Release Date: May 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Birlasoft Ltd (BOM:532400, Financial) reported a sequential increase in total contract value (TCV) during Q4, with deals worth $236 million signed, marking a 4% increase from Q3.
- The company achieved a significant multiyear engagement with a new customer in the UK, deploying advanced AI-powered capabilities.
- EBITDA margin rose to 13.2% in Q4, a sequential expansion of 119 basis points, driven by operational efficiencies and one-off benefits.
- Strong cash flow generation was maintained, with cash and cash equivalents growing by 24% year-on-year.
- The Board of Directors proposed a final dividend of INR4 per share, bringing the total dividend for the year to INR6.5 per share, translating to a payout of about 35%.
Negative Points
- Consolidated revenue for FY25 grew only 1.8% year-on-year, with a flattish performance in dollar terms compared to FY24.
- The company faced a decline in Q4 revenue to INR1,316 crores ($152.2 million), attributed to soft demand and project closures.
- Birlasoft Ltd (BOM:532400) experienced a 5.4% quarter-on-quarter decline in dollar terms due to higher-than-usual furloughs and project ramp-downs.
- The company anticipates muted revenue growth in Q1 FY26, with potential for minor degrowth due to ongoing macroeconomic challenges.
- ERP business declined by 6.4% year-on-year, with challenges in transitioning clients to cloud-based solutions like SAP S/4HANA and Oracle Fusion.
Q & A Highlights
Q: We have seen offshore revenue decline from Q2 FY25. Could you talk about this trend and its impact on margins?
A: Kamini Shah, CFO: The decline is due to discretionary demand largely being on-site. We expect a shift back to offshore by Q2, which should be margin accretive. However, revenue impact is uncertain due to ongoing client caution.
Q: Can you explain the one-offs in Q4 margins and their impact on Q1?
A: Kamini Shah, CFO: The margin improvement included one-offs like lower variable pay and currency benefits, contributing about 200 bps. Half of this may not recur in Q1, potentially impacting margins.
Q: What is the outlook for revenue growth in FY26 given the challenges in FY25?
A: Angan Guha, CEO: We expect muted growth in Q1 FY26, with potential for improvement from Q2 as new deals start contributing. Our goal is to achieve better performance in FY26 compared to FY25, despite starting from a lower base.
Q: With significant cash reserves, what are your plans for capital allocation, particularly regarding M&A?
A: Kamini Shah, CFO: We aim to maintain a dividend payout of 25-35% and retain cash for business investments. While organic growth is the focus, we are open to M&A if a suitable opportunity arises.
Q: Why has the BFSI vertical's growth decelerated for Birlasoft compared to peers?
A: Angan Guha, CEO: Our BFSI focus is on cards, payments, and asset management, not banks or insurance. While banks are increasing spending, our segments are experiencing temporary softness. We expect BFSI to return to growth after a couple of quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
