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Birlasoft’s Q4 performance was a mixed bag. Revenue was down 3.6% QoQ to USD145.3mn (-3.7% CC), below our expectation of USD151mn. EBITDAM increased by 30bps QoQ to 18.5%, above our estimate, on the back of better operating efficiencies, certain one-offs, and exchange-rate tailwinds. Deal intake was steady, at USD208mn in Q4 (book-to-bill 1.4x). However, net new deal TCV fell to USD41mn, due to clients deferring decision-making amid uncertainty, with deals pushed by a few months rather than lost. The management indicated that client-specific issues in Life Sciences/Medtech are largely behind, and FY27 should mark an improvement over FY26. Near-term revenue will continue to face headwind from upfront productivity pass-through on AI-led deals. However, the management expects revenue to catch up in subsequent quarters as these engagements mature. The management reiterated steady-state EBITDA margin of ~15%, given incremental investments in sales, AI orchestration, and capability build-out. We cut FY28E EPS by ~4%, while keeping FY27E EPS largely unchanged, given the Q4 performance. We retain ADD and TP of Rs400, at 16x Mar-28E EPS, considering undemanding valuation, though revenue growth challenges persist.

Results summary

Revenue was down 3.6% QoQ to USD145.3mn (-3.7% CC), below our expectation of USD151mn, due to soft demand environment because of sustained macro-economic headwinds, client-specific challenges, shifts in customer priorities, deferment in discretionary spending due to macro uncertainties, and exit from low-margin, nonstrategic businesses. EBITDAM increased by 30bps QoQ to 18.5%, on the back of optimization of cost structure, decisive actions to enhance revenue quality, incremental one-offs in Q4 (~170bps impact from lower performance-based provisions, leave provisions, and lower employee equity compensation expense), and continued upside from currency tailwinds (~170bps gain). Net profit stood at Rs1.8bn, above our estimate of Rs1.1bn, mainly due to a beat in EBIT and tax concessions. Active client-count stood at 221 (vs 232 in Q3FY26 and 254 in Q4FY25), reflecting rationalization in some tail accounts. Top 5 client revenue stayed flat QoQ on seasonal factors, while Top 6-10 clients fell 7.2% which will henceforth be the focus area for logo addition. Deal-win TCV stood at USD208mn, with book-to-bill of 1.4x. On TTM basis, deal TCV fell ~13% YoY, while new net deal TCV declined ~30%. Total headcount was down 2.4% QoQ, at 11,363. The Board declared a final dividend of Rs4 per share. What we liked: Margin beat, growth in E&U. What we did not like: Revenue miss; weakness in most verticals.

BFSI set to rebound; Manufacturing and Lifesciences need a reset

Among verticals, Energy and Utilities delivered 1.8% QoQ growth in USD terms, while Manufacturing, BFSI, and Lifesciences and Services registered QoQ decline of 0.3%, 4.4%, and 12.7%, respectively. Within geographies, Americas declined 4.4% QoQ, while RoW grew 0.8%. All Services offerings reported a sequential decline in revenue, with Digital and Data, ERP, and Infra declining 3%, 4.6%, and 4.5%, respectively.

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