Birlasoft Arrives At $2 Million Settlement With Bankrupt U.S. Client
The bankruptcy of client Invacare Corp. had wiped out the operational profitability of Birlasoft in the October- December quarter.
India's Birlasoft Ltd. has reached a settlement with a U.S.-based client whose bankruptcy wiped out its operational profitability in the October-December 2022 quarter.
Birlasoft Solutions Inc., a wholly owned subsidiary, has entered into a settlement and mutual release agreement with Invacare Corp., according to an exchange filing on Tuesday. The agreement follows consultations after the medical device maker filed for bankruptcy in Houston, Texas, in the U.S., on Feb. 1.
"A global reorganisation plan was filed, wherein Invacare and Birlasoft Solutions terminated the master IT services agreement in January 2023," the filing stated. "As per the settlement agreement approved on April 24, the parties have mutually provided releases and waivers from claims. BSI would receive $2 million for disengagement services ending on May 31."
The settlement is significant, as Invacare’s bankruptcy pushed Birlasoft into loss in the December quarter. The IT services firm had created a provision of Rs 151 crore against any outstanding receivables and contract assets. That wiped out the operational profitability of the Indian company.
Birlasoft signed a $240 million deal with Invacare in October 2019 to provide IT services over 10 years. At that rate, Birlasoft would have earned $25 million annually from the client.
"Overall, Invacare is about 3% of our revenues...so there’s of course an impact, and I’ll not deny that. But it’s not an impact that we cannot surmount," Angan Guha, chief executive officer of Birlasoft, told BQ Prime during a post-earnings interaction on Feb. 4.
"What we did, however, in true corporate governance. We decided to provide for everything we knew today. It’s important to tell our investors and provide upfront... That's what we have done."
