FIIs dumped Rs 20,000 crore of IT stocks—But kept buying this one name aggressively

The Information Technology (IT) sector.

Be it poor earnings growth, muted demand, regulatory pressures such as the H-1B visa rule changes in the US, and others, the IT sector is getting hit from all sides.

All this has taken a toll on the Indian IT stocks as well. The Nifty IT Index has declined 26.3% in the past year.

Foreign institutional investors (FIIs) have been net sellers in this space for quite some time now. But with the escalation of the West Asia turmoil, during Q4FY26, FIIs appear to have sold off IT stocks at an unusually fast pace.

In fact, during the Jan-Mar quarter, FIIs sold IT stocks worth over ₹20,000 crore. This compares to ₹6,862 crore in the previous quarter.

Amidst all this bearishness around IT stocks, however, FIIs bought one IT stock aggressively. It’s not TCS or Infosys.

The stock is Birlasoft Limited.

FIIs raised their stake by 2.73% points in this stock, taking the total holding to 13.64% at the end of the quarter.

So, what made FIIs buy this IT stock while dumping others?

Let’s find out.

Birlasoft Limited – A CK Birla Group Company

Birlasoft Ltd. is a part of one of the bigger business conglomerates in India – CK Birla Group. The company is engaged in offering IT services and solutions across different industries. From software development to implementing digital technologies, Birlasoft does it all.

While the company caters to all the sectors, it derives a major portion of its revenue from the manufacturing sector, banking, financial services, and insurance (BFSI) sector, life sciences and services, and energy & utilities sector.

Most of the clients of the company are based out of the US, catering to over 85% of the revenue, while the remaining comes from the rest of the world.

Q4FY26 – A Quarter of Major Deal Wins

During the quarter, Birlasoft won deals worth $208 million total contract value (TCV) (approximately ₹1,993 crore). This has increased by 3% QoQ from $202 million of deals signed during Q3FY26.

Some of the key deals include a strategic transformation engagement for modernizing the payments ecosystem for a leading payments & cards business.

Additionally, Birlasoft has entered into another strategic contract with an Intelligent Risk platform business to operationalize a delivery framework for the insurance domain.

The company further signed a multi-year contract with a healthcare major in North America that specialises in injectable medications for hospitals and the overall healthcare system. Here, Birlasoft has to maintain and support the core ERP and infrastructure along with the customer engagement platform of the company.

Birlasoft’s cloud data offerings also got a boost with another strategic engagement with a leading payments and cards platform for which the company has to provide AWS Cloud Data maintenance and support services.

Increasing Top Clients’ Contribution to Revenue

Birlasoft has been becoming a trusted IT services providers across the US, and this is evident from the increasing contribution of its top clientele.

For instance, the revenue contribution by the top five clients increased from 37.1% in Q4FY25 to 42.2% in Q4FY26. Similarly, from the top ten clients, it increased from 52% to 55.2% during the period.

Having said that, the number of clients declined compared to the previous year. The total number of active clients went down from 254 at the end of Q4FY25 to 221 at the end of Q4FY26.

44% Rise in Profits Despite Flat Sales Growth

Sales during Q4FY26 grew only by 2.4% YoY to ₹1,349 crore from ₹1,317 crore in Q4FY25. However, profit grew by a whopping 44% YoY during the quarter, irrespective of the sluggish sales. Profit increased from ₹122 crore in Q4FY25 to ₹176 crore in Q4FY26.

As per management, this rise in profits is a result of excellent operating efficiency as well as exchange rate tailwinds.

The management also stated that the Earnings before interest, tax, depreciation, and amortisation (EBITDA) margin grew for the third consecutive quarter in Q4FY26. For the quarter, it increased to 18.5%, from the previous 18.2% in Q3FY26 and 13.2% during Q4FY25. The management expects this healthy margin expansion to continue further as well.

Having said that, sales for the entire FY26 declined marginally by 1.2% YoY from ₹5,375 crore in FY25 to ₹5,310 crore in FY26, while profit remained almost flat at ₹518 crore.

This perhaps indicates that FIIs are more focused on the recent quarter growth and the future potential of the company, irrespective of the muted sales across the entire fiscal.

Returns and Dividends

Birlasoft pays dividends to its shareholders regularly. The current dividend yield of the company stands at 1.94%, while the industry median is just 0.34%.

However, the return on equity (RoE) is 14.35%, a little lower than the industry median of 18.4%.

Also, to note, the company is almost debt-free with a debt-equity ratio of just 0.03x.

Is the stock trading cheap?

Another reason why FIIs might have been buying this IT stock could be its valuation.

The stock is trading at a price-earnings (PE) of 17.2x, which is lower than the industry median of 20.6x. Even the price-to-book value (PBV) ratio is 2.3x, lower than the industry median of 3.6x, indicating the stock might be trading cheaper compared to its peers.

1-Year Share Price Chart of Birlasoft Ltd

Final Thoughts

While muted demand, consumer preference shift, geopolitical issues, and regulatory challenges weigh heavily on the IT industry, Birlasoft has been carving its space in this industry with operational efficiency.

FIIs investing in this IT stock while selling most of its peers perhaps indicates solid potential of the company, especially given the recent deal wins and strong profitability.

However, only time could tell how the company would perform in the future. For now, you can add the stock to your watchlist to keep an eye on it.

Disclaimer:

We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available have we used an alternate, but widely used and accepted source of information. 

The purpose of this article is only to share interesting charts, data points, and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only. 

Maumita Mitra is a seasoned writer specializing in demystifying the world of investment for a broad audience. She has a keen eye for detail and a knack for explaining complex financial concepts in the simplest manner possible. 

Disclosure: The writer and her dependents do not hold the stocks discussed in this article. 

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