Fidel Softech

Fidel Softech reported robust revenue growth in Q2 FY26, with sales reaching INR 23.15 crores, representing a 39% quarter-on-quarter increase and a 67% year-on-year surge. For the first half of FY26, consolidated sales stood at INR 39.78 crores, marking a 51% year-on-year growth. This performance is a significant leap from approximately INR 25 crores in yearly revenues just 3-3.5 years ago, demonstrating accelerated growth.

Despite strong revenue growth, Q2 FY26 PAT decreased by 22%-23% quarter-on-quarter to INR 2.77 crores. This was attributed to 2-3 deferred project closures, M&A expenses of approximately INR 30 lakhs in H1, interest payments on a foreign currency loan, and a yearly salary hike. H1 FY26 consolidated PAT, however, grew by 43% year-on-year to INR 6.41 crores, with EPS improving from 3.26 to 4.66. Management aims to retain traditional EBITDA/EBIT margins of 19%-20% in the coming quarters, acknowledging that US and Japan onsite businesses have slightly lower margins.

The company completed the acquisition of US-based Techvine, a tech consulting firm, on August 1, 2025. This acquisition contributed INR 5-5.6 crores (over $0.5 million) to H1/Q2 revenue (August-September) and is expected to add $1.5-$2 million in H2 FY26. The acquisition is strategic, enhancing Fidel's US footprint, providing access to new clients, and shortening the time to achieve top-line growth by 1.5-2 years. Fidel's business is now 90% export-oriented, with a geographic mix of approximately 25% from the US, 25% from Europe, and 50% from Asia-Pacific.

Fidel Softech is actively investing in AI initiatives, focusing on AI engine evolution and data pipeline services. The AI services generated INR 1.2 crores in Q2 FY26. Management envisions AI as a significant growth vertical, with the potential to contribute $2-$3 million, aligning with an aspiration for each of its 3-4 verticals to bring in INR 20-25 crores in revenue. The company is exploring AI use cases for clients in capital markets and manufacturing, focusing on services rather than product development.

Fidel Softech has set an ambitious outlook of 30%-40% top-line growth for the full year FY26, driven by both organic and inorganic strategies. Management expects H2 FY26 numbers to be better than H1, supported by the full consolidation of the US acquisition and Japan revenues. The company is aspiring to achieve double-digit EPS and aims to become an INR 100 crores company based on its Q4 run rate, building on its current quarterly run rate of INR 20-25 crores.

The company maintains an active strategic client base of over 25 customers, with the top 10 contributing 70%-75% of total revenues. This quarter, Fidel added 10-12 new clients, with efforts to transition some into strategic accounts. The service mix is currently 60% from IT and Consulting Services and 40% from Language Engineering Localization Service, with a focus on improving operating margins and PAT across all segments.

Fidel Softech secured a foreign currency loan of INR 16 crores in JPY for its acquisition, repayable over a 5-year period with monthly installments and interest payouts. The company benefits from a natural hedge due to JPY inflows from its Japan business, ensuring protection against currency fluctuations. This debt is part of the strategy to fund new growth opportunities while maintaining a steady positive cash flow.