Datamatics Glob.

Datamatics delivered a steady Q4 FY25 performance with revenue of INR 497.2 crores, up 20.5% year-on-year and 16.8% quarter-on-quarter. EBITDA for the quarter stood at INR 74.5 crores, reflecting a 15.3% YoY and 36.6% QoQ growth, with an EBITDA margin of 15%. For the full year FY25, revenues reached INR 1,723.4 crores, an 11.2% YoY increase, with EBITDA at INR 229.3 crores and a margin of 13.3%. The Q4 performance includes the full quarter contribution from TNQTech, acquired on December 31, 2024.

In Q4 FY25, Digital Operations revenue grew by 49.7% QoQ to INR 266.4 crores with an EBIT margin of 16.4%. Digital Technologies revenue declined by 8.3% QoQ to INR 159 crores, with a low EBIT margin of 1%, primarily due to R&D investments and the low-margin automatic fare collection business. Digital Experiences revenue saw a slight decline of 3.3% QoQ to INR 71.7 crores, maintaining an EBIT margin of 13.1%. The company expects margin improvement across all segments in the next year, particularly in Digital Technologies and Digital Experiences, driven by cost-cutting and TNQTech integration.

Datamatics continues to focus on strategic accounts, expanding its presence in the US and European markets, and driving cost optimization. AI remains a cornerstone of its strategy, with ongoing investments in product development, GenAI integration, and agentic AI solutions. While specific AI-driven revenue is not tracked due to its pervasive integration, several AI proof-of-concepts are converting into live projects. The company is also pursuing joint go-to-market initiatives with partners like Google to deploy AI solutions.

The TNQTech acquisition significantly contributed to Q4 revenue (INR 74 crores) and full-year revenue (INR 287-290 crores). The acquisition led to an increase in depreciation and amortization due to the amortization of customer contracts over approximately three years. The INR 150 crores debt taken for the acquisition is planned to be repaid over three years using the company's annual operating cash flow of over INR 200 crores, highlighting a healthy balance sheet with INR 415.3 crores in cash and investments net of debt.

The company experienced an unexpected dip in volumes from its tax business due to clients shifting to in-house captive centers. Slowness in pipeline velocity and decision-making was observed due to global tariff uncertainties and inflation, particularly impacting the US market, though some easing has been noted recently. India remains a growth market but is price-sensitive, leading to compressed margins. AI adoption in India faces challenges as customers prioritize immediate financial gains over automation benefits.