Equity L/S Analyst | Forensic Accounting | India, Yellowstone Equity

Ankit Agrawal, CFA

Equity L/S Analyst | Forensic Accounting | India

<a href="https://www.smartkarma.com/entities/birlasoft-ltd" target="_blank" data-smartkarma-citation="entities:14709:1" rel="noopener">Kpit Technologies (KPIT IN)</a> [KPIT Tech] announced a new employee compensation scheme to drive employee retention and engagement and to offset some of the salary cuts done to cope with the current uncertain COVID times. It shifted its ESOP's exercise price determination from market-driven pricing to fixed pricing at face value (or more as determined by the Nomination &amp; Remuneration Committee [NRC]). This policy change is currently under the voting process and will be valid only if it receives a 3/4th majority approval from the shareholders.
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Below we provide a detailed analysis of the new ESOP policy by comparing it with that of the peer companies and by quantifying its potential impact on future earnings and cash flow. Historically, institutional investors have not perceived issuance of ESOPs at face value favorably. However, our analysis suggests that in this case, the policy change is pertinent and prudent as well as earnings and cash-flow accretive.
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Insight Flow:
<ul>
<li>New vs Old Policy and Comparison to Peers</li>
<li>Rationale for New ESOP Policy</li>
<li>Economic and Accounting Impact of the Change</li>
<li>Voting Process</li>
<li>Conclusion</li>
</ul>

Kpit Technologies (KPIT IN) [KPIT Tech] announced a new employee compensation scheme to drive employee retention and engagement and to offset some of the salary cuts done to cope with the current uncertain COVID times. It shifted its ESOP's exercise price determination from market-driven pricing to fixed pricing at face value (or more as determined by the Nomination &amp; Remuneration Committee [NRC]). This policy change is currently under the voting process and will be valid only if it receives a 3/4th majority approval from the shareholders.

Below we provide a detailed analysis of the new ESOP policy by comparing it with that of the peer companies and by quantifying its potential impact on future earnings and cash flow. Historically, institutional investors have not perceived issuance of ESOPs at face value favorably. However, our analysis suggests that in this case, the policy change is pertinent and prudent as well as earnings and cash-flow accretive.

Insight Flow:

New vs Old Policy and Comparison to Peers
Rationale for New ESOP Policy
Economic and Accounting Impact of the Change
Voting Process
Conclusion


KPIT Tech: Analysis and Impact of the New Compensation Scheme

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/birlasoft-ltd" target="_blank" data-smartkarma-citation="entities:14709:1" rel="noopener">Kpit Technologies (KPIT IN)</a> is an Engineering R&amp;D services provider with a focus on the automobile sector. It is a small-cap company with a market cap of ~$200mm. Despite being a small player, KPIT has established a strong footing in the automotive technology segment with its focus on software and electronics domain - both of which are among the fastest growing segments in the space.
KPIT Technologies earlier was part of the larger KPIT group (which had both an IT services arm and an engineering R&amp;D services arm). Last year in 2019, the IT services business was acquired by a peer, Birlasoft, via a reverse merger while the Engineering R&amp;D services business was spun off as a separate listed entity keeping the original name KPIT Technologies.
This insight focuses on the new KPIT Technologies (KPIT Tech), the Engineering R&amp;D services business.
Insight Flow:
<ul>
<li>Q4FY20 Earnings Update</li>
<li>Business Background</li>
<li>Investment Thesis</li>
<li>Key Risks</li>
<li>Valuation</li>
<li>Conclusion</li>
</ul>

Kpit Technologies (KPIT IN) is an Engineering R&amp;D services provider with a focus on the automobile sector. It is a small-cap company with a market cap of ~$200mm. Despite being a small player, KPIT has established a strong footing in the automotive technology segment with its focus on software and electronics domain - both of which are among the fastest growing segments in the space.
KPIT Technologies earlier was part of the larger KPIT group (which had both an IT services arm and an engineering R&amp;D services arm). Last year in 2019, the IT services business was acquired by a peer, Birlasoft, via a reverse merger while the Engineering R&amp;D services business was spun off as a separate listed entity keeping the original name KPIT Technologies.
This insight focuses on the new KPIT Technologies (KPIT Tech), the Engineering R&amp;D services business.
Insight Flow:

Q4FY20 Earnings Update
Business Background
Investment Thesis
Key Risks
Valuation
Conclusion


KPIT Technologies: A Pure Play on Automotive Technology

India

KPIT Technologies Limited operates as a technology company. The Company specializes in embedded software, artificial intelligence, and digital solutions. KPIT Technologies serves automobile industry worldwide.

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KPIT Technologies (KPITTECH IN)

KPIT Tech: Analysis and Impact of the New Compensation Scheme

Kpit Technologies (KPIT IN) [KPIT Tech] announced a new employee compensation scheme to drive employee retention and engagement and to offset some...

Ankit Agrawal, CFA

KPIT Technologies: A Pure Play on Automotive Technology

Kpit Technologies (KPIT IN) is an Engineering R&D services provider with a focus on the automobile sector. It is a small-cap company with a...

Ankit Agrawal, CFA

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