Sonata Software will likely see a subdued FY25 due to a slowdown seen in its subsidiary, Quant Systems, and continued delay in the deal ramp-ups, the company’s CFO Jagannathan Chakravarthi Narasimhan told FE.
“So for the year (FY25), they (Quant) still are confident that later part of the year, they will grow. But in Q1, we are not sure what kind of growth will be coming in. Later part means, July to September and October to December will be a good quarter for them. But not very clear about April to June quarter. Hence, we said there will be a softness in growth for us.”
Additionally, he said that even if Quant Systems “takes off in July to September quarter”, there are still uncertainties in the large deals conversion as with the current uncertainties, large deals are taking nine to 12 months to close compared to the previous six months. “Hence, we said there can be a softness in the first two quarters of the year. And second quarter of the year, we expect that growth to resume back,” the CFO said.
Despite these immediate challenges, Sonata Software remains hopeful, anticipating a double-digit growth in FY25. Narasimhan elaborated, “We expect growth to resume back in the second half of FY25. The pipeline is very strong, and if we convert this into new large deals, it will definitely help us to achieve double-digit growth.”
In the fourth quarter of FY24, Sonata Software reported a 14.53% increase in revenue from operations at Rs 2,191.6 crore, up from Rs 1,913.5 crore in the same period last year. However, net profit declined by 3% year-on-year to Rs 110.4 crore, from Rs 113.8 crore. The CFO attributed this mixed performance to several factors impacting the business.
“The slowdown at Quant Systems and the postponement in a large deal were significant contributors to this quarter’s performance. We were expecting a large deal to come in Q4, and based on customer confirmation, we deployed people on-site from January. Unfortunately, due to changes in leadership and management at the customer’s end, the deal was delayed, leading to unutilized resources and impacting our margins,” Narasimhan said.
Looking ahead, Narasimhan highlighted the sectors such as BFSI, healthcare, and hi-tech sectors are expected to perform well.
Regarding hiring and employee management, Narasimhan said the company will continue to do lateral additions based on skill set requirements. “While the exact numbers for campus hiring are not finalized, they may mirror last year’s figures (of 650). We honored all campus hires from the previous year, and this year’s hiring is likely to occur in the second half.”
Further, the CFO said the company is planning implementation of new strategies to manage costs and improve efficiency. “For the margin, for the second quarter of the year, we are implementing a new performance management system for our people. We expect the salary increase to come in Q2, which may be a headwind for the quarter. However, based on the revenue growth and timing, we will decide the quantum and timing of the increase,” he explained.
