Birlasoft Ltd — Q4 FY25 earnings call

Call held 29 May 2025

Management summary

Birlasoft reported a challenging Q4 FY25 with revenue declining 5.4% QoQ in dollar terms to $152.2 million, impacted by soft demand, furloughs, and project closures. Despite this, the company achieved a sequential EBITDA margin expansion of 119 basis points to 13.2% and signed $236 million in deals, with new deals up 75% QoQ. Management expects muted Q1 FY26 but anticipates growth to return from Q2 FY26, driven by new deal wins and strategic investments in capabilities and sales.

Highlights

  • Q4 EBITDA margin rose to 13.2%, expanding 119 basis points QoQ, reflecting operational efficiencies and one-offs.

  • Q4 post-tax profit increased 4.4% QoQ to INR 122 crore ($14.1 million).

  • Signed deals worth $236 million in Q4, 4% higher than Q3, with new deals up 75% QoQ, indicating strong new client acquisition.

  • Cash and cash equivalents grew 24% YoY to $259.5 million, demonstrating strong cash flow generation.

  • Maintained a robust balance sheet with 54 days DSO and no corporate debt.

Concerns

  • FY25 consolidated revenue growth was disappointing, up only 1.8% YoY in INR (5,375 crore) and flat in USD ($635 million).

  • Q4 revenue declined 5.4% QoQ in dollar terms to $152.2 million due to furloughs, project closures, ramp-downs, and in-sourcing.

  • Q1 FY26 is expected to have muted or slightly negative revenue growth.

  • Project-based business currently contributes 70% of overall revenues, which management aims to reduce to 50% annuity-based over a couple of quarters.

Key financials

3 periods

Headline

  • DSO
    54 days

Q4

  • Revenue
    152.2 Mn
    QoQ -5.4%
  • EBITDA Margin
    13.2%
    QoQ +1.2%
  • Post-tax Profit
    ₹122 Cr
    QoQ +4.4%

FY25

  • Consolidated Revenue
    ₹5,375 Cr
    YoY +1.8%
  • Consolidated Revenue
    635 Mn
    YoY 0%
  • EBITDA Margin
    13%
  • PAT
    61.1 Mn
  • Effective Tax Rate
    25.8%
  • Operating Cash Flow to EBITDA
    88.3%

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.

Segment breakdown

  • Energy & Utilities
    1.8% Sequential Growth
  • Manufacturing & MedTech
    300 Mn Revenue Contribution
  • US Business
    87% Revenue Share

Order book

high confidence

Total value

$758 Mn

as of 2025-03-31 quantified

-13.2% YoY

Inflow this quarter

$236 Mn

Composition

Mix 2 deal sizes
  • Large Deal (US High-Tech) $30 Mn 54.5%
  • Financial Services (Europe) $25 Mn 45.5%

Share of order book by deal size, derived from disclosed amounts

Pipeline

deal pipeline tcv

Identified 19-20 accounts in US and Europe to pursue for new logos.

Cancellations & deferrals

  • cancelled: Project closures and ramp downs in a couple of customer accounts, along with in-sourcing, impacted Q4 revenue.
Management's endeavor over the next 4 to 8 quarters is to focus on market pipeline and deal closures.

Source: Prepared remarks

Capital allocation

high confidence
  • Dividend ₹4/share (final) Payout ratio 35%
    The Board of Directors has proposed a final dividend of INR 4 per share, subject to shareholders' approval. This, combined with the interim dividend that we had paid out after our Q2 Board meeting, takes our total dividend for the full year to INR 6.5 per share, translating to a payout of about 35%.
  • Liquidity Cash $259.5 Mn Cash and cash equivalents grew by 24% year-on-year and 8.1% quarter-on-quarter, with a DSO of 54 days and no debt on books.
    When I reflect back on the balance sheet, I am happy to note that we ended the year with cash and cash equivalents of $259.5 million which has grown by 24% year-on-year. Compared to the preceding quarter, our cash and cash equivalents was up by 8.1%. This reflects consistent good cash generation, which is evidenced by our operating cash flow which for the year FY '25 has been at about 88.3% of our EBITDA. You would agree that our DSO at 54 days is probably among the best in class. We remain committed to staying focused on sustained robust cash flow generation.

Guidance & targets

Revenue

  • FY26 Revenue Growth Revenue · FY26 · Low confidence Better than FY25
    Overall, from an FY '26 perspective, our endeavor would be to deliver FY '26 better than FY'25, but, Dipesh, you must also realize which you yourself said that our base revenue starts at $152 million, right? So we have a lot of headwind. So for me, even to stay flat for the year, it will need exceptional quarter-on-quarter growth going forward. ... But the management team's endeavor will be to at least have FY '26 better than FY'25, but that could be only slightly better because of the headwind that you see getting into this financial year.

    — Angan Guha, CEO & MD

  • Q1 FY26 Revenue Growth Revenue · Q1 FY26 · High confidence Muted/Slightly Negative
    I feel that this quarter too, the Q1, we will have muted revenue growth. Now the deals that we are winning that will start generating revenues from Q2, which is why, Dipesh, I said, we at least believe today that Q2 onwards, we will get some growth.

    — Angan Guha, CEO & MD

  • Q2 FY26 Revenue Growth Revenue · Q2 FY26 · High confidence Growth will be back
    However, we feel our growth will be back in the company starting Q2.

    — Angan Guha, CEO & MD

Margin

  • EBITDA Margin Margin · Next 3-4 quarters · Medium confidence Maintain 13%
    We will try and keep the margins at 13% because we want to win more market share. I feel if we can get back to good growth trajectory, which, of course, as you can tell, arithmetically, it cannot happen in FY '26. It will happen in FY '27. So FY '27 onwards, as the growth comes back, we will see an uptick of margin.

    — Angan Guha, CEO & MD

  • Long-term EBITDA Margin Margin · FY27, FY28 · Low confidence Increased margins

    From 13% today

    So FY '27 onwards, as the growth comes back, we will see far more increased margins once the growth comes back.

    — Angan Guha, CEO & MD

Business Mix

  • Project-based Revenue Contribution Business Mix · A couple of quarters · Medium confidence Reduce to 50%

    From 70% today

    Our endeavor will be to take it down to at least 50% and 50% business, which is more annuity based, right? ... So that will be our endeavor. But that will be a journey, Abhishek. It will take a couple of quarters to get there.

    — Angan Guha, CEO & MD

TCV

  • FY26 Total Contract Value TCV · FY26 · Medium confidence Better than $758 million

    From $758 million today

    I am reasonably confident that this year, my overall year TCV will be better than last year's TCV.

    — Angan Guha, CEO & MD

What to watch in Q1 FY26

Q1 FY26 Revenue Growth

next quarter
Current Q4 FY25 revenue declined 5.4% QoQ to $152.2 million.
Target Flat or slightly negative revenue growth QoQ.

Why it matters

Verifies management's near-term revenue outlook and the impact of ongoing headwinds.

Our Q1 revenues will also be muted. We are trying to keep it flat. There could be minor degrowth as well.

Risks & concerns

  • Soft demand environment and muted discretionary spend

    high

    Sustained macroeconomic challenges are leading to muted discretionary spending by clients, impacting project-based businesses.

    Management acknowledged

  • Project closures, ramp-downs, and in-sourcing

    high

    These factors have directly contributed to revenue downtick, particularly in Manufacturing and Healthcare segments.

    Management acknowledged

  • Macro uncertainty and trade tariffs

    high

    These factors are causing cautious spending by manufacturing-dependent MedTech clients, which forms a significant portion of Birlasoft's business.

    Management acknowledged

  • Muted/slightly negative Q1 FY26 revenue growth

    high

    The company expects Q1 FY26 to be flat or slightly negative, continuing the challenging revenue trend from FY25.

    Management acknowledged

  • Temporary margin dilution from investments

    medium

    Investments in sales, capabilities, and ERP may cause temporary margin impact in immediate quarters, though management aims to contain it.

    Management acknowledged

  • Underperformance of ERP business

    medium

    The ERP business has degrown for two years and requires structural changes to get back on track.

    Management acknowledged

Q&A highlights

6 direct
Offshore vs Onsite Mix and Margin Impact Partial
this trend will continue for may be one more quarter and towards the fag end of Q2 you will start seeing the movement back to offshore.

Analyst questioned the decline in offshore revenue and its impact on margins; management indicated a delayed shift back to offshore, implying continued near-term revenue headwinds but long-term margin benefits.

Asked by Ravi Menon

FY26 Revenue Growth Trajectory Direct
Q1, we will have muted revenue growth. Now the deals that we are winning that will start generating revenues from Q2, which is why, Dipesh, I said, we at least believe today that Q2 onwards, we will get some growth. ... management team's endeavor will be to at least have FY '26 better than FY'25, but that could be only slightly better because of the headwind that you see getting into this financial year.

Analyst pressed on the weak FY25 exit and FY26 growth. Management provided a clear, albeit cautious, outlook for muted Q1 and growth returning from Q2, with FY26 only 'slightly better' than FY25.

Asked by Dipesh Mehta

Long-term Margin Aspiration vs Near-term Reality Direct
We will try and keep the margins at 13% because we want to win more market share. ... So FY '27 onwards, as the growth comes back, we will see far more increased margins once the growth comes back.

Analyst questioned the path to aspirational 15-16% EBITDA margins. Management clarified a near-term focus on market share at 13% margins, with higher margins expected only in FY27/FY28 after growth stabilizes.

Asked by Dipesh Mehta

BFSI and MedTech Vertical Performance Direct
our BFSI business predominantly is cards & payments business and an asset management business. ... Now the situation is reversed because the banks spending has gone up... but a specialized company like ourselves are having a couple of quarters of degrowth or a couple of quarters of muted growth. ... MedTech more often than not is a manufacturing business... because of the trade as well as the tariffs, et cetera, we have seen a little bit of cautious spending by the customers.

Analyst challenged the degrowth in BFSI and MedTech against broader IT trends. Management explained the specific sub-segment focus and macro headwinds affecting these verticals, expecting growth to return in 2 quarters.

Asked by Harsh Chaurasia

Project-based vs Annuity Business Mix Direct
roughly our discretionary spend and project-based business contributes to about 70% of our overall revenues. ... Our endeavor will be to take it down to at least 50% and 50% business, which is more annuity based, right? ... It will take a couple of quarters to get there.

Analyst highlighted the high project-based business (70%) and its link to volatility. Management confirmed the current mix and stated an explicit goal to shift towards 50% annuity-based business within a couple of quarters.

Asked by Abhishek Shindadkr

Q1 FY26 Margin Impact from Q4 One-offs Direct
I was talking about the 200 bps that we said were one time. So out of it, maybe 100 bps may not reoccur from a structural standpoint, though we will see how we can make that up as far as Q1 is concerned.

Analyst sought clarification on the 119bps Q4 margin expansion. Management clarified that about 100bps of the 200bps tailwind might not recur in Q1, implying potential Q1 margin pressure.

Asked by Sandeep Shah

ERP Business Underperformance and Turnaround Strategy Direct
our ERP business for 2 years have actually degrown... we are making some structural changes here. ... And over the next 2-3 quarters, I will come back and update you on what we are doing there.

Analyst questioned the ERP business's degrowth despite industry demand for cloud upgrades. Management acknowledged the issue, attributed it to client segment, and committed to structural changes and updates in 2-3 quarters.

Asked by Sandeep Shah

Impact of US-China Tariff Changes on Demand Partial
it is cautious optimism, because the trade tariff is also limited to a particular time, we need to see how it goes. But again, like I said, as the companies that we serve, some of the companies who've got a larger China exposure are feeling a little better about it. So we believe that demand will come back in Q2.

Analyst asked about the impact of reduced US-China tariffs. Management noted cautious optimism and an expectation for demand to return in Q2, but emphasized the need to wait for clarity.

Asked by Girish Pai

3 min read 8 chapters

Detailed narrative

Q4 FY25 Performance Overview

Birlasoft reported a challenging Q4 FY25 with consolidated revenue of $152.2 million, marking a 5.4% sequential decline. This was primarily attributed to higher-than-usual furloughs, project closures, ramp-downs, and muted discretionary spending in a soft demand environment. Despite revenue pressures, the company achieved an EBITDA margin of 13.2%, expanding 119 basis points QoQ, and a post-tax profit of INR 122 crore ($14.1 million), up 4.4% QoQ.

Full Year FY25 Financials and Profitability

For the full fiscal year, consolidated revenues grew 1.8% YoY in INR to 5,375 crore, but were flattish in USD at $635 million, representing a 0.3% degrowth from FY24. FY25 EBITDA stood at $82.4 million, resulting in a 13% margin. The full-year PAT was $61.1 million, lower than $75.3 million in the preceding year, partly due to the absence of a one-time insurance claim. The effective tax rate for FY25 was 25.8%.

Deal Wins and Pipeline Health

The company signed deals worth $236 million in Q4, a 4% increase over Q3, with new deals contributing significantly (up 75% QoQ), accounting for almost half of the total. Key wins included a significant multiyear engagement in the UK (ROW region) and a $30-40 million deal with a US high-tech company. Birlasoft is also close to closing another $25-30 million financial services deal in Europe in Q1 FY26. The total TCV for FY25 was $758 million, and management is confident that FY26 TCV will surpass this figure.

Strategic Investments and Leadership Changes

Birlasoft has been actively investing in scaling capabilities, including early adoption of GenAI, and strengthening specialized domain expertise across verticals. Leadership changes were implemented in manufacturing, MedTech, and Digital & Data businesses. A senior leader was hired in India to focus on GCC opportunities, and a team is being built to target 19-20 new logos in the US and Europe, aiming to drive future organic growth.

Revenue Outlook and Growth Drivers

Management anticipates Q1 FY26 revenue to be muted or slightly negative, but expects growth to return from Q2 FY26, driven by new deal wins and strategic investments. Overall FY26 revenue is projected to be 'slightly better' than FY25 due to current headwinds. Long-term, the company aims for 13% EBITDA margins, with an aspiration for 15-16% in FY27-FY28 once consistent growth is re-established.

Vertical Performance and Headwinds

The BFSI segment, focused on cards and asset management, experienced muted growth after 9 sequential quarters of growth, contrasting with broader IT trends. The MedTech segment, being manufacturing-dependent, faced cautious spending due to trade tariffs, impacting its performance. Energy & Utilities, however, showed sequential growth of 1.8% in Q4. The ERP business has underperformed for two years, and structural changes are being implemented to revive it over the next 2-3 quarters.

Capital Allocation and Balance Sheet Strength

Birlasoft maintains a robust balance sheet with $259.5 million in cash and cash equivalents, up 24% YoY and 8.1% QoQ, and a DSO of 54 days. The company is debt-free, reflecting strong cash generation with operating cash flow at 88.3% of EBITDA for FY25. A final dividend of INR 4 per share was proposed, bringing the total FY25 dividend to INR 6.5 per share, representing a payout ratio of approximately 35%. The company intends to retain cash for future business investments.

Business Mix Transformation

Currently, project-based business accounts for roughly 70% of Birlasoft's overall revenues, which management aims to reduce to at least 50% annuity-based business over the next couple of quarters. This strategic shift is supported by recent multi-year, annuity-based deal wins. The company has also pruned its client list from 600 to 250 accounts and plans to continue this process while actively targeting new large logos.

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