Digitide Solutions Limited — Q1 FY26 earnings call

Call held 8 Aug 2025

Management summary

Digitide Solutions reported a solid Q1 FY26 with consolidated revenues of INR 736 crores, up 6% YoY, and an EBITDA margin of 11.2%. Despite one-time de-merger costs and macroeconomic turbulence, the company achieved a PAT of INR 10 crores, a 150 bps sequential improvement. Strategic portfolio realignment is underway, with strong sales momentum and a focus on AI-led delivery and margin expansion expected in H2 FY26.

Highlights

  • Consolidated revenues grew 6% year-on-year to INR 736 crores.

  • Overall EBITDA margin held firm at 11.2% despite investments, with business EBITDA margin expanding by 203 basis points.

  • PAT improved sequentially by 150 basis points to INR 10 crores, even after absorbing INR 9 crores in exceptional costs.

  • BPM segment EBITDA margin rose by 255 basis points to 17%, reflecting disciplined execution.

  • Secured 27 new client logos and a marquee cloud transformation engagement, with Q1 TCV at INR 523 crores.

  • Net Promoter Score (NPS) jumped to 71.3, one of the highest in the industry.

Concerns

  • Temporary slowdowns in billing and collections led to DSO increasing to 91 days.

  • INR 9 crores in one-time listing-related exceptional costs impacted PAT.

  • Anticipated 100-150 basis points dip in overall margin compared to the last financial year due to standalone setup costs and investments.

Key financials

  1. Consolidated Revenue ₹736 Cr +6%YoY
  2. EBITDA ₹83 Cr
  3. EBITDA Margin 11.2%
  4. PAT ₹10 Cr
  5. PAT Margin 1.3%
  6. DSO 91 days

What they filed

Q1 FY27: revenue up 5.3%, net profit down 69.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ1 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue696 733 733 736 764 +10%780 +7%800 +9%775 +5%
EBITDA106 110 82 83 85 −19%88 −21%88 +7%77 −7%
Net profit55 29 -1 10 3 −95%-2 −107%-5 −260%3 −70%
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

Share of Revenue
₹736 Cr Total
  • BPM ₹539 Cr 73.2%
  • Tech & Digital ₹197 Cr 26.8%

Order book

high confidence

Total value

₹523 Cr

as of 2025-06-30 quantified

Inflow this quarter

₹523 Cr

Management believes the momentum in TCV continues, noting that the previous quarter (Q4) is typically stronger for bookings, and that two consecutive quarters have seen TCV above INR 500 crores.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Gross ₹46 Cr
    Post our de-merger, we strengthened our balance sheet that remains to be our core focus, and as of quarter-ended June, our gross debt stands at INR46 crores, while on a net basis, we are a net cash company at INR34 crores net cash.
  • Liquidity Liquidity disclosed The company is in a net cash position of INR 34 crores as of quarter-ended June 2025.
    Post our de-merger, we strengthened our balance sheet that remains to be our core focus, and as of quarter-ended June, our gross debt stands at INR46 crores, while on a net basis, we are a net cash company at INR34 crores net cash.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY31 · High confidence triple our revenues
    You know, our strategy is a bold roadmap to triple our revenues by financial year '31.

    — Gurmeet Chahal

  • Organic Growth CAGR Revenue · Long-term · High confidence 16% to 17%
    So, we believe to be a $1 billion enterprise, our organic growth should be in the 16% to 17% CAGR, and then the incremental 150 million to 200 million to the $1 billion will come through our acquisition that we plan to do.

    — Gurmeet Chahal

  • Acquisition-led Growth Revenue · Long-term · High confidence 2% to 3%

    — Gurmeet Chahal

  • FY26 Growth Revenue · FY26 · High confidence double-digit growth
    So, we definitely want to end the year in double-digit growth. You're absolutely right.

    — Gurmeet Chahal

Margin

  • Margin Trajectory Margin · Second half of this year · High confidence start climbing
    Yes, Darshil. So, we expect our margins to start climbing from the second half of this year.

    — Gurmeet Chahal

  • Overall Margin Dip vs Last FY Margin · Current financial year · High confidence 100 to 150 basis points dip
    So, we did say that versus the last financial year, we should expect 150 to 100 basis points dip.

    — Gurmeet Chahal

Business Mix

  • Tech & Digital Revenue Share Business Mix · FY31 · High confidence 40%
    Look, as our stated goal is to grow our tech and digital business to 40% of our overall revenues, by FY '31.

    — Gurmeet Chahal

  • International vs Domestic Revenue Share Business Mix · Long-term · High confidence 50%-50%
    And second is, we said that our international and the domestic business will be 50%-50%, right? So, we still stand by that.

    — Gurmeet Chahal

Working Capital

  • DSO Improvement Working Capital · End of FY26 · High confidence 5% to 7% improvement
    And my second question is the DSO that we told that have increased to 91 days. In last fall also, we told that going to get I mean, we are going to ensure that we kind of streamline that and there will be 5% to 7% improvement by the end of FY '26. So are we sticking with the same guidance that by the end of FY '26, DSO will be better?

    — Ankit Dharamshi (question), Gurmeet Chahal (implied agreement)

Profitability

  • OCF to EBITDA Conversion Ratio Profitability · Q3 to Q4 · High confidence around 60%
    So if you look at in the past, we were almost at around 60% OCF to EBITDA. Now, with these investments, etc going in and this working capital flux, which we have in the first quarter, we'll have to come out of that and probably give you a much more detailed picture. You will see that coming back to the same steady-state over the Q3 to Q4.

    — Gurmeet Chahal

What to watch in Q2 FY26

DSO Improvement

Next quarter onwards, by FY26 end
Current 91 days
Target Tracking back to historical levels, 5-7% improvement by FY26 end

Why it matters

DSO increased this quarter due to de-merger related issues; its normalization is key for working capital efficiency.

However, the good news is that we are already seeing normalization, and the DSO is tracking back to our historical levels. ... So are we sticking with the same guidance that by the end of FY '26, DSO will be better? ... So from next quarter, you should see the improvement already showing.

Risks & concerns

  • Macroeconomic turbulence

    medium

    The company continued to build momentum despite macroeconomic turbulence.

    Management acknowledged

  • Ongoing portfolio transformation

    medium

    Building momentum despite the ongoing portfolio transformation.

    Management acknowledged

  • Softness in BFSI segment

    medium

    Even given the softness in the BFSI segment, BPM margins rose.

    Management acknowledged

  • Temporary slowdowns in billing and collections

    medium

    Due to new GST registrations and contract innovations after de-merger, leading to DSO increase to 91 days.

    Management acknowledged

  • Impact of restructuring and optimization on H1 FY26

    medium

    The first half of the year (Q1 and Q2) will see some impact of optimization and restructuring.

    Management acknowledged

  • One-time de-merger and listing costs

    low

    INR 9 crores in exceptional costs impacted PAT, with some spillover expected in Q2.

    Management acknowledged

Q&A highlights

8 direct
TCV decline and its impact Direct
So, Sanjay, the TCV in Q1 is at 523 versus 568 that's a very marginal difference. And in this industry, typically, the last quarter is also a better quarter for bookings for obvious reasons. So, I think the momentum continues, Sanjay.

Analyst questioned a sequential dip in TCV, and management clarified it as a marginal difference, attributing it to Q4 typically being a stronger booking quarter and maintaining confidence in continued momentum.

Asked by Sanjay Shah

Shrinking core business margin and recovery timeline Direct
So, Sanjay, in our last earnings call, we did explain that as we set up a standalone company coming out of the Quess Corp, there are certain expenses that we have to incur to create a setup standalone company. Second, we've been making very deliberate investments in leadership and basing up our offerings. So, we did say that versus the last financial year, we should expect 150 to 100 basis points dip.

Analyst inquired about the dip in core business margin and the path to recovery, prompting management to reiterate the impact of de-merger costs and strategic investments, with recovery expected from H2 FY26.

Asked by Sanjay Shah

Competitive positioning and business models Direct
So, the mode that I had referred to was in our BPM business. See, in our BPM business, majority of our business is platform led, which gives us stickiness in the contracts, which gives us stickiness or differentiation versus our competition. And like I mentioned, we are actually further enhancing that by embedding AI.

Analyst asked for clarification on the company's competitive edge and business models, leading management to highlight their platform-led BPM business and AI integration for stickiness and differentiation.

Asked by Sanjay Shah

FY26 growth outlook and long-term targets Direct
So, Darshil, great question. So, in the current financial year, I don't believe we will be flat. We will definitely be in the upper quartile of the industry growth. Now, coming to the long-term, if you look at our historical data, organically, we have grown at about 13% to 14% CAGR. So, we believe to be a $1 billion enterprise, our organic growth should be in the 16% to 17% CAGR, and then the incremental 150 million to 200 million to the $1 billion will come through our acquisition that we plan to do.

Analyst sought clarity on FY26 growth expectations, given the restructuring, and management provided specific long-term organic and acquisition growth targets, reaffirming double-digit growth for the current year.

Asked by Darshil Jhaveri

Macro environment and competitive intensity Direct
So, Darshil, in our context, you will have to look through two lenses. Since 64% of our revenues come from India. So, there will be an India lens, and then there will be a North America lens. See, from the India lens perspective, the market is still strong. There has been a little bit of a softness in the financial services. However, we believe that things will start to pick up there.

Analyst questioned the demand environment, and management provided a nuanced view, distinguishing between a strong domestic market (despite BFSI softness) and international markets, emphasizing their focus on high-growth segments and differentiated offerings.

Asked by Darshil Jhaveri

De-risking BFSI concentration and AWS transformation deal Direct
So on the BFSI side, look, the banking financial services and insurance is the biggest spend in the industry. I mean, that size of that market makes it very, very attractive. Our de-risking is from three perspectives. One is geography. Second is the platform embedment. And third is the kind of services that we are creating afresh.

Analyst asked about managing BFSI concentration risk and the significance of the AWS deal, prompting management to detail their de-risking strategy through geographic diversification, platform-led services, and focus on data analytics/AI, while confirming the AWS deal is a multi-year, transformational engagement.

Asked by Jyoti Singh

One-off costs beyond Q1 Direct
Yes. Maybe. Garvita, what Gurmeet alluded to, so there are one-timers which are primarily related to the listing and demerger per se, but the remaining expenses are increased mostly due to the normal growth, which we had already guided to, which is the independent list entity cost. So please also need to keep in mind the entire transformation of enterprise stack, the tech stack, the offerings, all of the investments. What you see in the corporate expenses going up is all towards leadership capabilities and market things. There's no one-time in that. These are direct investments. We will look forward to getting the benefits very soon.

Analyst questioned if there were other one-off costs beyond the INR 9 crores, and management clarified that while some de-merger related costs might spill into Q2, other increases in corporate expenses are strategic investments, not one-offs.

Asked by Garvita Jain

Steady-state OCF to EBITDA conversion ratio Direct
So if you look at in the past, we were almost at around 60% OCF to EBITDA. Now, with these investments, etc going in and this working capital flux, which we have in the first quarter, we'll have to come out of that and probably give you a much more detailed picture. You will see that coming back to the same steady-state over the Q3 to Q4.

Analyst inquired about the long-term OCF to EBITDA conversion ratio, and management indicated it would return to the historical 60% range by Q3-Q4 after the current quarter's working capital flux and investments.

Asked by Manthan D. Patel

2 min read 6 chapters

Detailed narrative

Q1 FY26 Performance Overview Post De-merger

Digitide Solutions reported consolidated revenues of INR 736 crores for Q1 FY26, marking a 6% year-on-year increase and a 0.4% sequential growth. The company's EBITDA stood at INR 83 crores, achieving an 11.2% margin, which remained flat sequentially. Despite this, the business EBITDA margin expanded by 203 basis points. PAT for the quarter was INR 10 crores, showing a 150 basis point sequential improvement, even after absorbing INR 9 crores in one-time listing-related exceptional costs.

Strategic Portfolio Realignment and Market Focus

The company completed its de-merger from Quess Corp Ltd. in June 2025, becoming an independent listed entity. This move is part of a strategic leap to accelerate value creation and sharpen market focus. Digitide is actively reshaping its portfolio by exiting non-strategic and low-margin contracts, a process expected to conclude by Q2 FY26. This realignment is already showing early gains and is crucial for achieving the long-term goal of tripling revenues by FY31.

Segmental Performance: BPM and Tech & Digital

The BPM business generated INR 539 crores in revenue, growing 6% year-on-year and 0.4% sequentially. Its EBITDA margin improved significantly by 255 basis points to 17%, driven by disciplined execution. The Tech & Digital segment contributed INR 197 crores in revenue, growing 4% year-on-year and 0.7% sequentially, with its EBITDA margin rising by 63 basis points to 9.8%. The company aims to grow its tech and digital business to 40% of overall revenues by FY31.

Sales Momentum and Client Wins

Digitide started FY26 with strong sales momentum, securing 27 new client logos, including a significant cloud transformation engagement. The total contract value (TCV) for Q1 stood at INR 523 crores, providing future revenue visibility. The company also launched 15 new AI-led pilots, underscoring its commitment to AI-led delivery. The Net Promoter Score (NPS) jumped to 71.3, reflecting strong client relationships.

Working Capital and Balance Sheet

The company strengthened its balance sheet post de-merger, reporting gross debt of INR 46 crores and a net cash position of INR 34 crores as of June 2025. However, the Days Sales Outstanding (DSO) increased to 91 days during the quarter due to temporary slowdowns in billing and collections related to new GST registrations and contract innovations. Management expects DSO to normalize and show a 5-7% improvement by the end of FY26.

Strategic Investments and Margin Outlook

Digitide made deliberate investments in leadership, solution development, innovation, and go-to-market accelerations, which are designed to unlock significant operating leverage. While overall EBITDA margin remained flat sequentially, the company anticipates margins to start climbing from the second half of the year. This improvement will be driven by higher revenue, operational efficiency, and a focus on higher-end work from international geographies.

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