IT services company Birlasoft is cutting down on the number of active clients and is significantly increasing investments in key business areas to enhance performance as it marches towards achieving a billion-dollar revenue target, CEO Angan Guha told FE.
The Pune-based company reported its January-March earnings on Monday, with its consolidated revenue rising 1.5% sequentially to Rs 1,362.5 crore. Meanwhile, the operating margin rose 31 basis points to 16.3% and the net profit increased nearly 12% quarter-on-quarter to Rs 180.1 crore.
The company has strategically reduced its active client base from approximately 280-300 in FY23 to around 260 by the end of FY24 and plans to further decrease this number to under 200 clients. This approach is aimed at focusing more effectively on a select group of clients who contribute the majority of its revenue.
“If you dissect our numbers correctly about 45 or 48 clients contributed to 90% of our revenues and then there is a tale of 200 clients which contribute 10% of our revenues. So we will continue to rationalise,” he said.
Even as the company sees FY25 to be subdued in terms of discretionary spending, it plans to ramp up its investments in the next 24 months with Guha expressing a commitment to industry-leading growth. But he said the operating margins will be between 15.8% and 16.3% as any additional revenue generated will be reinvested back into the business to fuel growth.
However, Guha admitted some areas needed improvement. “The markets are strong. I think we did not do a good job in our data business. I think we have a great opportunity there. We are continuing to invest in that business, but you know, if I were to be a little self-critical, I would say that we have lost the plot in our data business”.
Thus, in an attempt to improve the vertical, Guha said, the company is combining data and digital business “because quite frankly, if we don’t build a great data business, we can’t build a great AI business”. Additionally, he said that all the deals the company has, have AI embedded in them and will disclose separate AI revenue in a few quarters.
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The company is facing a shift in utilisation rates, which Guha noted had reached a record high last quarter but were unsustainable. He anticipates a further dip in the next quarter but remains confident that this is aligned with the company’s strategic objectives.
In the March quarter, the utilisation of the company fell to 86.3% from 87.1% in October-December.
Further, Birlasoft plans to double its freshers hiring in FY25 to 1,000 from 500 in FY24.