Analysts are bullish about Birlasoft’s new CEO, who has not just steadied the ship but also managed to provide a momentum in just under a year since he took the reins.
Part of the CK Birla Group, the IT company had posted a net loss of Rs 16.4 crore in the December quarter of FY23, a period when its new CEO, Angan Guha assumed responsibilities. Today, after completing eleven months in the company, Birlasoft has posted a “solid result”, say IT analysts.
Just after Guha joined the company, Invacare Corporation, a US customer that used to give 3% of Birlasoft’s revenue, filed for bankruptcy. The company was under pressure, with analysts not showing much optimism.
But things changed for the better. Nomura, in a note post Q2 FY24 earnings, said, “Organization-wide transformation under the new CEO Angan Guha has led to both margin stability and now robust deal wins, thus giving confidence on growth. We raise FY24- 26F EPS by 2-3%, with higher growth and margin estimates. Our FY25-26 EPS is about 8% ahead of consensus. We reaffirm Buy with a higher TP of Rs 630, implying 22x 1HFY26F EPS.”
In a note titled “New CEO’s strategy working”, the analysts said, “Birlasoft maintained its FY24 exit EBITDA margin aspiration of 16% and medium-to-longer term EBITDA margin target of 15.5-16.5% as it intends to invest incremental margin for growth. Birlasoft has implemented a new organisational structure from Apr 1, 2023, leading to EBITDA margin expansion of 180 bp (from FY23 adjusted EBITDA margin of 14%). It is looking to continue to add to its senior leadership team (with a new CEO for the ROW region, chief strategy officer and chief growth officer) and invest in developing service lines and offerings. It recently appointed a new COO.”
HDFC Securities in a note said, “Birlasoft delivered strong Q2 performance, both on revenue (matching Persistent Systems’ sequential growth) and margins. We believe that Birlasoft’s return potential is a combination of earnings growth trajectory (accelerating) and multiple rerating, supported by resilience and scalability of service portfolio, strong relative positioning and recent leadership refresh.”
Emkay Global analysts in a note said the company revenue grew ahead of their estimates of $156.7 million and revenue growth was led by digital and cloud service offerings, which grew 11.9% QoQ. It added, “Birlasoft has appointed Selvakumaran Manappan as its COO, who will oversee global delivery and operations, service lines, and business excellence, along with CTO/CISO functions.”
Birlasoft net profit grew by 5.5% quarter on quarter (q-o-q) to Rs 145 crore in the second quarter of FY24. The IT firm’s net profit in the preceding quarter was Rs 137 crore. On a year on year (y-o-y) basis, the company’s net profit grew by 26.1%.
The company’s second quarter revenue was at Rs 1,310 crore, up by 3.7% from the June- ending quarter. The company saw its number of active clients declined to 278 in September ending quarter, down from 285 in June quarter. Birlasoft attributed this decline to “sustained rationalisation of the tail”.
Its employee headcount increased marginally by 85 to reach 12,322 at the end of Q2. The attrition level further declined to 15% in Q2 from 18.8% in Q1. Utilisation ratio improved from 84.9% in June quarter to 86.5% in September ending quarter.