Harris forecasts a sequential revenue growth of over 10% in the fourth quarter, following a $3 million revenue loss due to a cyber-attack impacting a major client in the third quarter. This growth will be fueled by organic demand, alongside the integration of its ES-Tec acquisition.
For the October–December quarter (Q3FY26), Tata Technologies recorded revenue of ₹152.7 crore, profit after tax of ₹6.6 crore, and margins of 14.1%.
Post-adjustment for the one-time costs related to the cyber incident, margins were approximately 16.5% in the second quarter. The company anticipates margins to approach this level in the fourth quarter, aiming to return to around 18%, consistent with FY25 levels, over the next fiscal year.
Rising demand in automotive engineering and R&D, particularly as global OEMs resume delayed programs, is further bolstering management’s confidence in a persistent upcycle for the business.
These are edited excerpts from the interview.
Q: Profits are down 96%, can you explain what led to that? There is a labour code, there is an exceptional item on account of an acquisition, and will the acquisition-related expense recur?
A: We have made adjustments due to the new labour laws introduced in India and have accounted for costs tied to the ES-Tec transaction. Excluding these, the business has shown growth both sequentially and year-on-year. With the one-off impact from the third quarter not affecting our fourth quarter results, we are very optimistic about a strong finish to the year and our prospects for FY27.
Q: You have projected over 10% sequential growth in the fourth quarter. How much of this is organic versus stemming from the ES-Tec acquisition?
A: We expect to surpass 10%; we’re being somewhat conservative with the 10% estimate. About 4% to 5% will come from ES-Tec, with the remainder being organic. In the third quarter, we faced setbacks due to a cyber-attack on one of our largest customers, which impacted our ability to bill for certain engagements in October. However, that business rebounded in November and December and will positively impact the fourth quarter.
Moreover, the growth we’re experiencing, the new contracts we are securing, and the absence of the issues that complicated the third quarter all contribute to our optimism for a strong year-end.
Q: What was the revenue loss in the third quarter due to the cyber-attack, and will organic growth in the fourth quarter exceed 5%?
A: The revenue hit from the cyber-attack surpassed $3 million, and it was a one-off event. We do not anticipate a repeat in the fourth quarter or in FY27. We believe that the sequential improvement we expect in the fourth quarter will carry into FY27, leading to double-digit growth in top-line revenue.
The increased volume will certainly enhance margins. During the industry slowdown, we made a conscious decision to protect our capacity, knowing that our clients would eventually return with investments in new products. This capacity can now be leveraged as deal signings translate into executable business.
Q: Margins declined in the third quarter despite revenue growth. Can you clarify this?
A: We prioritized capacity for our largest client and managed the newly won deals in the third quarter. Additionally, we implemented salary increments and adjusted for the new labour laws, which impacted margins. We view the third quarter margins as a low point for earnings and see the fourth quarter as the start of the momentum needed for margin improvement—not just in the fourth quarter but extending into the next fiscal year.
Q: You mentioned expecting margins to return and surpass the adjusted levels from the second quarter. Can you specify the expected margins and the key factors driving this recovery into FY27?
A: In the second quarter, after adjusting for the one-off cyber-related costs, margins were approximately 16.5%. We certainly expect to approach this margin in the fourth quarter and aim for about 18% next year, aligning with FY25 levels. Our planning revolves around this target, and we are committed to achieving operational efficiency and delivery excellence. Our confidence is based not merely on aspiration but on rigorous data-driven planning for future quarters.
Q: JP Morgan recently noted an improving demand environment in auto R&D due to trade deals and reduced tariff uncertainty. Is this reflected in your current experiences?
A: Absolutely, what we are witnessing aligns perfectly with that observation. The automotive sector, being product-driven, has faced geopolitical headwinds and regulatory challenges, particularly concerning EVs, over the last 18-24 months. This situation has led many clients to reevaluate their project timelines.
With the current clarity in the operational environment, our clients are starting to make informed decisions regarding their investment in propulsion systems, which is generating commitments to full vehicle projects that we are actively engaging with.
A major success we celebrated in the third quarter was securing our first full vehicle project in nearly 18 months, which we believe signals a resurgence of the type of projects we were consistently winning in FY23-24 and early FY25. Therefore, we are highly confident that the demand landscape is improving. Given our extensive capabilities in delivering complete vehicle solutions, we are optimistic about the prospects for Tata Technologies.
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