Birlasoft Q4 Results: Back To Profit Amid Flat Revenue Growth

Birlasoft Ltd. has swung back to profit, and even beat estimates, after a quarter of loss due to the bankruptcy of its biggest client. Growth, however, was flat.

Revenue of the Pune-based IT services firm rose 0.36% over the previous three months to Rs 1,226.38 crore in the quarter ended March 31, according to a stock exchange filing on Monday. That compares with the Rs 1,217-crore consensus estimate of analysts tracked by Bloomberg.

Birlasoft Q4 Results FY23: Key Highlights (QoQ)

• Revenue up 0.36% sequentially at Rs 1,226.38 crore (Estimate: Rs 1,217 crore).

• Net profit at Rs 112.16 crore vs net loss of Rs 16.36 crore (Estimate: Rs 109 crore).

• EBIT at Rs 146 crore vs Q3 EBIT loss of Rs 136 crore.

• Q4 EBIT margin at 11.90%.

In dollar terms, revenue rose 3.1% sequentially to $149.1 million. It was up 3.3% in constant currency terms. Net profit came in at $13.6 million. Operational profitability—measured as earnings before interest and tax—stood at $20.3 million, while margin improved 20 basis points to 13.6%.

For the full fiscal, net profit stood at Rs 331.6 crore, on the back of revenue that increased 16.1% year-on-year to Rs 4,794.8 crore. Operational profitability stood at Rs 671.5 crore, while margin came in at 14%.

The financials exclude a one-time provision of Rs 151 crore created in the December quarter against the bankruptcy of U.S.-based client Invacare Corp.—a maker of medical devices. That had pushed the company into loss in the third quarter.

To be sure, Birlasoft has had some respite from the bankruptcy.

Birlasoft Solutions Inc., a wholly owned subsidiary in the U.S., has entered into a settlement and mutual release agreement with Invacare Corp. to receive $2 million for disengagement services, according to an exchange filing on April 25.

The agreement follows consultations after the medical device maker filed for bankruptcy in Houston, Texas, on Feb. 1.

Birlasoft signed a $240 million deal with Invacare Corp. in October 2019 to provide IT services over 10 years. At that rate, the company would have earned $25 million annually from the client.

According to Birlasoft, growth during the fiscal ended March 31 was driven by a healthy mix of revenue. While digital transformation services made up 42.6% of Birlasoft’s revenue in Q4 FY23, enterprise solutions and cloud services contributed 35.8% and 21.6%, respectively.

At 47.1%, manufacturing was the biggest contributor to the top line in Q4 FY23, followed by banking, financial services and insurance (20.5%), life sciences (17.6%), and energy and utilities (14.9%).

During the March quarter, the company clocked a total contract value—or deal wins—of $286 million. That figure stood at Rs 869 crore for the full fiscal. As on March 31, Birlasoft had 288 active clients, with the top 10 bringing in nearly half of the annual revenue.

Birlasoft, however, continued to see a churn higher than that of peers.

As on March 31, the IT firm’s attrition rate stood at 22.1% on a trailing 12-month basis—its overall headcount declined by 337 employees sequentially to 12,193. The utilisation level improved 80 basis points sequentially, but fell 50 basis points annually to 84.8% in Q4 FY23.

Birlasoft has declared a dividend of Rs 2 per share for FY23. That follows an interim dividend of Rs 1.50 per share declared in November 2022. The IT firm has also concluded a share buyback worth Rs 475 crore in FY23.

On Monday, shares of Birlasoft Ltd. rose 2.15% to Rs 287.85 apiece on the BSE, even as the benchmark Sensex ended the day 1.16% higher at 61,764.25 points.