Excelsoft Technologies Limited

Excelsoft reported a strong Q2 FY26 with revenue from operations growing 20% YoY to INR 646 million and EBITDA increasing 26% YoY to INR 175 million, resulting in a 1.2% margin expansion to 27.1%. For H1 FY26, revenue grew 10.9% YoY to INR 1,203 million, and PAT surged 254% YoY to INR 164.9 million (or 21% adjusted for deferred tax impact). However, H1 FY26 EBITDA margins saw a slight decline to 22.9% from 24% in H1 FY25, primarily due to a 29% increase in other expenses, including INR 25.7 million in exceptional legal and professional fees.

The company highlighted significant progress through strategic partnerships, including a joint AI task force with AQA for high-stakes assessments and being selected by VTCT Skills as their digital assessment partner for approximately 300,000 annual assessments. All four key verticals—Assessment & Proctoring, Learning & Student Success, Education Technology Services, and Learning Design & Content Solutions—demonstrated significant growth. The Assessment and Proctoring Solutions vertical, in particular, saw a 44% revenue increase in H1 FY26, underscoring the success of AI-enabled platforms.

Following its successful IPO, which raised INR 500 crores, Excelsoft is actively deploying the proceeds. INR 62 crores are earmarked for land acquisition and construction of a new development center in Mysore, with an additional INR 39.5 crores for upgrading existing facilities. A further INR 9 crores are allocated for general corporate purposes. These investments are aimed at scaling delivery capacity, accelerating innovation, and enhancing readiness for global opportunities, with a payback period of approximately four years for the new facility.

Excelsoft's AI strategy, branded 'AI-Levate,' focuses on developing micro-apps for various use cases in assessment and learning. The company leverages an in-house GPU farm and multiple tuned LLMs, with a dedicated 45-member R&D team tracking AI advancements. AI-Levate modules are monetized through separate licensing or embedding into existing platforms, with per-test, annual license, or per-user models. The roadmap includes continuously integrating the latest LLMs and anticipating future integration with quantum computing.

Management explained the business's seasonality, with H2 typically generating 55-60% of annual revenue and higher margins due to customer budget cycles and large annual license arrangements in Q2 and Q4. An analyst raised concerns about a working capital stretch in H1 FY26, evidenced by a decrease in net cash from operating activities and an increase in unbilled revenue. Management clarified that these are seasonal effects, with billing cut-offs and revenue recognition patterns leading to normalization by the fiscal year-end (March 31st).

North America remains the largest market, contributing 63% of Q2 revenue, with Europe and UK showing strong traction (22.5% in Q2). India and Asia (outside India) also contributed meaningfully, particularly in digital learning and services. Management noted promising growth in the Middle East and Southeast Asia, with new customer wins. The company also confirmed plans to implement an India-specific strategy in the near future.

Excelsoft has INR 245 crores available from deposits for inorganic growth and acquisitions, actively pursuing potential targets. The criteria for M&A include 'feet-on-street' in key markets (US, UK), complementary strengths, PAT positivity, synergy, and low integration risks. The company maintains strong client relationships, with its top 5 customers accounting for 64% of Q2 revenue and top 20 customers for 83%, indicating a concentrated but stable client base.