Birlasoft Ltd

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.

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%.

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.

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.

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.

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.

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.

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.