IGI Logo

Strong Execution; Valuation Caps Near-Term Upside

We remain constructive on OFSS' long-term fundamentals, supported by its leadership in banking software, expanding AI capabilities and strong cash generation. Healthy RPO growth (+16% YoY) and a robust product pipeline provide confidence in medium-term revenue visibility. While Q1FY27 margin was supported by a large perpetual license deal, we believe earnings quality remains strong, underpinned by a structurally high-margin product portfolio. Following the recent stock outperformance, we see limited scope for a meaningful near-term re-rating and therefore revise our rating to ‘ADD’ from ‘BUY’. Our FY26–29E Revenue/EBITDA/PAT CAGR estimates stand at 12.6%/17.1%/18.1%, with a revised TP of INR 11,750, based on 28x FY28E EPS (maintained).

Revenue & EBITDA above Estimate; Strong Beat on all Fronts

* OFSS reported Q1FY27 revenues at INR 31,252 Mn, up 68.7% YoY and 51.3% QoQ (vs CIE est. INR 22,535 Mn), driven by strong execution and a major perpetual license deal win.

* Revenue from products business grew by 75.3% YoY to INR 29,358 Mn and service business grew by 6.5% YoY to INR 1,894 Mn.

* EBITDA came in at INR 18,765 Mn (vs CIE est. at INR 10,819 Mn), up 121.7% YoY owing to strong operating leverage. EBITDA margin came in at 60.0% (vs CIE est at 48.0%), down 1,435 bps YoY.

* PAT for the full quarter came in at INR 14,155 Mn up 120.5% YoY (vs CIE est. 8,240 Mn).

* The company also announced that MD & CEO Makarand Padalkar has resigned while CFO Avadhut (Vinay) Ketkar has been appointed as the new Managing Director & CEO, effective 24 July, 2026.

Landmark Deal Lifts Quarter; Healthy Pipeline Supports Outlook

OFSS reported a strong Q1FY27, with revenues rising 60.0% YoY & 51.3% QoQ, driven by the recognition of a landmark perpetual license deal valued at about USD 100 Mn with a US-headquartered global bank. Beyond this one-off, underlying execution remained healthy, supported by multiple product wins, a robust pipeline and 16.0% YoY growth in Remaining Performance Obligations (RPO), strengthening medium-term revenue visibility. We expect growth to normalise over the next few quarters as the large license deal annualises, while sustained deal momentum and a healthy pipeline should continue to support medium-term growth.

Margin Expansion Accelerates; Operating Leverage Kicks in

EBITDA grew 121.7% YoY, with margin expanding 1,435 bps to 60.0%, riven by strong operating leverage from the large perpetual license deal, a favourable product mix and disciplined cost execution. Margin expansion was further supported by AI-led productivity gains, enabling leaner team structure, faster delivery and improved cost-efficiency. We expect margin to normalise from the elevated Q1 levels as the one-off license contribution subsides, although continued traction in high-margin software products, cloud adoption and AI-led offerings should support structurally healthy profitability

For Detailed Report With Disclaimer Visit. https://choicebroking.in/disclaimer

SEBI Registration no.: INZ 000160131