middle East, and the artificial intelligence boom in the United States. However, in conversations with institutional allocators across Tokyo, Singapore, and Paris, India’s source-based taxation remains an acute structural irritant.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
The Indian debt market has been artificially suppressed by central bank interventions and high taxes, preventing it from functioning as a free market. This environment has historically flooded banks with cheap liquidity but penalised the savers who provide it.
“It is less about preferential treatment for equities and more about the stepchild treatment of fixed income. The debt market suffers from a combination of financial repression and punitive taxation. Over recent years, the Reserve Bank of India purchased ₹11.6 lakh crore of government securities—roughly 2.5% of GDP annually across FY25 and FY26—to suppress sovereign yields and support growth. While the central bank is now net selling bonds, it previously facilitated $143 billion of FCNR(B) deposit inflows and swapped them at subsidised rates, flooding commercial banks with cheap liquidity. As a result, interest rates have been managed by policy interventions rather than determined by the equilibrium of willing savers and borrowers.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
High earners in India currently face negative real returns on bank deposits after paying taxes, causing them to move money into stocks and gold. This flight of capital explains the current difficulty banks are having in growing their deposit bases.
“When artificial rate suppression is compounded by charging the highest marginal tax rate of 39% on interest income, post-tax returns fail to beat real inflation perceptions. A 7% fixed deposit yield yields negative real returns for anyone in the 30% to 39% bracket. Savers logically abandon fixed income and redirect capital into assets offering inflation protection, specifically equities, gold, and real estate. This explains why commercial banks face an uphill battle mobilising deposits.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
India’s financial system is heavily skewed toward equity, with a credit market that is significantly smaller relative to its stock market than global averages. This imbalance suggests the domestic lending and bond markets are severely underdeveloped for an economy of India’s size.
“The consequences for capital formation are profound. Non-government credit—spanning bank loans, NBFC lending, and corporate bonds—stands at just 65% of equity market capitalisation in India. That is the lowest credit-to-equity ratio globally, compared to 95% in the United States, between 125% and 195% across mature economies, and a global norm of 140%. We have cultivated a buoyant equity market while structurally stunting our credit and debt markets.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
Domestic tax policy is unintentionally pumping the stock market full of retail cash, driving up valuations to levels that cause foreign investors to sell. Correcting this requires either higher interest rates or lower taxes on savings to balance out where money flows.
“Because tax policy penalises debt, an enormous flood of domestic retail liquidity is forced directly into equities, sustaining elevated valuation multiples across the market. These rich valuations make it compelling for foreign institutional investors to take profits and withdraw capital, compounding foreign outflows. To resolve this distortion, policymakers must either allow market interest rates to rise to levels that compensate domestic savers post-tax, or lower the tax burden on interest income.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
Simplifying the tax on interest to a flat 20% could stabilise the financial system by drawing excess liquidity out of the stock market. This move would likely lower equity valuations to more sustainable levels and help build a stronger corporate bond market.
“If taxation on interest income were rationalised to a flat 20%, a meaningful portion of domestic capital would migrate out of overheated equity segments back into bank deposits and corporate bonds. That rebalancing would normalise equity multiples, revitalise the domestic credit market, and create a balanced asset framework capable of attracting institutional foreign capital across both debt and equity.”
— Ananth Narayan Gopalakrishnan, Former Whole-Time Member, SEBI
Automobiles
Mahindra & Mahindra Limited | Large Cap
Mahindra & Mahindra is a diversified Indian conglomerate and a global leader in tractor manufacturing and the Indian SUV market. The company operates across multiple sectors including financial services, technology, and hospitality through its various subsidiaries.
Management successfully protected profits during the quarter by using price hikes and cost-cutting measures to fight inflation. Investors should see this as a sign of high operational efficiency and the ability to maintain strong returns on equity even in a tough market.
“The defining keyword for the second quarter was resilience. Performance came in significantly ahead of market expectations despite navigating substantial operational challenges throughout the period. Geopolitical tensions drove commodity inflation across multiple inputs, requiring proactive interventions to prevent cost pressures from diluting our bottom line and key return metrics. Our operating teams executed an all-hands-on-deck effort across disciplined pricing actions, structural cost takeout programs, and operating leverage. That operational rigour delivered 25% revenue growth alongside a 21% return on equity. More importantly, this was a synchronised performance where every single business contributed to group earnings.”
— Dr. Anish Shah, Managing Director and CEO
The company’s diverse subsidiaries, particularly in finance and technology, are showing strong profit growth simultaneously. This trend suggests that the company’s value is being driven by multiple engines rather than just its core automotive business.
“We are seeing the true compounding power of the Mahindra federation. Our Growth Gems tripled their profit contribution, Mahindra Finance surged 61% with a meaningful earnings impact, and Tech Mahindra continues on a strong turnaround trajectory, up 33%. Across India, the underlying economic resilience has been remarkable. Despite crude volatility, input inflation, and higher borrowing costs, consumption remains exceptionally robust.”
— Dr. Anish Shah, Managing Director and CEO
Vehicle demand is so high that the company is struggling to expand production quickly enough to keep up. This massive order backlog provides a clear and visible revenue runway for the upcoming quarters.
“In automotive, we are seeing 20% volume growth, and we simply cannot build vehicles fast enough. Even after quadrupling our capacity and preparing to add another tranche in the coming months, demand continues to outstrip supply. Looking into the second half, inflationary pressures are stabilising, supported by softer crude prices.”
— Dr. Anish Shah, Managing Director and CEO
The company is shutting down loss-making international businesses to improve the overall profitability of its farm division. This strategic cleanup should result in higher margins for the segment regardless of local sales volume.
“Internationally, where we faced market headwinds, we executed decisive portfolio cleanups by shutting down operations across three underperforming entities. That rationalisation will substantially enhance international farm profitability. Consequently, on a consolidated basis across domestic and global markets, our farm equipment business will emerge stronger and more profitable than last year.”
— Dr. Anish Shah, Managing Director and CEO
The company is aggressively increasing its manufacturing space and expects these new plants to be fully utilised the moment they open. This rapid expansion is necessary to clear existing customer orders and convert them into revenue.
“We are expanding automotive manufacturing capacity by 27% this fiscal year and expect that expanded capacity to operate at near 100% utilisation almost immediately upon commissioning. Next year, we will add another 10,000 units of monthly capacity, which we also anticipate will run at full utilisation. Our primary operational challenge right now is adding capacity fast enough to fulfil outstanding order banks.”
— Dr. Anish Shah, Managing Director and CEO
A massive new plant in Nagpur is intended to double the company’s manufacturing capacity within two years. Management plans to maintain some spare capacity to ensure they can always meet surges in customer demand without long waiting lists.
“Looking further out, our greenfield Nagpur plant is designed to double our manufacturing footprint over the next two years. Ultimately, as an operating philosophy, I would rather run facilities at 85% to 90% capacity utilisation with a built-in buffer than operate at 100% and leave customer demand unfulfilled on the table.”
— Dr. Anish Shah, Managing Director and CEO
Financial Services
Life Insurance Corporation of India | Large Cap
Life Insurance Corporation of India is the country’s largest life insurer, maintaining a dominant market share through its vast agency force and growing digital presence. The company offers a comprehensive range of individual and group insurance solutions, including participating, non-participating, and unit-linked products.
Management is focusing on selling more protection policies, which are more profitable but show up differently in growth metrics than traditional savings plans. They expect the gap between total premium growth and these metrics to close as market conditions improve later this year.
“Our primary strategic focus over the past quarter has been on strengthening our individual and group protection portfolio. Protection products inherently carry different premium payment structures compared to large single-premium savings contracts, meaning the volume expansion in protection does not translate into an immediate, outsized spike in reported APE. Concurrently, heightened equity market volatility led to subdued consumer and distributor appetite for market-linked products like ULIPs, which further restrained APE expansion during the quarter. However, as operating conditions stabilise, we are confident that this divergence will narrow significantly over the second half of the fiscal year.”
— R. Doraiswamy, Managing Director and Chief Executive Officer
The company expects sales of market-linked products to bounce back following recent stock market volatility and distributor caution. Management is signalling a stronger performance for the second half of the year driven by their existing distribution network and a better product mix.
“As an institutional policy, LIC does not issue forward-looking quantitative guidance targets. What we have consistently maintained is an unwavering focus on profitable, sustainable growth, and our operating performance reflects that commitment. To address the first part of your question, the correction in domestic equity indices and broader market volatility during the second quarter dampened distributor momentum and customer demand for ULIPs. With market sentiment improving and our simultaneous push across high-margin protection and participating savings products, we expect customer interest in ULIPs to rebound in the coming months. Supported by this product mix, we anticipate strong momentum in the second half that will drive healthy, full-year APE growth. While I will not commit to a specific percentage, our underlying distribution strength positions us for an accelerated performance.”
— R. Doraiswamy, Managing Director and Chief Executive Officer
The CEO clarifies that recent margin improvements are primarily due to better internal operations rather than just changes in interest rates. This is important for investors as it suggests that profitability gains are sustainable and not just a result of temporary market movements.
“That perception is inaccurate. Positive operational variance has been a substantial and structural contributor to our expanding VNB margins over successive periods, driven by ongoing internal operational efficiencies. Second, while ULIPs witnessed a contraction in conventional APE terms, they generated positive growth on a Weighted Received Premium basis. LIC markets both single-premium and regular-premium ULIPs, and we saw healthy traction across single-premium structures, ensuring our aggregate inflows remained resilient. There was a modest contribution to reported margins from risk-free rate shifts and yield-curve movements, but we do not disclose interim line-item reconciliations; the complete VNB walk will be presented at the close of the financial year. Our core focus remains on enhancing operational cost discipline and driving profitable underwriting.”
— R. Doraiswamy, Managing Director and Chief Executive Officer
LIC is diversifying how it sells policies to rely less on individual agents, with bank partnerships now making up nearly 8% of new business. While the sale of IDBI Bank might change their exclusive deal, management believes their long-term relationship will protect their sales volumes.
“Over the past three years, LIC has systematically broadened its distribution architecture, expanding the contribution of bancassurance, corporate agents, brokers, and alternate channels to roughly 7.8% to 8% of total new business premium. On the banking side, IDBI Bank remains one of our premier partners and holds an exclusive pan-India bancassurance tie-up that contributes meaningfully to our volumes. As the government’s divestment process advances, a strategic promoter will acquire controlling equity, and if that group houses an existing life insurance arm, our exclusive arrangement may evolve. However, given our operational depth and entrenched relationship across IDBI Bank’s branch network, we do not foresee any decline in the overall volume of business originated through the partnership.”
— R. Doraiswamy, Managing Director and Chief Executive Officer
LIC must reduce its ownership in IDBI Bank to 15% to follow standard banking rules once the government completes its sale of the bank. This provides a clear two-year timeline for LIC to sell its remaining excess shares and bring its capital allocation in line with regulations.
“Current Reserve Bank of India banking regulations strictly prohibit an insurance company from holding a majority controlling stake in a commercial bank. LIC was granted an extraordinary regulatory dispensation by the authorities at the time, given the capital requirements and financial stress prevailing at IDBI Bank. Once the government divestment concludes and majority control transfers to the incoming promoter, standard regulatory frameworks will be reinstated. Under banking regulations, LIC will be required to bring its residual shareholding down to the statutory threshold of 15%. Upon closing the current transaction, LIC’s stake will reduce to approximately 19%, and we will utilise the permitted two-year regulatory window to orderly pare the remaining equity down to the mandated 15% level.”
— R. Doraiswamy, Managing Director and Chief Executive Officer
Engineering & Capital Goods
Bharat Forge Limited | Large Cap
Bharat Forge is a global technology-driven metal forming company specialising in safety-critical components for the automotive, energy, and defence sectors. The firm is currently undergoing a strategic pivot toward high-margin domestic manufacturing and advanced technology applications.
Management is navigating short-term profitability pressure caused by higher input costs and delayed pricing adjustments. Investors should note the ambitious target to reach 28% margins by next year as these cost pressures ease.
“Regarding margins, performance was definitely impacted by raw material inflation alongside the customary pass-through lag. We expect margins to improve quarter-on-quarter and recover to significantly higher levels than where we stand today. Our operational objective is to return toward the 28% mark by next fiscal year.”
— Amit Kalyani, Vice Chairman and Joint Managing Director
The company is undergoing significant structural changes in Europe while simultaneously investing heavily in new domestic capacity. The massive 1,350 crore capital expenditure program is expected to drive significant revenue growth starting in early 2025.
“We are absorbing certain exceptional costs tied to the restructuring of our German entity, which remains on track and will be fully completed by the middle of next year. On the top line, export growth has been robust across both automotive and non-automotive sectors. On the industrial front, we have secured approximately 2,000 crore of new business over the past six months. These orders will begin ramping up early next year as our newly added capacities come online. This represents one of our largest capex programs at close to 1,350 crore, starting commercial commissioning sequentially from the January–March quarter of this year through the end of next year.”
— Amit Kalyani, Vice Chairman and Joint Managing Director
Defence margins were temporarily suppressed because the company hired staff and built infrastructure before production actually started. Now that the ATAGS system has received bulk production clearance, investors can expect revenue and margin recovery in the defence segment starting next fiscal year.
“The margin contraction was driven by one-time development expenses for new products that have secured healthy order pipelines, combined with preparatory overheads. We had prepared manpower and operational infrastructure in anticipation of an earlier ramp-up for the Advanced Towed Artillery Gun System (ATAGS), so we absorbed those advance costs ahead of volume delivery. The positive development is that we received Bulk Production Clearance (BPC) for ATAGS roughly two weeks ago. Deliveries will commence from the first quarter of next fiscal year, allowing us to ship whatever volume the armed forces require.”
— Amit Kalyani, Vice Chairman and Joint Managing Director
Bharat Forge is aggressively shifting its manufacturing weight back to India, aiming for 90% of revenue to come from domestic plants. This strategy reduces reliance on struggling overseas units and focuses resources on the more profitable Indian operations.
“Currently, domestic manufacturing accounts for approximately 65% to 70% of total revenue, with overseas operations contributing 30% to 35%. Within two to three years, we expect India-based manufacturing revenue to expand to roughly 90% of our consolidated business. By FY29, domestic operations—including standalone Bharat Forge and domestic subsidiaries like defence, Kalyani Powertrain, and JS Auto Cast—will account for 80% to 85% of total revenue. Simultaneously, our objective is to bring overseas subsidiaries to operational break-even so they eliminate losses and function as strategic beachheads to capture global contracts.”
— Amit Kalyani, Vice Chairman and Joint Managing Director
The company is in a very strong liquidity position with substantial cash on hand and incoming advances from defence contracts. This financial cushion allows them to execute large projects without needing more equity capital or debt.
“We recently concluded a 2,000 crore fundraise and currently hold 4,000 crore in cash, so there is no requirement for further fundraising. In addition, with the commencement of ATAGS bulk production, we will receive working capital advances from the armed forces to fund production. We also anticipate substantial defence contract awards following Defence Acquisition Council (DAC) clearances for tenders where we have already been selected as the preferred bidder, which will be significantly larger than orders secured in the first half.”
— Amit Kalyani, Vice Chairman and Joint Managing Director
Software Services
Mphasis Limited | Mid Cap
Mphasis is a global information technology solutions provider specialising in cloud and cognitive services. The company focuses on architecture-led transformation to help enterprise clients modernise legacy systems and integrate artificial intelligence into core operations.
While traditional discretionary IT spending remains muted, companies are pivoting toward short-cycle, high-impact investments in corporate integration and market expansion. This shift benefits specialised providers who can guarantee business outcomes rather than just providing general technical labour.
“I would not say those concerns were entirely unfounded, because traditional discretionary spending as the industry historically defined it has not returned. Instead, current enterprise spending is strictly directed toward mission-critical foundational investments. That has generated a concentrated burst of shorter-cycle spending across corporate integrations, market expansions, and targeted revenue-unlocking initiatives, which has expanded our addressable market. However, this recovery will not lift all IT providers equally. Realising these gains requires acute specialisation across technical architecture, vertical industry domain knowledge, deep enterprise context, and the ability to guarantee operational outcomes.”
— Nitin Rakesh, Chief Executive Officer
The IT services industry is moving away from billing for hours worked toward long-term partnerships focused on implementing complete AI technology stacks. This structural change in how clients buy technology services is forcing a modernisation of service delivery frameworks.
“The industry’s commercial engagement model is fundamentally shifting away from traditional time-and-materials, input-led efficiency deals toward multi-year transformation partnerships where enterprises progressively deploy the full AI stack at scale. Enterprise consumption patterns are undergoing a profound evolution. Chief Information Officers are explicitly directing their technology leadership teams to abandon legacy ways of working in favour of modern frameworks, fundamentally altering both the enterprise buying centre and the strategic outcomes clients expect technology partners to deliver.”
— Nitin Rakesh, Chief Executive Officer
The company has narrowed its full-year revenue growth guidance to the low double-digit range following strong deal intake in the first half. This reflects high management confidence and visibility in client spending despite broader macroeconomic fluctuations.
“We began the fiscal year guiding for high-single-digit to low-double-digit revenue growth. Backed by our performance across the first two quarters, our expanding pipeline, and recent large deal closures, we have firmed up our expectations toward the low double-digit mark. Fortunately, underlying corporate IT budgets and strategic enterprise initiatives do not fluctuate with the daily news cycle or market sentiment. Enterprise clients formulate deliberate, long-term operational plans and execute them systematically. Supported by our sustained deal intake and the operational drivers Nitin outlined, we have strong visibility and confidence in meeting our stated full-year guidance.”
— Aravind Viswanathan, Chief Financial Officer
The new Tria AI platform is moving into live production with clients and facilitating a shift toward outcome-based revenue-sharing models. This evolution suggests a potential improvement in earnings quality by aligning company compensation with client revenue growth.
“It is slightly premature to publish isolated financial metrics regarding specific client counts or standalone revenue booked directly under Tria. However, as highlighted in our earnings materials, we are actively transitioning multiple enterprise clients into live production environments on the platform. Tria is opening up substantial commercial opportunities across business process reimagination, operational modernisation, and core technology transformation. During the quarter, we signed a major outcome-based contract with a financial broker-dealer to accelerate platform adoption across new advisor networks. That engagement is structured around an aligned revenue-share model, directly linking our commercial compensation to the new revenue pools we help them unlock. Client reception across our target verticals has been very encouraging, and we have established specialised value streams across banking, insurance, and healthcare anchored on Tria. As these deployments mature over the coming quarters, we will provide more granular metrics, but early operational traction strongly reinforces our underlying thesis.”
— Nitin Rakesh, Chief Executive Officer
Management is prioritising market share growth and strategic AI investments over immediate margin maximisation in a competitive environment. Investors should expect a temporary increase in onshore delivery costs before execution shifts back to lower-cost offshore locations as projects mature.
“We are operating in an environment characterised by elevated competitive intensity and ongoing industry recalibration regarding software, token, and implementation service costs. Whenever a compelling opportunity emerges to capture market share or expand our wallet share within strategic enterprise accounts, we pursue it aggressively, provided the economics remain financially attractive and accretive over the contract life cycle. We have consciously prioritised growth by continuing to fund strategic investments into Tria, expanding front-end sales coverage, and accommodating an initial increase in onshore delivery, where early-stage AI implementations naturally originate. As these enterprise programs scale, execution will normalise back toward our traditional global delivery footprint. Our primary focus is driving growth, while profitability remains well within our operational control.”
— Nitin Rakesh, Chief Executive Officer
Operating margins are currently at the lower end of the target range due to intentional spending on AI platforms and localised delivery teams. The company maintains a strict margin corridor of 14.75% to 15.75%, providing a predictable floor for profitability.
“Our reported margin is tracking within our guided range, currently toward the lower boundary. We have absorbed upfront investments into Tria through targeted capabilities, funded expanded infrastructure in our SDNA business, and managed the cost impact of a heavier on-site delivery mix required for early-stage enterprise AI deployments. Our operational commitment is to prioritise revenue growth while managing execution to ensure we remain comfortably within our 14.75% to 15.75% margin corridor through the remainder of the year.”
— Aravind Viswanathan, Chief Financial Officer
Defence
BEML Limited | Small Cap
BEML is a public sector undertaking that manufactures a wide range of heavy equipment for mining, construction, defence, and rail and metro segments. It is a key player in India’s defence and urban infrastructure sectors, supplying specialised vehicles and rolling stock.
Management explains that current low margins are due to high raw material costs and a focus on lower-margin metro projects in the first half. Investors should watch for a significant margin recovery in the second half as the company shifts production to higher-margin mining and defence equipment.
“Top-line momentum has been exceptionally strong through the first half, and we expect that pace to sustain across the third and fourth quarters, allowing us to maintain robust full-year growth. On operating margins, EBITDA currently stands at 4.4%, primarily because capital goods manufacturing involves long lead cycles where revenue conversion and higher profitability are heavily back-ended into the second half. Margin performance is fundamentally dictated by raw material costs as a percentage of the value of production, which rose year-on-year during the first half. In our portfolio, material cost intensity varies significantly by division: raw material costs represent roughly 48% of value in mining equipment, 52% to 53% in commuter rail, 58% to 60% in defence, and approximately 80% in metro rolling stock. As execution shifts in the third and fourth quarters toward high-margin mining equipment, commuter rail, and export contracts, profitability will expand substantially. I remain confident we will meet our original double-digit EBITDA margin guidance and return to normalised FY25 levels.”
— Shantanu Roy, Chairman & Managing Director
The company has officially increased its full-year revenue growth target from 30% to over 35%. This upgrade, combined with a commitment to double-digit annual margins, suggests strong confidence in the execution of the existing order book.
“Yes, full-year revenue growth should exceed 35%, reflecting an upgrade over our initial 30% guidance. Regarding profitability, our double-digit EBITDA guidance applies to the entire financial year, not merely the fourth quarter. If you look at our half-year performance, we have transitioned back into operational profitability compared to an operating loss during the same period last year. On a net profit basis, the sequential comparison appears optically muted because we were in a loss position in Q2 of the previous year with zero tax liability, whereas this year includes standard tax provisions. Underlying profitability has turned positive from the second quarter, and both the third and fourth quarters will deliver progressively stronger margins to lift the full-year average into double digits.”
— Shantanu Roy, Chairman & Managing Director
BEML has successfully built a local network of suppliers to replace international sources that were previously causing delays. This stabilised supply chain is the key reason the company can now accelerate its manufacturing and meet higher revenue targets.
“Supply-side challenges have largely been ironed out, as evidenced by our 37% top-line growth. Over the past three to four years, we have systematically developed and stabilised our indigenous domestic vendor ecosystem. That localisation effort took time to mature, but the domestic supply chain is now functioning predictably, which is directly enabling our accelerated delivery pace.”
— Shantanu Roy, Chairman & Managing Director
The company is aggressively expanding its international footprint, targeting a $200 million export order book by year-end. Growth in exports is highly beneficial for investors because these international orders typically carry higher profit margins than domestic contracts.
“On the export front, our active order book stands at $120 million, with another $25 million where we are the lowest bidder (L1), and we expect our export order book to approach $200 million by the end of this financial year. Export execution is accelerating, and we expect international shipments to contribute at least 6% to 7% of total revenue.”
— Shantanu Roy, Chairman & Managing Director
Management has set an ambitious goal to secure ₹20,000 crore in new orders for the full year. Investors should note the strategic focus on defence and mining, which are intended to balance the dominant rail and metro business.
“We are targeting total full-year order inflows of ₹20,000 crore, which should break down to roughly 50% from rail and metro, 30% from defence, and 20% divided between mining and exports.”
— Shantanu Roy, Chairman & Managing Director
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Quotes in this newsletter were curated by Shahid Barmare.
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Disclaimer: We’ve used AI tools in filtering and cleaning up these quotes, so there may be some mistakes. Now, if you are thinking why we are using AI, please remember that we are just a small team of 5 people running everything you see on Zerodha Markets 😬 So, all the good stuff is human, and mistakes are AI.