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Informist, Friday, Feb. 6, 2026

 

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By Shakshi Jain and Narayana Krishna

 

MUMBAI – Demand for engineering services and digital transformation solutions has recovered to a "stable and moderate" state since the September quarter, according to Sukamal Banerjee, executive director and chief executive officer of Cyient Ltd. Client decision-making regarding deals has stabilised and has picked up momentum in the last two quarters, while some caution is visible in areas of discretionary spending, he said.

 

"It is not a robust demand environment. It is not a demand environment which creates 20% year-over-year growth... But at the same time, it is also not frozen like it was in March-April-May of last year, when, because of some macro issues which came up at that point in time, there was pretty much a stall. I think we are beyond that," Banerjee told Informist in an interview.

 

Banerjee heads Cyient's digital, engineering, and technology business, which accounts for 80% of the company's total sales. Cyient currently has a record large-deal pipeline, which is diversified across the industries the company operates in, Banerjee said. In fact, the company has a deal pipeline even in industries where growth has been absent for a while, for instance, rail transportation, he said. Geographically, the deal pipeline is largely concentrated in North America and Europe. The company classifies deals worth more than $10 million as large deals.

 

Banerjee's comments come at a time when industry watchers are keenly awaiting signs of a turnaround in the technology services industry, which is navigating a prolonged slowdown driven by macroeconomic and geopolitical uncertainties. Further, the rise of artificial intelligence is disrupting the traditional business and service models, rendering linear models obsolete and unleashing a race to cash in on new opportunities. It has also triggered fears of job losses as employers shift their focus to highly specialised areas such as cloud modernisation, cybersecurity, and generative AI.  

 

RENEWALS, PRICING

Amid the evolving technological changes and macroeconomic uncertainties, about 50%-60% of Cyient's deal renewals have remained intact, Banerjee said. In roughly 25%-30% of the deals, the company has observed changed expectations. "Either do more work for the same money or do the work at a lesser money and then move the money somewhere else, where you've to go and win new projects to make sure that we can maintain our revenue," Banerjee said. In about 5%-7% of deals, which has traditionally been the case, renewals have not materialised as clients decided to terminate investments.

 

"I think the macroeconomic environment has a lot to do with discretionary programmes. Product life cycles are not so discretionary. I mean, that is the lifeblood of the company. That is what generates the revenue stream for the company. So this does not get as affected," Banerjee said.

 

As a result, Cyient managed to negotiate price increases on some of its existing deals during the December quarter. In terms of new deals, the company is making price concessions only in strategic areas where it sees a longer-term path for itself and the newer segments where it is trying to build a larger presence.

 

On artificial intelligence, Banerjee said nearly 100% of deals involving data and software include an AI component. In the mechanical engineering domain, about 20% of deals currently involve an AI element. "In some cases, it is not even a requirement from the customer, but we are using it to service, to improve our service delivery. In some cases, I think it is part of the requirement which comes from the customer as well," Banerjee said. In terms of AI advancement, the range currently extends from the proof-of-concept stage to on-site deployment, he added.

 

Banerjee said the company will continue to add to its workforce as business visibility builds up. However, there has definitely been a shift in the skills expected of new hires. On the impact of the provisions in the new Labour Codes, Banerjee said, "... yes, there is a cost impact. It is not significant, but there is a cost impact going forward."

 

For the quarter ended December, Cyient reported a one-time cost of INR 423 million due to an increase in employee benefits provisions arising from the implementation of the new Labour Codes. Under the new codes, basic pay, dearness allowance, and retaining allowance must together comprise at least 50% of an employee's total cost to the company.

 

In the December quarter, Cyient's digital, engineering, and technology business net added 481 employees sequentially to take its overall headcount to 14,115. On a year-on-year basis, the company's workforce grew by 121 employees as of Dec. 31. "We continue to invest in our talent pipeline, bringing in senior leaders in key areas of growth," Banerjee said.

 

MARGIN, GROWTH

Cyient's digital, engineering, and technology business has its target cut out for the quarters ahead: to improve its earnings before interest and tax margin by 260 basis points in five quarters to meet the aim of 15?IT margin by the end of FY27. According to Banerjee, the company's margin and efficiency improvement programme is progressing as planned. 

 

"Our Q2 (Jul-Sep) and Q3 (Oct-Dec) numbers had a lot of one-timers that we had to deal with. Those one-timers are behind us... We should see more substantial progress in our margin as we move forward. So, let's wait for our Q4 (Jan-Mar) results. That probably will give you a better picture," said Banerjee, adding that the improvement levers that the company has set in motion should start showing results from the ongoing quarter onwards.

 

In the December quarter, the company's digital, engineering, and technology business registered a 25 bps sequential expansion in its EBIT margin to 12.4%. At the end of the first nine months of FY26, the segment's EBIT margin was down 60 bps from 13% in the March quarter of FY25.

 

The Hyderabad-headquartered company is also actively considering inorganic growth opportunities to boost its capabilities, particularly on two fronts. The first is where the company lacks large-scale competency, such as data engineering and platform software. Cyient is considering a ticket size of $30 million to $100 million for such acquisitions. The second is two priority industries, that is, automotive and software, where the company would like to engage in slightly larger transactions, as they are big outsourcing markets. 

 

"Our conservatism in terms of our approach continues because that's the right thing to do... The last thing we want is to do an M&A (merger and acquisition) because it is available," Banerjee said.

 

In the December quarter, the digital, engineering, and technology business generated free cash flow of INR 2.36 billion while the larger group recorded a free cash flow of INR 1.63 billion. The business registered 3.5% sequential and 6.5% year-on-year revenue growth in the December quarter to INR 14.88 billion. The segment's net profit grew over 9% on quarter and more than 40% on year to INR 1.5 billion in the same period. Banerjee reaffirmed that the company expects better revenue and margin performance in the second half of FY26 compared with the first. 

 

Friday, Cyient's shares ended at INR 1,066.60 on the National Stock Exchange, down 3.2% from the previous close.  End

 

US$1 = INR 90.65

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

 

Edited by Saji George Titus

 

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