BIRLASOFT FOR Q2FY25 REPORTED REVENUE OF US$ 163.3 MN

News: Birlasoft for Q2FY25 reported revenue of US$ 163.3 mn, up 2.6% QoQ/ up 3.2% YoY (up 2.2% QoQ/ up 2.9% YoY in CC terms) Vertical wise on a QoQ basis the growth was led by Manufacturing (40% of the mix) which grew by 4.7% closely followed by ER&U (16.1% of the mix) which grew by 4.6% while BFSI (23.3% of the mix) which led the growth last quarter saw a muted performance growing at 1.3% QoQ. Lifescience (20.6% of the mix) faced some pressures and de-grew by 1.2%. Geography wise, changing the dynamics of the previous quarter, Americas region (87.3% of mix) grew by 6.7% QoQ while ROW (12.7% of the mix) declined sharply by 18.5% QoQ. The company reported an absolute EBITDA of ₹165.3 crore with EBITDA margins coming at 12.1%, down ~260 bps QoQ primarily due to increase in its onshore revenues, ramp up in deals which were delayed earlier in the ERP vertical and pricing pressures in certain projects which were in the nature of vendor consolidation deals. The company’s revenue from The company reported TCV of US$ 136 mn, down 15% QoQ,  marking a second consecutive decline with new TCV wins of US$ 47mn during the quarter. LTM attrition was up by 20 bps QoQ to 11.8% while utilization was up by ~30 bps QoQ to 82%. The company declared an interim dividend of ₹2.5 per share.

Views: The sharp margin decline and weak deal wins remain concerning. Management expects margins to recover by Q4 only, after a seasonally soft Q3 due to wage hikes (~150 bps impact), furloughs, and the absence of a one-time benefit from Q1, partially offset by planned offshoring. Thus, While revenue growth regained some momentum in Q2 and is expected to continue in Q3 as well, margins are expected to remain subdued in Q3. TCV is projected to improve in H2 vs. H1, with a focus on annuity and transformational deals to drive sustainable margin recovery through improved utilization, offshoring, and pricing. Despite the weak TCV, management indicated a robust pipeline and reiterated its aspirational 15% margin target, though achieving it by FY25 appears challenging.

Impact: Negative