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Informist, Wednesday, Aug. 6 2025

By Eshitva Prakash

MUMBAI – Information technology services company Birlasoft Ltd.'s net profit for the June quarter is expected to be flat sequentially. A weaker performance by the company's verticals, slower project ramp-up, high exposure to the uncertainties created by US tariffs, and a decline in core services are expected to lower growth in the company's bottom and top lines, according to brokerages tracking the company.

Birlasoft's consolidated net profit for the June quarter is expected to be marginally higher on quarter at INR 1.22 billion, according to an average of estimates from seven brokerages. The highest estimate for net profit is INR 1.30 billion from Mirae Asset Sharekhan Ltd. and the lowest is INR 1.13 billion from IDBI Capital Market Services Ltd.

The software company's consolidated net sales is likely to rise 1.8% quarter-on-quarter to INR 12.92 billion. The company had posted net sales of INR 13.17 billion in the previous quarter. The highest estimate for net sales is INR 13.18 billion from Nirmal Bang Equities Pvt. Ltd. and the lowest is INR 12.77 billion from IDBI Capital. "FY26 (financial year 2025-26 is likely) to be a washout year, recovery expected in FY27," ICICI Securities said of the company.

Birlasoft provides infrastructure and cloud technology, digital and data services, and enterprise resource planning services to several sectors--manufacturing, energy and utilities, life sciences, and banking, financial services, and insurance. IT companies serving manufacturing and retail industries have been more susceptible to uncertainties arising from US tariff threats and weak discretionary spending by customers. Birlasoft earns around 88% of its revenue from the US, according to Anand Rathi Share and Stock Brokers Ltd. On a sectoral basis, nearly 40% of the company's revenue in the last quarter came from the manufacturing segment.

The performance of the company's life sciences and services vertical is also expected to suffer from tariff-related uncertainties. This vertical is closer to a manufacturing business dominated by medical technology products rather than working directly with payers or providers. The life sciences and services vertical contributed almost 20% to Birlasoft's revenue in the trailing quarter.

Birlasoft's enterprise resource planning is the company's second largest service in terms of revenue contribution and has seen a consistent on-quarter decline in the company's revenue mix. According to BoB Capital Markets Ltd., "The decline in ERP revenue is due to both portfolio and client mix factors. The company mainly works with Tier-II and some smaller manufacturing clients, unlike larger peers who benefit from demand driven by Tier-I companies upgrading to cloud ERP solutions like SAP S4 HANA and Oracle Fusion. This cloud upgrade trend is expected to start benefitting smaller clients like theirs gradually over the next year."

The company's BFSI vertical is expected to continue to decline for a few quarters. In the March quarter, Birlasoft's clientele from this sector declined due to soft performances in their credit cards, payments, and asset management businesses. "Going ahead, the management mentioned that the BFSI vertical will see a muted performance for a few quarters and will eventually grow," said ICICI Securities.

Birlasoft's total contract value in the June quarter is expected to be dragged down by lower contract renewals. "While the pipeline remains healthy, the current order book is not enough to deliver double-digit growth," Nirmal Bang said. Project ramp-downs in the trailing quarter are expected to affect top-line growth of the company for this quarter. "Revenue softness due to extended furloughs was called out in the third quarter of FY25 itself. Due to this, Q1FY26 (the June quarter) will be flat or will see a slight decline," Nirmal Bang said.

The company's consolidated earnings before interest, tax, depreciation, and amortisation is expected to be between INR 1.62 billion and INR 1.64 billion, according to estimates from three brokerages. The highest EBITDA is estimated by Emkay Global Financial Services Ltd. and the lowest by Anand Rathi. Birlasoft reported a consolidated EBITDA of INR 1.74 billion in Jan-Mar.

The company's earnings before interest and tax margin is likely to be 11.34%, according to the average of estimates from five brokerages. The highest EBIT margin estimates are from Nirmal Bang and IDBI Capital at 11.80% each. The lowest estimate is from Anand Rathi at 10.90%. Nirmal Bang expects the margin to expand slightly due to tight cost control measures by the company.

The company will detail its earnings Thursday. Analysts will monitor the outlook for demand for the enterprise resource planning business, manufacturing vertical, and the company's deal pipeline for FY26.

On Wednesday, shares of Birlasoft ended at INR 386 on the National Stock Exchange, down 1.8%. The stock is down nearly 9% since the announcement of the March quarter earnings. Of the 11 brokerage reports on the stock available with Informist, four have a "buy" recommendation with an average target price of INR 465. Four brokerages have a "hold" recommendation with an average target price of INR 499. Three have "sell" recommendations.

Following are the June quarter earnings estimates for Birlasoft in INR million, based on reports from seven brokerages in descending order of net profit:

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Nishant Maher

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