Birlasoft Ltd — Q2 FY26 earnings call

Call held 6 Nov 2025

Management summary

Birlasoft reported a healthy Q2 FY26 with marginal sequential revenue growth in USD but strong EBITDA margin expansion to 16%. While deal signings were lower due to some committed deals slipping to Q3, the company remains confident in sequential revenue growth for Q3 and Q4. Challenges persist in the Manufacturing and ERP verticals, and the ETR increased, but cash flows and operational efficiencies showed significant improvement.

Highlights

  • Revenue grew 0.1% QoQ in USD to $150.7 million, and 3.4% QoQ in INR to Rs. 13,289 million.

  • EBITDA margin expanded significantly by 369 bps QoQ to 16%, driven by operational efficiencies, rationalization of low-profitability accounts, and one-offs.

  • Cash collections were robust, increasing 11.4% QoQ to $166.7 million, leading to an improved DSO of 55 days.

  • The company reported winning a strategic deal in configuration management, replacing a global Tier 1 firm.

  • An interim dividend of Rs. 2.50 per share was recommended, reflecting a focus on shareholder returns.

Concerns

  • Q2 TCV signings were optically lower at $107 million, with $60-65 million of committed deals slipping from Q2 to Q3.

  • The Manufacturing vertical continued to experience weakness, offsetting growth in BFSI and Life Sciences & Services.

  • The Effective Tax Rate (ETR) increased due to incremental U.S. federal tax liability provisions and higher state tax slabs.

  • The ERP business has seen a decline, tied to the weakness in the Manufacturing vertical, with management acknowledging pipeline issues.

Key financials

  1. Revenue 150.7 Mn +0.1%QoQ
  2. Revenue 13,289 Mn +3.4%QoQ
  3. EBITDA 2,133 Mn +34.3%QoQ
  4. EBITDA 24.2 Mn +29.9%QoQ
  5. EBITDA Margin 16% +3.7%QoQ
  6. Cash Collections 166.7 Mn +11.4%QoQ
  7. DSO 55 days
  8. Operating Cash Flow to EBITDA 74.3%
  9. Adjusted Basic Non-Annualized EPS ₹5.28

What they filed

Q1 FY27: revenue up 7.3%, net profit up 51.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,368 1,363 1,317 1,285 1,329 −3%1,348 −1%1,349 +2%1,379 +7%
EBITDA165 163 174 159 213 +29%245 +50%249 +43%223 +40%
Net profit128 117 122 106 116 −9%120 +3%176 +44%161 +52%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

$107 Mn

as of 2025-09-30 quantified

Inflow this quarter

$107 Mn

Pipeline

deal pipeline tcv

Funnel is improving with a lot of deal conversations, led with AI capabilities.

Cancellations & deferrals

  • deferred: Two committed deals, worth approximately $60-65 million, could not be signed by September 30 and slipped to Q3.
Management expects Q3 TCV to be significantly better due to slipped deals and an improving pipeline, with an endeavor to reach $850 million for FY26.

Source: Prepared remarks · Q&A

Capital allocation

high confidence
  • Dividend ₹2.5/share (interim)
    You are probably already aware that the Board has recommended an interim dividend of Rs. 2.50 per share.
  • Liquidity Cash ₹23,434 Mn Cash and cash equivalents increased by 3% QoQ and 26% YoY.
    As a result, cash and cash equivalents have increased to Rs. 23,434 million by the end of the quarter, up about 3% quarter-on-quarter and 26% year-on-year.

Guidance & targets

Revenue Growth

  • Sequential Revenue Growth Revenue Growth · Q3 and Q4 FY26 · High confidence Growth
    We expect that there will be sequential growth in the remaining two quarters of the year, as in Q3 and Q4. We expect that in both the quarters we will deliver sequential revenue growth.

    — Angan Guha

  • H2 FY26 Revenue Growth vs H1 FY26 Revenue Growth · H2 FY26 · High confidence Better
    So all in all, we expect the second half of the financial year to be better than the first half of the financial year, both in revenue as well as order book.

    — Angan Guha

Order Book

  • H2 FY26 Order Book vs H1 FY26 Order Book · H2 FY26 · High confidence Much better
    But I can only tell you, H2 order book will definitely be much, much better than the H1 order book.

    — Angan Guha

  • TCV Order Book · FY26 · Medium confidence $850 million
    Our intention, obviously, is to get to the number that you're referring to. ... But the comment that I had also made is that our endeavor is to try and take the TCV past that 800 million, closer to 850.

    — Angan Guha

Effective Tax Rate

  • ETR Effective Tax Rate · FY26 · High confidence 42-43%
    For the full year FY '26, we are looking at an ETR of about between 42% and 43%.

    — C. Thyagarajan

  • ETR Effective Tax Rate · H2 FY26 · High confidence 44-45%
    And for the second half of the year, it will hover around the 44% to 45% mark.

    — C. Thyagarajan

  • ETR Effective Tax Rate · FY27 · High confidence 28-30%
    On a full year basis in FY'27, our expectation is that the ETR will settle down to between 28% and 30% on a run rate basis.

    — C. Thyagarajan

EBITDA Margin

  • Sustainable EBITDA Margin EBITDA Margin · Ongoing · High confidence 14%
    So like I said, Sandeep, 13.5% to 14% is where I see our EBITDA levels at this time. I think 14% and improving from there would be a good aspiration to go with. But the base would be 14%. So, short answer to your question, a sustainable number is 14% at this time.

    — C. Thyagarajan

Vertical Performance

  • BFSI Growth Vertical Performance · Q3 FY26 onwards · High confidence Flattish Q3, Growth Q4 onwards
    I mean, Q3 may be a little bit of a flattish quarter for BFSI, but Q4 onwards again we will see growth.

    — Angan Guha

  • Manufacturing Growth Vertical Performance · Q3 FY26 onwards · High confidence Drag in Q3/Q4, Growth next year onwards
    Manufacturing will continue to be a drag. It will continue to be a drag for Q3 and Q4, but all the others will overcompensate, which is why we feel that we can get positive growth. ... Next year onwards, Manufacturing can get back to growth.

    — Angan Guha

  • Other Verticals Growth (LSS, E&U, Technology) Vertical Performance · Ongoing · High confidence Growing
    Whether it is Life Sciences vertical, whether it is Energy & Utilities vertical, we have a small Technology vertical business, all of that is growing.

    — Angan Guha

Wage Hike

  • Wage Hike Cycle Wage Hike · Q3/Q4 FY26 · High confidence Decision in Q3 for next calendar year, might see in Q4
    Wage hike, again, will be a function of the discussions that we do and the decisions we make and it will be related to performance and retention. So, right now we haven't looked at it, but this will be a key topic that we will make a decision on in the third quarter for the next calendar year. ... So, Q3 we don't have the wage hike for sure. We might see it coming in Q4, if at all.

    — C. Thyagarajan

Business Mix

  • T&M vs Fixed Price Business Mix · Some time to come · High confidence Around 50-50
    It could hover around this percentage that we are talking about, roughly 50-50. And that is where it is at this time, and will continue for some time to come.

    — C. Thyagarajan

What to watch in Q3 FY26

Q3 FY26 Sequential Revenue Growth

Next quarter (Q3 FY26 results)
Current 0.1% QoQ (USD)
Target Positive sequential growth

Why it matters

Management has expressed high confidence in sequential growth for Q3 and Q4, making this a key indicator of execution.

We expect that there will be sequential growth in the remaining two quarters of the year, as in Q3 and Q4. We expect that in both the quarters we will deliver sequential revenue growth.

Risks & concerns

  • Weakness in Manufacturing vertical

    high

    The Manufacturing vertical is under pressure and will be a drag in Q3 and Q4, though expected to recover next year.

    Management acknowledged

  • Macroeconomic uncertainty and client spending optimization

    medium

    The macroeconomic environment remains challenging, with customers optimizing spends and lengthening decision cycles.

    Management acknowledged

  • Increased Effective Tax Rate (ETR)

    medium

    ETR for FY26 is expected to be 42-43% (H2 at 44-45%) due to US federal tax liability and higher state taxes, impacting net profitability.

    Management acknowledged

  • Seasonally weak Q3 with furloughs

    low

    Q3 is a seasonally weak quarter with furloughs, particularly in BFSI, which will make it flattish for the vertical.

    Management acknowledged

Q&A highlights

8 direct
Confidence in Q3/Q4 growth despite Q2 deal slippage Direct
The reason what gives us the confidence that Q3 will deliver growth even in a seasonally weak quarter, considering that the furloughs remain at the same levels as last year, which I think it will remain because we have not heard otherwise from the client, is the fact that we had won a couple of deals, if you remember, in Q4. Those transitions are now over and those revenues will start flowing in, which gives us the confidence that Q3 will be a much healthier quarter from a revenue growth perspective than what we have seen in Q2.

Analyst questioned the basis for growth confidence given soft Q2 TCV, management clarified that prior quarter deals are now transitioning to revenue.

Asked by Sudheer G

Quantification of one-off margin benefits Direct
So, I said that the one-off plus forex benefits together was 250 basis points. Within that, about 150 basis points or thereabouts was on one-off and about 100 basis points on forex.

Provides a clear breakdown of the one-time and forex-related components of the significant margin expansion, helping assess sustainability.

Asked by Sudheer G

Nature of one-off margin benefit Direct
There were instances where there were excess provisioning in the prior quarters, so we got advantage from some excess provisions that were reversed and some other corrections that we had to make where we had to readjust the provisioning that we made in past quarters. So, some of that benefit we got into this quarter, which is the one-off that I was calling out.

Explains the source of the one-off margin gain, confirming it's non-recurring and related to prior period adjustments.

Asked by Sudheer G

Q2 deal intake vs. prior guidance and FY26 TCV aspiration Direct
The signings that we are doing that got slipped from the 30th of September to the current quarter, those signings will be shown in our TCV performance in Q3. Right now, those again have to go through their own transition and then the revenues will come in. So, I hope that answers your sequencing question. ... So Dipesh, on the overall year, so if you look at our first half year, our first half year, we would have signed roughly about give or take 247 million to 250 million. Our intention, obviously, is to get to the number that you're referring to.

Addresses the discrepancy between expected and reported Q2 TCV, clarifying that significant deals were committed but signing dates slipped, and reiterates the FY26 TCV aspiration.

Asked by Dipesh Mehta

Outlook for Effective Tax Rate (ETR) for H2 FY26 and FY27 Direct
For the full year FY '26, we are looking at an ETR of about between 42% and 43%. And for the second half of the year, it will hover around the 44% to 45% mark. ... On a full year basis in FY'27, our expectation is that the ETR will settle down to between 28% and 30% on a run rate basis.

Provides crucial forward-looking guidance on ETR, indicating a higher rate for H2 FY26 and FY26 overall, but a significant reduction for FY27, which impacts future profitability.

Asked by Dipesh Mehta

Decline in ERP business and strategy for revival Direct
So again, Vibhor, truth be told, of course, we have a pipeline issue. But equally, you must appreciate the fact that our ERP business is very tied to our Manufacturing business. So, if you really think about it, the very fact that our ERP business is not doing well, which also has a reflection on our Manufacturing business. ... Now, as a part of the refresh plan, when we are redoing our Manufacturing business to get it to growth, obviously a major part of that refresh will have to happen from ERP, including leadership refresh. So, we are looking at everything.

Highlights a key underperforming segment (ERP) and its link to the struggling Manufacturing vertical, outlining a comprehensive refresh plan including leadership changes.

Asked by Vibhor Singhal

Sustainability of EBITDA margin and wage hike cycle Direct
So like I said, Sandeep, 13.5% to 14% is where I see our EBITDA levels at this time. I think 14% and improving from there would be a good aspiration to go with. But the base would be 14%. ... Wage hike, again, will be a function of the discussions that we do and the decisions we make and it will be related to performance and retention. So, right now we haven't looked at it, but this will be a key topic that we will make a decision on in the third quarter for the next calendar year.

Clarifies the sustainable margin level post one-offs and provides a timeline for the wage hike decision, which is a key cost driver.

Asked by Vibhor Singhal

Mix of annuity vs. project-based deals Direct
So, my current understanding of the percentages here, we would have about 65% to 70% roughly on annuity deals plus some of the long-term deals. And then the project-based would be in 30%, 35% range. So, that is the number that we have.

Provides a crucial breakdown of the revenue mix, indicating a healthy proportion of sticky annuity deals, which is a positive for revenue visibility.

Asked by Sandeep Shah

3 min read 8 chapters

Detailed narrative

Q2 FY26 Performance Overview

Birlasoft reported a healthy operating quarter with a strong margin performance. Revenue for Q2 FY26 grew 0.1% quarter-over-quarter in dollar terms to $150.7 million, and 3.4% QoQ in rupee terms to Rs. 13,289 million. This growth was achieved despite a challenging macroeconomic environment, with BFSI and Life Sciences & Services verticals offsetting weakness in Manufacturing. The company also announced the appointment of Komal Jain as the new CEO for Americas, focusing on accelerating growth and strengthening client partnerships in the region.

Margin Expansion Drivers

EBITDA performance was strong, with EBITDA increasing 34.3% QoQ in rupee terms to Rs. 2,133 million, and 29.9% QoQ in dollar terms to $24.2 million. Consequently, the EBITDA margin expanded by 369 basis points QoQ to 16%. This robust expansion was attributed to better operational efficiency, rationalization of low-profitability tail accounts, exchange rate tailwinds, and one-off benefits. Approximately 250 basis points of the margin expansion were due to one-offs (150 bps from excess provisioning reversals) and forex benefits (100 bps), implying a steady-state EBITDA margin of around 13.5% without these factors.

Deal Wins and Pipeline Health

The company reported a signed Total Contract Value (TCV) of $107 million for Q2 FY26. However, this figure was optically lower as two committed deals, estimated to be worth $60-65 million, could not be signed by the quarter-end and have slipped into Q3. Management expressed confidence in sequential growth for Q3 and Q4, partly due to these slipped deals and the transition of deals won in Q4 of the previous year. The overall endeavor for FY26 TCV is to exceed FY25 and aim for $850 million, with H1 signings at $247-250 million.

Vertical Performance

BFSI continues to be a growth leader for Birlasoft, with steady performance expected to be flattish in Q3 due to furloughs but resuming growth from Q4 onwards. Life Sciences & Services (LSS) and Energy & Utilities (E&U) verticals are also showing growth. The Manufacturing vertical, however, remains under pressure and is expected to be a drag in Q3 and Q4, with recovery anticipated from next year. Management is implementing measures to revive the Manufacturing business, including leadership refresh.

Taxation and ETR Outlook

The Effective Tax Rate (ETR) for Q2 FY26 reflected incremental U.S. federal tax liability provisions and higher state tax slabs. Without these additional federal tax impacts, the normalized ETR for Q2 would have been 29.7%. For the full year FY26, the ETR is projected to be between 42% and 43%, with H2 FY26 hovering around 44% to 45%. However, management expects the ETR to settle down to a more sustainable 28% to 30% on a run-rate basis for FY27, with no spillover of the exceptional tax from FY26.

Capital Allocation and Shareholder Returns

The Board recommended an interim dividend of Rs. 2.50 per share, demonstrating the company's intention to reward shareholders while balancing capital allocation requirements. Cash flows and cash balances improved significantly, with collections up 11.4% QoQ to $166.7 million and cash and cash equivalents increasing to Rs. 23,434 million by quarter-end, up 3% QoQ and 26% YoY. The Days Sales Outstanding (DSO) improved to 55 days, which is considered among the best in the industry.

ERP Business Strategy

The ERP business has seen a significant decline, with revenue falling from a peak of $62 million to $46-47 million quarterly. This decline is closely tied to the weakness in the Manufacturing vertical. Management acknowledges a pipeline issue but emphasizes investments in ERP capabilities, including leadership refresh, and sees opportunities in the mid-tier market, particularly with JDE which is expected to remain on-premise until 2030. The company is also leveraging its Agentic AI platform for new deal wins.

Organizational Changes and Leadership

Birlasoft welcomed Komal Jain as the new CEO for Americas, bringing over two decades of leadership experience in IT services. Komal will focus on accelerating growth and strengthening client partnerships in the US, Canada, and Latin America. Management stated that the overall organizational structure is stable, but they will continue to drive performance metrics and replace leaders who do not perform, ensuring a strong and effective leadership team for future growth.

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