SATECH

SA Tech Software India Limited reported flat revenue for the first half of FY26, which stood at INR 49.61 crores. Despite maintaining revenue, the company experienced a significant decline in profitability, with EBITDA margin dropping from 13.6% in H1 FY25 to 0.8% in H1 FY26. This compression was primarily driven by a 12% increase in total expenses, notably a 13% rise in employee costs, as the company heavily invested in sales, marketing, and AI initiatives. Consequently, the company reported a loss and negative operating cash flow for the period.

Management emphasized that the profitability dip is a short-term challenge resulting from strategic investments aimed at future growth. These investments include strengthening the sales and marketing teams, expanding in the U.S. and U.K. markets, and building in-house AI capabilities. The company expects to bounce back to profitability in H2 FY26, targeting an EBITDA margin of 7-8% for the full FY26 and 12-13% for FY27. They also project a 15-20% revenue growth for FY26 and aim for INR 200 crores in revenue by FY27, partly driven by the ongoing merger.

In H1 FY26, SA Tech added eight new clients and expects to secure 13-14 more in the next six months, aiming for a total of 24-25 new customers for the full fiscal year. The company is actively pursuing opportunities in the GCC sector, particularly with new entities establishing operations in India, and is engaged in 30-40 RFP bids, including 3-4 for consulting and software development. A new project from a UK client was also secured, contributing to future revenue and profitability.

SA Tech has significantly invested in AI, deploying AI agents in sales and marketing to improve client outreach and developing an in-house tool for automated RFP responses, reducing proposal generation time from weeks to hours. AI is also being used by the software development team for AI-based coding and by HR for screening and validating talent. These initiatives are expected to lead to a 20-30% improvement in employee productivity and a reduction in internal operational costs, ultimately boosting profit margins.

The proposed merger with Mindpool is progressing but has encountered a delay due to new regulations from the National Stock Exchange (NSE). The NSE now requires financial valuations to be based on data no older than three months, necessitating a re-valuation process. The company expects the new valuation report shortly, followed by a board meeting for approval and re-filing the scheme with the NSE. Management hopes the swap ratio will remain consistent with previous valuations, anticipating a combined headcount of 800-1000 employees post-merger.

In the first half of FY26, SA Tech made a capex investment of INR 12.5 crores, which contributed to a jump in non-current liabilities from INR 2.17 crores to INR 14 crores. This investment includes the acquisition of a larger office for INR 15 crores, which was inaugurated in November and is expected to be 100% utilized by March. The company is currently funding its expansion through debt but is considering equity fundraising or converting debt to private equity within the next six to eight months.