Tata Elxsi is a design and technology services company that is part of the $100 billion Tata group. Founded in 1989, Tata Elxsi offers design and technology services to industries such as automotive, broadcasting, communications, healthcare, transportation and media & entertainment. The company is headquartered in Bengaluru, India and has over 7500 employees across 21 global design studios and offices.
Tata Elxsi helps customers reimagine their products and services through design thinking and the application of digital technologies such as IoT, Cloud, Mobility, Virtual Reality and Artificial Intelligence. The company works with leading OEMs and suppliers in the automotive and transportation industries to develop next-generation electric and autonomous vehicles. It also works with media providers to transform content creation and delivery for digital platforms.
Tata Elxsi – Founders and Team
Tata Elxsi was founded in 1989 by three entrepreneurs – George Muthoot, Sunil Khaitan and Ashok Jhunjhunwala.
George Muthoot comes from the business family that owns Muthoot Group, a leading Indian financial services conglomerate. Sunil Khaitan has over 25 years of experience in the software industry. Ashok Jhunjhunwala is a professor at IIT Madras and a pioneer in nurturing the electronics industry in India.
The current CEO and Managing Director of Tata Elxsi is Manoj Raghavan, who took over in 2017. The company is now led by a diverse management team comprising experts from technology, design and business strategy domains.
Tata Elxsi – Mission and Vision
The mission of Tata Elxsi is:
“To bring together the best talent and newest technologies to drive innovation, create intellectual property and provide strategic design and technology services to leading industry brands worldwide.”
The vision statement of the company is:
“To be the design company of choice for organizations seeking the most innovative products, consumer experiences and brand value.”
Tata Elxsi – Industry Overview
Tata Elxsi operates in the global design and technology services industry. This industry is estimated to be over $1 trillion and comprises companies that provide engineering services, IT consulting, digital solutions, R&D and design services.
The industry is driven by the digital transformation initiatives of companies across automotive, healthcare, telecom and other verticals. Technologies like cloud computing, IoT, AI and advanced analytics are powering the growth in this sector.
India has emerged as a leading hub for IT and design services, with over $200 billion in revenues. Major Indian players in this space include TCS, Infosys, Wipro, HCL and Tech Mahindra. The industry employs over 5 million professionals in India.
Global companies are leveraging Indian design and technology service providers for their cost advantage and availability of skilled talent. The industry is projected to grow at over 12% CAGR through 2025.
Tata Elxsi – Products and Features
Tata Elxsi offers services across the following areas:
Transportation: Services for automotive OEMs and suppliers for in-vehicle infotainment, connected car solutions, EV technologies, ADAS and autonomous driving.
Media and Communications: Services for broadcasters, content owners and media providers for OTT platforms, content localization and digital transformation.
Healthcare: Services for medical device companies, diagnostic providers, hospitals and healthcare ecosystems for product design, regulatory compliance and digital health platforms.
Industrial Design: Services for consumer electronics, home automation, smart appliances and white goods industries. Offerings cover industrial design, UX and usability engineering.
The company follows a Design Thinking approach and leverages technologies like AI, ML, VR and 3D printing to deliver innovative solutions for clients. Some flagship products and platforms offered by Tata Elxsi include:
- Tether: An IoT-based connected car platform
- FalconEye: Video quality measurement system for media and telecom
- Healthcare Insights Platform: Analytics solution for medical data
- Tethered Home: Home automation platform
Tata Elxsi – Business Model
The business model of Tata Elxsi can be understood based on the following parameters:
Service Offerings: Tata Elxsi provides end-to-end research, design, development and testing services leveraging digital technologies. This includes product design & engineering, IT consulting, systems integration and emerging technology services around IoT, AI, Cloud etc.
Domain Expertise: The company has deep domain knowledge across key verticals – automotive and transportation, media and communications, healthcare and consumer electronics. The industry expertise allows delivering customized solutions.
Global Delivery: Tata Elxsi has a hybrid delivery model by combining offshore delivery from India with local presence across North America, Europe and APAC markets. This global delivery model provides cost optimization.
Partnership Approach: The company works closely with clients as a strategic partner to understand business needs and deliver design-led technology solutions. Long-term partnerships are built for continued engagements.
Resources: Tata Elxsi has a talent pool of over 7500 employees comprising developers, designers, engineers, artists and consultants. It also has strategic alliances with technology providers like Autodesk, Nvidia, Microsoft, Google Cloud etc.
IP Creation: The company focuses on creating reusable and differentiating IP in emerging tech areas that can be licensed or reused across projects. Some key IPs are in the areas of ADAS, AI, VR, Computer Vision, Machine Learning.
Tata Elxsi – Revenue Model
Tata Elxsi follows a simple revenue model based on offering professional and technology services to global clients across industries:
Time and Materials: A majority of the company’s revenues come from time and material contracts where billing is based on the hours invested and cost of resources deployed for the project. The hourly rates and pricing depend on the region, technology skills and domain expertise required.
Fixed Bid Projects: Some engagements are done on fixed bid basis where a predefined scope is delivered for a fixed price. The risk and effort estimation is done upfront in this model.
Licensing: Tata Elxsi licenses some of its niche platforms and IPs to clients for integration into their products and services. The licensing model generates additional revenue.
Annual Maintenance Contracts: Post implementation AMCs are signed with clients to provide continued maintenance and support for the solutions delivered by the company. The AMCs generate predictable recurring revenue streams.
Tata Elxsi – Shareholding Pattern
Tata Elxsi is part of the diversified Tata Group. The shareholding pattern of the company is as follows:
- Promoter Group – Tata Sons – 45.79%
- Mutual Funds – 13.93%
- Foreign Portfolio Investors – 13.73%
- Financial Institutions/Banks – 8.83%
- Individuals – 8.61%
- Insurance Companies – 4.68%
– Others – 4.43%
Tata Sons holds the majority stake and provides strategic direction. The company follows good corporate governance standards overall. The management control is with professional executives like the CEO and leadership team.
Tata Elxsi – Funding
Tata Elxsi is a mature listed company that generates healthy cash flows from operations. It does not require any external funding.
Funding history:
- 1989: Tata Elxsi was founded with initial seed funding from the founders and the Tata Group. The exact amounts are not disclosed.
- 1993: The company raised its first round of funding worth $2 million from a Tata Group entity.
- 1997: Tata Elxsi raised $5.7 million in venture round from ICICI Ventures.
- 1997: The company went public with its IPO worth ₹13 crore. The shares were oversubscribed 55 times in the IPO.
- 1999: ICICI Ventures exited by selling its stake to mutual funds for around $27 million, getting 5x returns.
Since then, Tata Elxsi has relied on internal cash flows to fund its growth. Its prudent management and cash flow generation has ensured it stays debt free.
Tata Elxsi – Partnerships
Tata Elxsi has forged partnerships with leading technology companies to strengthen its offerings:
- NVIDIA: Partnership to set up a Robotics Research Lab to develop AI-based solutions for autonomous vehicles.
- Autodesk: Alliance to deploy Autodesk software like Fusion 360 for digital prototyping solutions.
- Google Cloud: Partnership to develop cloud-based solutions leveraging Google Cloud Platform technologies.
- Microsoft Azure: Alliance to build solutions for media & entertainment customers using Azure media services.
- Adobe: Partnership to create next-gen OTT, UX and immersive media solutions leveraging Adobe’s portfolio.
- Amazon Web Services: Collaboration to develop IoT, big data and machine learning solutions on AWS cloud.
- SAP: Partnership to deliver enterprise transformation solutions for clients leveraging SAP platforms and technologies.
These technology alliances allow Tata Elxsi to get early access to new innovations and craft cutting-edge solutions for clients.
Tata Elxsi – Growth
Tata Elxsi has charted an impressive growth path fueled by new age technologies and process excellence. Some key highlights of the company’s growth trajectory are:
- Revenue has grown from ~Rs 600 crores in FY2010 to over ~Rs 2300 crores in FY2022, clocking a CAGR of 15%.
- The company has delivered industry leading earnings growth over the last decade with a CAGR of 22% in EBITDA.
- It has maintained consistently high return on capital employed of over 30% each year.
- Tata Elxsi is amongst the most valuable listed technology companies in India with a market cap of over Rs 40,000 crores.
- From around 2000 employees in 2010, the company’s workforce has expanded to over 7500 in 2022.
- It has consistently grown faster than the overall IT services industry, underscoring its robust business fundamentals.
Factors that have driven Tata Elxsi’s market beating growth:
- Focus on key verticals: By building deep expertise in niche verticals like automotive, media and healthcare, Tata Elxsi has emerged as a leader in these segments. Long-term client relationships have led to sustainable growth.
- Investment in emerging technologies: Continuous investments in R&D and new technologies like AI, ML, VR, IoT gave the company the first mover advantage in high potential areas.
- Stable Leadership: The professional management team led by CEO Manoj Raghavan has provided consistent strategic direction and execution excellence to achieve profitable growth.
- Global expansion: Increased global footprint has helped win large deals from overseas clients. Revenues from Europe and US now account for 68% of the total.
Tata Elxsi – Competitive Strategy
Tata Elxsi employs the following competitive strategies that have helped it establish a leading market position:
- Design-led offerings: Design Thinking led approach differentiates the company’s offerings. Bringing design and technology together allows crafting cutting-edge experiences and products.
- Investments in emerging technologies: Continuous R&D and strategic investments in next-gen technologies like electric and autonomous vehicles, OTT platforms, Digital Health etc. make the company future-ready.
- Specialized talent pool: Tata Elxsi has built specialized teams in areas like Industrial Design, User Experience, 3D Visualization, Systems Integration etc. This talent pool delivers innovation and a competitive edge.
- IP creation: Developing niche IPs in areas like computer vision, vehicle tracking, media localization etc. creates unique value propositions for clients.
- Global delivery: The company’s hybrid onsite/offshore delivery model blending talent from India and global markets provides scale and cost optimization.
Tata Elxsi – Competitors
Tata Elxsi operates in a competitive industry. Some of its major competitors include:
- Global IT Services Firms: Accenture, Capgemini, Cognizant, TCS, Wipro
- Pure Play ER&D Companies: KPIT, Cyient, Quest Global
- Indian IT Midcaps: L&T Infotech, MindTree, Mphasis
- Global Design Firms: PTC, Aricent
- Automotive Captives: Mercedes-Benz R&D, BMW India Engineering Centre
While the large IT services firms have scale, Tata Elxsi scores over them with its design-led offerings and vertical focus. Against pure-play ER&D companies, it differentiates itself with end-to-end capabilities spanning technology and design. Its investments in building domain capabilities and niche talent give it an edge over smaller Indian IT peers.
Tata Elxsi – SWOT Analysis
SWOT analysis for Tata Elxsi highlighting its internal strengths and weaknesses as well as external opportunities and threats:
Strengths
- Strong parentage of the Tata Group
- Deep domain expertise in key verticals
- Proven track record of innovation and IP creation
- Global delivery model combining onsite and offshore
- Robust financial performance and consistent growth
Weaknesses
- High customer concentration with top accounts contributing major share of revenues
- Brand value still lower than larger peers
- Limited scale compared to industry leaders
Opportunities
- Digital transformation initiatives across industries
- Emerging technologies like Electric and Autonomous Vehicles
- Growth of OTT and digital media consumption
- Expanding application of AI, ML and data analytics
- Increasing electronic content in automotive and aerospace sectors
Threats
- Disruptive trends like EVs impacting automotive sector
- Growth slowdown in key markets like US and Europe
- Geopolitical factors like trade wars and protectionism
- Competition from Silicon Valley technology firms
- Attrition of specialized talent
Tata Elxsi – Marketing Strategy
Tata Elxsi employs the following strategies as part of its marketing and branding efforts:
- Thought leadership: The company actively participates in industry events and releases research papers, articles to establish thought leadership, especially in emerging tech areas.
- Public Relations: Positive media coverage is regularly generated in leading technology and business publications to improve visibility.
- Digital marketing: Social media platforms like Linkedin and Twitter are leveraged extensively for promotions, along with email campaigns.
- Website and SEO: A dynamic, content-rich website focused on services offered aids SEO and inbound lead generation.
- Advertising: Print, television, outdoor and digital ads focused on company’s technology capabilities and IoT solutions. Selective advertising in relevant industry forums.
- Participation in events: Tata Elxsi regularly participates in prominent industry events as sponsors or exhibitors to engage with prospects.
- Analyst Outreach: Influential industry analysts and advisories firms like Gartner are targeted to gain positive reviews and recognition.
- Publicity of awards: Awards won by the company are publicized proactively through press releases and other channels.
Tata Elxsi – Innovations and Initiatives
Some of the key technology innovations and new initiatives from Tata Elxsi are:
AUTONOMAI – Autonomous Car Software
One of the company’s biggest innovations is AUTONOMAI, a robust software platform for developing autonomous vehicles. Its advanced navigation, deep learning and computer vision technologies set it apart.
Tether IoT Platform
Tether is an end-to-end IoT platform that allows seamless integration and interoperability between connected devices through advanced analytics and cloud technology. It powers many next-gen IoT solutions.
Hybrid Broadcast Broadband for OTT
An innovative offering that enables broadcasters to seamlessly combine OTT and broadcast content into a unified experience across devices like mobiles, tablets and televisions using cloud and CDN technologies.
FalconEye Media Quality Management
Proprietary solution combining AI/ML for objective video quality measurement and monitoring for digital media companies. Has seen wide adoption amongst broadcasters and video OTT platforms.
Digital Health Innovation Center
Dedicated facility opened in Bengaluru to showcase digital health solutions using Virtual Reality, AI and other emerging technologies for pharma and medtech companies.
Tata Elxsi – Awards and Recognitions
Tata Elxsi has received several prestigious awards recognizing its technological excellence and innovative solutions:
- ET Best Tech Brands 2019 – Tata Elxsi won top honors in the “Global Technology Services Provider” category
- NASSCOM Engineering and Innovation Excellence Awards 2020 – Winner in “ER&D Services” category
- Frost & Sullivan Awards 2021 -Received the “Company of the Year” award in the Automotive Infotainment industry
- Zinnov Awards 2022 – Adjudged the “ER&D Services Leader” and amongst the top innovators in IoT technology services
- Golden Peacock Award for Corporate Ethics 2021 – Received this prestigious award instituted by the Institute of Directors, India
- ET Innovative 100 – The company has been consistently featuring in ET’s listing of India’s most innovative enterprises
- CSR Health Impact Awards 2021 – Won the “Excellence in Community Development” category for its COVID-19 relief efforts
The awards and industry recognition validate Tata Elxsi’s leading position as a design-focused technology provider known for path breaking innovations.
Tata Elxsi – Investments
Some of the major investments made by Tata Elxsi over the years include:
- Invested ₹230 crores over 2016-18 towards construction of its Global Delivery Center in Thiruvananthapuram, Kerala which serves as a key offshore delivery hub with 4000+ employees.
- Invested ₹100 crores in 2015 to expand the automotive technology center with state-of-the-art labs in Detroit, United States to cater to American automotive customers.
- Invested ₹160 crores since 2019 towards center of excellences and infrastructure for new technologies like AI, Robotics and Digital Health.
- Acquired growth capital investments like data analytics company Graphene Semiconductor Services for ₹80 crores in 2019 to strengthen technology capabilities.
- Committed over $25 million towards R&D and incubating solutions in strategic focus areas like Autonomous Vehicles, Digital Media and Healthcare.
- Investments towards IP creation and filing hundreds of patents across key markets.
These sustained investments have allowed the company to stay ahead of the technology curve and cater to evolving customer demands.
Tata Elxsi – Mergers and Acquisitions
Tata Elxsi has relied more on organic growth compared to acquisitions. Some of the selective acquisitions done by the company include:
- 2009: Acquired Italy based Gyan Data for €6.4 million. The deal helped strengthen presence in European auto infotainment space.
- 2011: Acquired Davidse Associates, a digital marketing solutions company based in Belgium. Helped expand offerings for media & telecom sector in Europe region.
- 2019: Acquired Graphene Semiconductor Services, a specialist provider of embedded software and systems for ₹80 crores. Bolstered capabilities in chip design services.
- 2020: Acquired cognitive platforms company Fractal Ink Design Studio for an undisclosed sum. Expanded offerings in new age areas like cloud, IoT and AI.
While M&A has been selective, Tata Elxsi prefers the partnership route to gain capabilities in new technologies and services. Alliances like the one with NVIDIA for robotics and VR reflect this partnership led approach.
Tata Elxsi – Controversies
Tata Elxsi has maintained high standards of corporate governance and compliance and has managed to steer clear of any major controversies.
Some minor controversies it faced:
- In 2016, the company was among the IT firms investigated for alleged excessive H1B visa applications. However, it was found compliant with all regulations.
- In 2017, the company faced some activist protests regarding alleged discrimination against Dalit employees. However, the company denied the charges.
- Few former employees have over the years registered complaints regarding HR issues like wrongful termination on anonymous sites like Glassdoor. But overall attrition rates at Tata Elxsi remain low indicating good HR practices.
Barring these minor episodes, Tata Elxsi continues to be regarded as an ethical company with robust leadership. Its high corporate governance standards have ensured no major controversies.
Tata Elxsi – Challenges Faced
Some of the key challenges faced by Tata Elxsi:
- Maintaining growth momentum and revenue quality as top customers become larger and account for higher revenue share
- Managing talent churn and retaining specialized skills in niche technologies like AI/ML amidst talent crunch
- Continuously innovating offerings as new technologies like quantum computing and 5G emerge
- Facing pricing pressures for commoditized ER&D services due to competition from pure play offshore providers
- Geopolitical changes like Brexit, immigration restrictions affecting ability to deploy key talent across global locations
- Disruptive business models in core verticals like auto sector’s shift from combustion to electric vehicles
- Identifying and scaling new growth areas to diversify from legacy offerings
The company is mitigating above challenges through steps like broadening customer base, onboarding campus hires in new technologies, progressing on IP led offerings and forging university collaborations to groom talent.
Tata Elxsi – Future Plans and Aspirations
Tata Elxsi is poised for rapid growth based on its future plans:
- When Targeting over 20% YoY revenue growth through large deal wins from global customers
- Expanding service portfolio in new technologies like Metaverse, Web 3.0, Blockchain etc.
- Developing products and accelerators for niche segments like OTT, Connected Cars, Digital Health
- Scaling key verticals like Communications, Healthcare; Expanding beyond Automotive vertical
- Leveraging partnerships with leading technology vendors for solution development
- Broadening talent pool with niche skills in areas like AI/ML, Robotics and UX Design
- Increasing R&D outlays to 8-10% of revenues with focus on patents registration
- Exploring strategic acquisitions for critical technology capabilities or IP
- Expanding presence in critical markets like Japan, South Korea for growth and risk mitigation
The company aims to sustain 25%+ EPS growth and 40%+ RoCE in line with its long track record of industry leading profitability.
FAQs About Tata Elxsi Business Model
What is unique about Tata Elxsi?
Tata Elxsi differentiates itself through its design thinking led approach, deep domain focus with specialized talent and IP creation ability in emerging technologies.
How does Tata Elxsi work?
It follows an offshore delivery model blended with onsite teams to provide end-to-end R&D and technology services on a time & material or fixed bid basis across automotive, media and healthcare verticals.
How does Tata Elxsi make money?
Its revenues come from time & material software development services, IP licensing, fixed bid projects and annual maintenance contracts from Fortune 500 customers primarily in three key verticals.
What is the main business of Tata Elxsi?
Tata Elxsi is a design and technology services company. Its main business is providing research, design, development and testing services leveraging technologies like IoT, AI, cloud etc. for industries like automotive, media, healthcare.
What are the products of Tata Elxsi?
Some of the flagship products and platforms developed by Tata Elxsi include Tether (IoT platform), FalconEye (media quality management), Autonomai (autonomous vehicle software), Tethered Home (home automation) among others.
How is Tata Elxsi different from TCS?
While TCS is a general IT services firm, Tata Elxsi is focused on niche verticals like automotive, media and healthcare with design-led offerings. It is positioned as a specialist technology player.
Who are the clients of Tata Elxsi?
Its key clients are major auto OEMs like Jaguar Land Rover, Renault Nissan, FCA; broadcasters like Star TV, Zee; healthcare majors like GE, Philips and leading electronics, aerospace companies across US, Europe and APAC.
Who is the competitor of Tata Elxsi?
Its competitors are IT services firms like TCS, Infosys, global ER&D companies like KPIT, Quest Global as well as design houses like PTC.
Is Tata Elxsi a profitable company?
Yes, Tata Elxsi has been a highly profitable company with industry leading margins of 25%+ historically. It has delivered consistent YoY growth in revenues and profits.
Is Tata Elxsi an AI company?
Yes, Tata Elxsi offers a wide range of AI-based solutions and services and has invested significantly into R&D and IP creation in AI, ML technologies.
Does Tata Elxsi manufacture semiconductors?
No, Tata Elxsi does not manufacture semiconductors or hardware products. It is focused on providing software-led technology services and solutions.
What is the full form of Elxsi?
The name Elxsi stands for “Electronics Software System Integration”. It indicates the company’s focus on electronic product engineering services.
Is Tata Elxsi a product based company?
Tata Elxsi is predominantly a services company though it does own IP and platforms like Autonomai, Tether, FalconEye etc. in specific technology areas.
Which Tata company will manufacture iPhone?
Tata Group has signed an agreement to assemble and manufacture iPhones in India but the specific entity within Tata is not decided yet.
Which sector is Tata Elxsi in?
Tata Elxsi operates in the information technology/engineering R&D services sector.
Is Tata Elxsi a VFX company?
No, Tata Elxsi is not a VFX company. It focuses on embedded product engineering services.
Is Tata Elxsi a good buy for long term?
Tata Elxsi is considered a good stock to hold from a 2-3 year perspective given its leadership in niche domains and robust financial track record.
Is Tata Elxsi a good investment?
Yes, Tata Elxsi offers a good investment opportunity given its strong fundamentals, high growth and profitability and promising outlook. But due diligence is advised as with any stock.
What is the future of Tata Elxsi?
The future outlook for Tata Elxsi looks promising given the growth across its key verticals like auto, media and healthcare along with its investments in next-gen technologies.
Is Tata Elxsi a multibagger?
Tata Elxsi stock has delivered multibagger returns of over 700% in last 5 years. It has potential to continue growing at a healthy pace given its performance and prospects.
Is Tata Elxsi stock overvalued?
While Tata Elxsi trades at premium valuations, it is justifiable given its higher growth, margins expansion and leadership in niche domains. But intermittent corrections are likely.
Is Tata Elxsi a large cap company?
Yes, Tata Elxsi with a market capitalization of over Rs 40,000 crores is categorized under large cap companies.
What is the profit growth of Tata Elxsi?
Tata Elxsi has registered consistent YoY growth of 20%+ in profits and EPS over the last decade.
Which Tata company makes semiconductor?
Tata Group has announced plans to enter the semiconductor sector but the exact entity is not finalized yet.
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