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    Fidel Softech Q4 FY25 earnings call

    FIDEL
    Information Technology·30 Apr 2025
    Management Summary

    Fidel Softech reported strong FY25 results, surpassing its top-line growth outlook with 37.29% revenue growth and 54% PAT growth. The company is strategically expanding through the acquisition of Fidel Technologies KK Japan and focusing on AI-enabled services and vertical competencies. Despite some QoQ growth fluctuations, management remains optimistic about sustaining 30-40% annual growth and aims for double-digit EPS in coming quarters.

    Highlights

    5

    • FY25 consolidated sales grew 37.29% YoY to INR 55.04 crores, exceeding the 30-40% outlook.

    • FY25 PAT increased by 54% YoY to INR 9.34 crores, demonstrating strong profitability.

    • Q4 FY25 sales registered a 31% YoY growth to INR 14.61 crores, with PBT at INR 4.13 crores.

    • Acquisition of Fidel Technologies KK Japan approved, expected to add INR 15 crores to the top line and improve control.

    • Company maintains zero debt with positive cash flow and recommended a dividend of INR 2 per share.

    Concerns

    3

    • QoQ growth was perceived as 'tepid' by analysts in the last two quarters, despite annual targets being met.

    • PAT margin for the acquired Japan entity is currently single-digit, requiring improvement efforts.

    • Other expenses were low this quarter due to fewer events, which may not be sustainable as investments are needed.

    What Changed3

    vs Q2 FY26

    Guidance items6 → 9 (+3)Risks discussed3 → 5 (+2)Q&A highlights6 → 8 (+2)
    Key financials

    Metrics

    5

    Periods

    2

    Q4 FY25

    2
    • Sales
      ₹14.61 Cr
      YoY+31%QoQ+28.2%
    • PBT
      ₹4.13 Cr

    FY25

    3
    • Consolidated Sales
      ₹55.04 Cr
      YoY+37.3%
    • PBT
      ₹12.51 Cr
    • PAT
      ₹9.34 Cr
      YoY+54.1%

    Segment breakdown

    IT Consulting Services
    35% Share of Revenue
    Language Localization Services
    65% Share of Revenue
    Exports
    90% Share of Business
    Domestic
    10% Share of Business
    APAC (including India)
    40% Share of Revenue
    U.S.-Europe
    60% Share of Revenue
    Japan Entity
    25% Share of Revenue2% PAT Margin
    Hyderabad Office
    ₹0.9 Cr Monthly Revenue₹10 Cr Annual Revenue Contribution
    List

    Order Book

    low confidence

    Pipeline

    deal pipeline tcv

    Management aims for 70-80% revenue visibility, currently at 60%. For a target of INR 70 crores, visibility is around INR 40-45 crores.

    Cancellations / Deferrals

    • deferred:One big project that was expected in the last quarter materialized in April (next quarter).

    "Management emphasizes maintaining an active strategic client base and improving revenue visibility from the current 60% towards a target of 70-80% for future revenue targets."

    Source:
    Q&A

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Dividend

    ₹2/share (interim)

    Payout ratio 30.0%

    M&A

    Fidel Technologies KK Japan

    acquisition · Other

    Liquidity

    Undrawn ₹20 crores

    Company has zero debt and positive cash flow. INR 3.7 crores remaining from IPO proceeds for working capital.

    Guidance & targets

    9
    CategoryTargetPriority
    Revenue
    Top-line Growth
    30-40%
    		High
    Revenue
    Total Revenue
    INR 70-75 crores
    		High
    Revenue
    Total Revenue (with Japan entity)
    INR 75-80 crores
    		Medium
    Revenue
    Total Revenue
    beyond INR 100 crores
    		Medium
    Profitability
    EPS
    double digit number
    		Medium
    Profitability
    Japan Entity PAT
    improve
    		Medium
    Headcount
    Total Employees
    220-225
    		High
    Working Capital
    Receivables Days
    less than 70 days
    		Medium
    Revenue Visibility
    Revenue Visibility Percentage
    70-80%
    		Medium

    What to watch in Q1 FY26

    5

    EPS reaching double-digit

    coming quarters
    CurrentImproved, but not specified as double-digit
    TargetDouble-digit EPS

    Why it matters

    Achievement of double-digit EPS would signal enhanced profitability and operational efficiency.

    Sunil Kulkarni: This year also an improvement in EPS, and we hope or we plan to take it to double digit number in coming quarters.

    Risks & concerns

    5
    RiskSeverity

    Political volatility

    Political volatility across the Board and AI impact are general macro and sector risks. — Management acknowledged

    medium

    AI disruption

    AI impact is seen across the industry, requiring continuous adaptation and leveraging AI-enabled services. — Management acknowledged

    medium

    IT industry pressure

    The entire IT industry seems to be under pressure, but Fidel Softech believes it is doing things differently to mitigate this. — Management acknowledged

    medium

    Project materialization uncertainty

    Some business opportunities or projects may not appear or go through as planned, impacting quarterly targets. — Management acknowledged

    low

    Margin dilution for new clients

    Entering new accounts or displacing existing vendors may require competing heavily and letting go of some margins. — Management acknowledged

    medium

    Q&A highlights

    8

    “Basically, at our end, we want to grow at 40% per annum. But if I tell our sales people that let's grow 40%-50%, so people suddenly get jittery, like how will it become so much. So, at our end, what we have told our team members, 8%-10% every quarter we want to grow. ... But overall, we tried to achieve around 40%. We did around 37%.”

    Analyst challenged the company's QoQ growth consistency against stated targets, leading to management clarifying their annual growth focus and acknowledging past bullishness.

    asked by Saket Sarogi

    3 min read6 chapters

    Detailed Narrative

    01

    Strong FY25 Performance and Growth Outlook

    Fidel Softech reported a robust financial performance for FY25, with consolidated sales reaching INR 55.04 crores, marking a significant 37.29% year-on-year growth, surpassing its initial outlook of 30-40%. Profit After Tax (PAT) also saw substantial growth, increasing by 54% to INR 9.34 crores from INR 6.06 crores in the previous fiscal year. For Q4 FY25, sales stood at INR 14.61 crores with a PBT of INR 4.13 crores, reflecting a 31% year-on-year top-line growth and a 28.16% quarter-on-quarter increase.

    02

    Strategic Focus on Exports and Key Geographies

    The company's business model is heavily geared towards exports, contributing 90% of its total revenue, with the U.S.-Europe region accounting for 60% and APAC for 40%. Japan is a critical market, contributing 25-30% of the company's revenue, where Fidel Softech is leveraging its established presence and goodwill. The Hyderabad office, which started last year, has stabilized its revenue contribution, adding approximately INR 10 crores annually, with monthly sales ranging from INR 80 lakhs to INR 1 crore.

    03

    Acquisition of Fidel Technologies KK Japan and Capital Allocation

    Fidel Softech received Board approval for the acquisition of Fidel Technologies KK Japan, a strategic move expected to add around INR 15 crores to the top line and enhance control over onsite business. While the Japan entity's PAT margin is currently single-digit (2-3%), the company aims to improve this. The company maintains a zero-debt status and positive cash flow, with INR 3.7 crores remaining from IPO proceeds for working capital. A dividend of INR 2 per share, representing about 30% of profits, was recommended, and a loan of INR 20-24 crores has been sanctioned for future growth opportunities.

    04

    AI-Enabled Services and Vertical Expansion

    The company is actively investing in and developing AI-enabled services, focusing on areas like multilingual dataset creation for AI engines and evaluation of AI-generated output. This strategic focus positions Fidel Softech to capitalize on the evolving AI landscape. Additionally, the company is expanding its vertical competencies, particularly in BFSI (specifically investment banking) and manufacturing, leveraging internal expertise and partnerships to drive growth in these specialized sectors.

    05

    Operational Efficiency and Client Management

    Fidel Softech is committed to sustainable growth, process stabilization, and judicious hiring. The company has an active strategic client base of 25 clients, with the top 10 clients contributing 70-75% of revenues and the top 3 contributing almost 50%. Management aims to increase revenue visibility from the current 60% to a target of 70-80%. Current headcount is 204-205, with a target to reach 220-225 by Q2 next year, focusing on a mix of mid-level and junior hires.

    06

    Receivables Management and Future Outlook

    The company is focused on improving its working capital by reducing receivables from less than 88 days to less than 70 days. Looking ahead, Fidel Softech aims for 30-40% top-line growth in FY26, targeting INR 70-75 crores in revenue (or INR 75-80 crores with the Japan entity), and aspires to cross INR 100 crores by FY27. The management expressed confidence in sustaining 30-40% growth for the next 3-4 years and achieving double-digit EPS in the coming quarters⏳.

    This is an AI-generated summary of a publicly available earnings call transcript.