Detailed Narrative
Robust Q3 FY26 Performance Driven by Education Technology
Excelsoft reported a strong Q3 FY26 with revenue from operations growing 29.5% YoY to ₹710 million. This growth was significantly bolstered by the education technology services segment, which saw a 58% YoY increase. For the first nine months of FY26, revenue stood at ₹1,914 million, marking a 17.13% YoY growth. Adjusted PAT for Q3 FY26, after accounting for one-off📎 items, reached ₹133 million, representing a 40% YoY increase.
Strategic Market Expansion and Client Optimization
The company is actively pursuing market expansion by scaling its geographical footprint and establishing sales teams in key regions like the US and UK. This strategy aims to acquire new customers and deepen international presence. Concurrently, Excelsoft focuses on client optimization through cross-selling products and services to existing customers, which has led to healthy order booking and higher-margin platform-led engagements. The top five customers contributed 72.2% of Q3 revenue, reflecting stable long-term relationships.
Landmark Partnerships and Deal Wins
Excelsoft secured significant partnerships, including one with the Civil Services Commission of the Philippines to power digital examinations starting in 2026, utilizing its SARAS eAssessment platform. Another major multi-year engagement was signed with VTCT Skills in the UK to deploy the next-generation SARAS eTesting platform for 300,000 vocational and technical examinations annually. These wins underscore the company's leadership in the assessment space.
Investment in AI-Native Product Development and Infrastructure
The company is heavily investing in building its own AI hardware infrastructure, including GPU farms and large language models, to develop AI-native testing and assessment solutions. This includes e-marking for handwritten text with 98.6% accuracy and AI-based proctoring. Excelsoft plans to spend ₹150 million over the next two years to upgrade its infrastructure, integrating AI devices and tools across its network to become a fully AI-enabled entity.
M&A Strategy and Strong Liquidity Position
Excelsoft is actively pursuing inorganic growth opportunities, with due diligence completed for an American company and valuation discussions underway. Due diligence has also commenced for other targets in the UK. The company maintains a strong net cash balance of ₹421 crores, providing significant financial flexibility for these strategic acquisitions and innovation. One-off📎 legal and professional fees of ₹2.9 crores related to M&A due diligence impacted Q3 margins, though future M&A-related expenses are expected to be lower.
EBITDA Margin Dynamics and Q4 Outlook
Q3 FY26 EBITDA margin compressed to 27.7% from 32.8% in Q3 FY25, primarily due to a 61% increase in other expenses, including vendor stock resources and M&A-related fees. However, management clarified that if the one-off📎 M&A expenses were excluded, the EBITDA margin would have been 32%. The company expects Q4 to be the heaviest quarter, contributing upwards of 30% of annual revenue, and anticipates Q4 EBITDA margins to remain strong, as one-off📎 M&A expenses (retainership) have ceased.