Nuvama lowered its 12-month target price on Birlasoft to Rs 350 from Rs 370, maintaining a ‘reduce’ rating. The revised target implies a potential downside of about 11.6% from Friday’s low.
“Birlasoft reported weak Q4FY25 results,” Nuvama said in a post-results note, adding that the company missed the brokerage’s estimates. “Birlasoft continues to disappoint on revenue growth,” it added, citing the weakest annual growth across its coverage universe apart from Wipro.
For the March quarter, Birlasoft’s consolidated revenue fell 3.36% QoQ to Rs 1,316.89 crore, and 3.35% YoY. In dollar terms, revenue stood at USD 152.2 million, down 5.4% QoQ and 7.2% YoY. Constant currency revenue fell 5.3% QoQ.
Despite the revenue miss, operating margins improved, with EBITDA rising 6.2% QoQ to Rs 173.6 crore. EBITDA margin expanded to 13.2% from 12% in the previous quarter, although it was down from 16.3% a year earlier. EBIT margin also rose by 110 basis points QoQ to 11.5%, beating Nuvama’s estimate of 10.7%.
Management attributed the margin gains to operating efficiencies and one-off benefits, including lower variable pay and currency gains, which contributed around 200 basis points to the expansion.
Project ramp-downs, segment weakness
The top-line pressure was largely due to project closures and ramp-downs in key verticals. “Revenue declined 5.3% CC QoQ/6.9% CC YoY due to higher-than-usual furloughs extending into January, some project closures and ramp-downs in a couple of large accounts, mainly in the Manufacturing and Lifesciences segments,” Nuvama said.
The company highlighted leadership changes in underperforming verticals, including Manufacturing and the MedTech segment within Lifesciences. The ERP segment also continued to decline, falling 7% QoQ.
Among verticals, Energy & Utilities (E&U) was the only segment to post growth, rising 1.9% QoQ, while Lifesciences, Manufacturing, and BFSI declined 7.2%, 6.8% and 5.7% QoQ, respectively.
Growth revival expected from Q2
The management indicated a muted Q1 FY26, with growth expected to pick up from Q2 onwards, while margins are expected to remain in a narrow band through FY26.
“Management highlighted a muted Q1 in terms of growth and deal-wins with growth starting from Q2. Management’s endeavour is a better FY26 than FY25 while EBITDA margin are likely to remain in a similar range,” Nuvama said noting the company’s post-earnings call.
Full-year FY25 performance remained soft, with constant currency revenue flat, margins contracting 280 basis points, and total TCV declining 13% YoY. Net new deal TCV was down 20% YoY.
“Birlasoft has had a disappointing FY25 on all fronts,” Nuvama said. “A weak exit run rate in Q4 along with tepid TCV in FY25 raises serious concern about FY26 growth prospects. We continue to be negative as we see little respite in the near term.”
TCV stable, but net wins still subdued
Total contract value (TCV) for Q4 came in at $236 million, up 4% QoQ but down 2% YoY, including $112 million in new deals and $124 million in renewals. Net new deal wins grew 5% YoY, indicating some momentum despite the overall soft environment.
Management said it is using “its specialised domain expertise within each of the verticals and sub-verticals together with technology capabilities to create an offering.” The company is also focusing on organic growth, with no mention of M&A-led expansion.
The post-earnings decline suggests investor concerns about the company’s weak growth visibility and execution risks. Birlasoft’s efforts to revive momentum through leadership changes and operational efficiencies have yet to reassure the market, as the stock now trades close to the revised target price set by analysts.
“Growth remains elusive,” Nuvama concluded, underscoring persistent challenges for the mid-tier IT firm as it navigates a tough demand environment and attempts to rebuild its growth engine in FY26.
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