Tata Elxsi – Riding the EV & auto-tech wave.

What does Tata Elxsi do?

Tata Elxsi is a top ER&D (Engineering Research & Development) player, primarily assisting automotive, healthcare, and media firms in designing and developing new products. For automobiles, Tata Elxsi develops smart software such as Advanced Driver Assistance Systems (ADAS), connected car platforms, and electric vehicle systems. One of their most popular products is AUTONOMAI, an autonomous vehicle platform. They also build digital healthcare products, like remote patient monitoring applications and device integration software. In the media, Tata Elxsi builds video streaming and broadcasting software that enables marketers to reach out to customers across the world. It enables large brands to conceptualize cutting-edge products, from car safety to intelligent health devices.

Why is Tata Elxsi Not Performing?

As of the end of September 2025, Tata Elxsi’s stock has fallen 51% from its all-time high and has been declining steadily for over three months. In comparison, the Sensex also declined during the same period, but only by 2.46%, making Tata Elxsi’s performance appear relatively weak.

What’s to blame? A lot of things. The company’s quarterly results didn’t excite investors, as quarterly sales growth was negative, and net profit actually dipped to its lowest in the last few years. Operating profit margin has consistently deteriorated for the last 3 years. Many traders are dropping out, and there’s barely any buzz in trading volumes these days.Also at all time high stock was trading at 110 PE & now it is trading at lowest PE of 45.ROA,ROCE,ROE is declining for last 2 years .These weaker numbers have made investors worry about growth and margins, and since the stock was also priced higher than other mid-cap tech companies, it added fuel to the fire.

In the recent investor call, the company has also highlighted geopolitical uncertainty. The Transportation (Auto) Sector is “in a state of flux”  [this sector contributes to greater than 50% of revenues]

Another thing to notice is that all Tata group stocks have kind of trended down for most of 2025, so it’s probably a bit of a herd thing, too.

Tata Elxsi’s Strengths and Positive Aspects

If you look past the 3 years of weak stock movement, Tata Elxsi still shows some solid fundamentals. 

• Almost no debt
• Return on equity is pretty strong (27.44%). This is rare for tech firms with intense competition.
• PEG is lower than the Industry PEG
• The company is able to generate Net Cash (Net Cash Flow improving for the last 2 years)
• Zero Promoter pledge
• Backed by the Tata Group
• FII & DII increasing increasing their shareholding last quarter(June 2025)

The company also keeps landing new deals, especially in auto-tech and health-tech,which we will discuss after this section.

Also, management is positive on the following aspects, which can impact the business numbers.

• Management expects transportation to be the growth engine in FY26, followed by a recovery in media & communications. Healthcare is expected to remain volatile but should recover in H2
• Guidance given by management of 29-30% EBIDTA margin as compared to the current 21% margin

 

Operating cash flow is in line with net profit, meaning the business is very much alive and humming, even if the bottom line takes a hit. So, long-term investors and optimistic analysts see value in the company’s DNA, if not in its current quarterly numbers.

How Tata Elxsi is Shaping the Future with 2025 Strategic Collaborations

Tata Elxsi strengthened its position as a leader in cutting-edge technology this year by making a few key alliances. 

Tata Elxsi and Infineon partnered to jointly develop cutting-edge, application-ready electric vehicle (EV) solutions specifically for the Indian market. Collaboration focuses on ready-to-deploy EV systems built on Infineon technologies for two-wheelers (2W), three-wheelers (3W), passenger vehicles (PV), and  commercial vehicles (CV)

In July 2025, Tata Elxsi also partnered  with KAVIA AI. This joint go-to-market delivers the power of GenAI for Software Development Lifecycle (SDLC) to enterprises across Transportation, Media, Communications, and  Healthcare

Additionally, Tata Elxsi also partnered with Synopsys in July 2025 to advance automotive virtualization technologies for software-defined vehicles (SDVs).

Together, these partnerships reflect Tata Elxsi’s strategic focus in 2025 on sustainable mobility, AI-driven enterprise automation, and automotive technology leadership by collaborating with global technology pioneers.

​You can check all the partnerships & alliances here  – Link.

Valuation : Tata Elxsi and Peers

We have compared TATA elsi with the top 2 relevant players in the market.Tata Elxsi stands out in several respects, but also faces challenges versus its top competitors.

 

Name	CMP Rs.	Mar Cap Rs.Cr.	P/E	PEG	ROE %	Sales Var 3Yrs %	ROIC %	OPM %	ROA 12M %
KPIT Technologi.	1150.75	31547.05	39.09	0.88	33.2	33.92	29.43	20.29	18.39
Tata Elxsi	5226	32554.09	43.68	3.45	29.27	14.71	30.97	24.56	23.19
L&T Technology	4228.75	44818.73	35.34	3.34	22.16	17.55	27.36	17.14	13.92

Valuation Metrics (PE, PEG, Price/Book)

• Tata Elxsi’s PE ratio (43.68) is the highest among these peers, above KPIT (39.09) and L&T Technology (35.34).Compared to KPIT and L&T Technology, Tata Elxsi trades at a premium price, which means investors expect strong growth and are willing to pay more for it; also, any shortfall in price can hit the price downwards.
• Tata Elxsi’s high PEG indicates it might be overvalued relative to its growth.KPIT’s better sales growth and lower P/E suggest it may offer better value for a growth investor
• Price/Book value at 11.38 is the highest here, again reflecting premium reputation and expectations.

 

Operating & Profitability Metrics

• Return on Equity (ROE) for Tata Elxsi is 29.27%, just below KPIT at 33.2%, but comfortably above L&T Technology at 22.16%.
• Operating Profit Margin (OPM) for Tata Elxsi (24.56%) is the highest in this group, indicating efficient operations and strong pricing power in its specialty domains.
• Return on Assets (ROA, 23.19%) and Return on Invested Capital (ROIC, 30.97%) remain robust, surpassing KPIT and L&T Tech on asset and capital efficiency.
• Debt/Equity is extremely low (0.07), showing Tata Elxsi is virtually debt-free—a major positive in uncertain markets.

Growth & Ownership Trends

• Sales growth for Tata Elxsi over 3 years (14.71%) is lower than KPIT’s (33.92%). This is a key area of concern and partly why the recent stock performance has lagged.
• FII and DII holdings increased in Tata Elxsi recently, a sign of renewed confidence, despite the volatility.
• No promoter pledge and strong backing by the Tata Group provide stability.

Future

Tata Elxsi is still a strong player in the EV and auto tech wave, with good fundamentals and various global partnerships. For long-term investors, it offers a quality business with high expectations, but in the short term, performance and valuation need to be on the same page for continued upside. Any surprise on growth or margins in positive/negative can result in big stock moves, so monitoring quarterly progress and partnership execution will be important.

 We see a strong support around 4500 to 4800 also stock is trading below 200EMA. Investors should keep an eye on earnings growth,margins & profit growth.Also once the stock is able to cross 6500 along with 200EMA then this might be a good company to look at from fundamentals & technicals perspective.

Conclusion

Tata Elxsi remains a premium mid-cap contender in the engineering research and development (ER&D) due to its specialist positioning, strong operating margins, and almost zero debt. However, it faces pressure from slow/negative sales growth and declining returns metrics in recent years, reflected in its higher valuation multiples compared to KPIT and L&T Technology. Investors are paying a high premium for Tata Elxsi, betting on its sector leadership and breakthrough collaborations, but the company must deliver consistent growth and margin improvement to sustain such support.

KPIT grows faster but earns less per rupee spent, while Tata Elxsi is more efficient but grows more slowly. It’s a classic case of growth versus margin trade-off.

DISCLAIMER: The information given in this blog is for educational purposes only. Any content of this blog is not investment advice.