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News: Sonata’s IT services revenues (28% mix) were up 8.6% QoQ, 18% YoY to US$65.7 mn for Q4FY23. IT services EBITDA margins (69% of EBITDA mix, including other income) was down 200 bps to 23.1% due to some wage corrections as indicated by the company in the last call. For FY23, the company reported IT services revenues of US$240 mn, 18.6% growth while EBITDA margins came in at 25.1%, down 330bps. IT services reported PAT of Rs310 crore for FY23, a growth of 13%. Product business reported growth of 39% in FY23 while EBITDA margins were up 10bps to 3.6%. At the company level in FY23, revenue growth was 20% while EBITDA margins were down 120bps to 9.1%.
Views: Q4 revenues also helped by Quant systems (20 days revenues), so as per our calculation organic growth could be 5.3% QoQ and 14.3% YoY, which is still strong in our view on sequential basis. From FY23 to reach US$500mn in four years, required run rate for sonata is 20% CAGR in IT services and as per our calculation, 17-18% mix of that number in FY27 would be contributed by Quants and rest would be organic growth. We believe considering strong deal wins, improving presence in life sciences and BFSI verticals, acceleration of growth to achieve the guided number should not be a challenge.
Impact: Positive