SONATA SOFTWARE IT SERVICES IN Q4FY25 REPORTED REVENUE OF US$ 81.3 MN

News: Sonata Software IT services in Q4FY25 reported revenue of US$ 81.3 mn, down 7.2% QoQ/ 0.3% YoY in CC terms. Geography wise on a QoQ basis, the growth was led by Europe (17% of the mix), up 44.4%, while, RoW (9% of the mix) and USA (74% of the mix) declined by 23.5% and 11.3%. The International IT services reported EBITDA ₹115.7 crore, up 8% QoQ, translating to an EBITDA margin of 16.5%, up ~190 bps QoQ. At the company level for the quarter, Sonata reported a revenue of US$ 302.2 mn, down 10.3% QoQ. The company reported EBITDA of ₹172.7 crore, up 5.8% with an EBITDA margin of 6.6%, up ~80 bps QoQ. PAT for the quarter stood at ₹107.5 crore, up 2.4% QoQ. The company during the quarter won 2 large deals and added 14 new customers in the quarter In FY25, for International IT Services the company reported a revenue of US$ 335.5 mn, up 3.7% YoY & EBITDA of ₹480.5 crore, translating to an EBITDA margin of 17%, down ~400 bps YoY. At the company level in FY25, the company reported revenue of US$ 1201.4 mn, up 15.5% YoY. EBITDA came at ₹689.3 crore, translating to an EBITDA margin of 6.7%, down ~160 bps YoY.

View: Sonata’s Q4FY25 performance reflected topline weakness, largely in line with management commentary, owing to macro-driven budget cuts by its largest client, quant-driven seasonality, and the ramp-down of a key tech client. Despite headwinds in Retail and Manufacturing, the company maintained a robust deal pipeline and signed a US$73 million, five-year deal with a US-based TMT company which is expected to ramp up Q1 onwards and fully ramp up by end of Q2/early Q3. While this ramp-up may weigh on near-term margins, management reiterated its aspiration to return to 20%+ EBITDA margins by Q2FY26, though there could be a one-quarter delay due to prevailing uncertainty. It further aims to scale BFSI and Healthcare & Lifesciences verticals (currently contributing ~35% of international revenues jointly) to US$250 million in 3-5 years. Q1FY26 is expected to remain flat to marginally positive, with a more meaningful recovery anticipated from Q2FY26, led by Tech, BFSI, and Healthcare verticals. Key monitorable include the execution of large deals, ramp-up of vertical growth (especially in BFSI and Healthcare), margin recovery, and progress toward the US$1.5 billion revenue aspiration. Management maintains an optimistic outlook with the aim of top quartile growth in the next 3-5 years. However, growth and margins recovery could be gradual.

Impact: Neutral