In conversation with Kamini Shah, Chief Financial Officer of Birlasoft Limited

We do expect to see a softness in the Indian IT Industry due to the macroeconomic situation, but we are confident of the long-term potential of this industry, expresses Kamini Shah, Chief Financial Officer of Birlasoft Limited

In Q4FY23, net sales surged by 11.34 per cent from last year’s same quarter while the net profit dipped by 15.6 per cent from the corresponding quarter last year. What were the contributing factors which led to this performance? 

We have had strong revenue growth in the last fiscal year. Our revenues grew by 16.1 per cent. Our Top 10 accounts have experienced a remarkable growth rate of 17 per cent and our Top-20 accounts have shown substantial growth at 11.6 per cent year-over-year.

We have always been focused on operating metrics and driving significant transformation within the organization. We have made substantial improvements in utilization, pyramid structure, and attrition rates, resulting in notable progress. The net profit in Q4’23 has shown an operational improvement however it's not visible in the YOY growth due to a client-specific situation which is temporary in nature.

For the financial year, we have delivered an adjusted EBITDA of USD 84 million, implying a margin of 14 per cent for the entire reporting year. Our cash flows from operations at 100 per cent of adjusted EBITDA are on the back of sustained focus on collections resulting in a best-in-class DSO of 53 days. 

These results reinforce our confidence in delivering strong performance quarter-on-quarter and showcase our strong underlying strength.  

Looking at the current macroeconomic situation, can you throw some light on your deal wins for the quarter?  

We had a strong deal-signing quarter in Q4’23, which has further strengthened our position in the market. Our Total Contract Value (TCV) signings reached USD 286 million, surpassing the USD 231 million TCV achieved in the previous quarter. This signifies our highest-ever deal wins in a quarter and serves as a testament to our ongoing success. In addition, we have reported a healthy balance between new deals and renewals, with 40 per cent of our deals being new signings and 60 per cent comprising renewals of Total Contract Value (TCV) deals. 

In the new deal wins, we secured a significant deal worth USD 50 million from one of our customers, marking it our largest deal for the quarter. 

These reflect a strong operating quarter, characterized by robust revenue and an impressive EBITDA margin. We remain committed to delivering excellence and driving success by converting the deal pipeline to revenue. 

While the pipeline continues to be strong; due to the macroeconomic situation, customers are taking their time in decision making which may result in a soft near-term outlook. 

Your revenue by manufacturing industry vertical contributed to 47.1 per cent of the total revenues. What is your outlook on the manufacturing industry vertical for the next few quarters? 

The manufacturing industry is going through a major shift due to the advent of technologies like robotics, IoT, 5G, Cloud, and AI, which bring in new paradigms to the traditional manufacturing approach. We remain optimistic about the manufacturing industry's future. While there may be a shift in spending priorities towards efficiency-focused initiatives rather than large-scale transformation projects, this presents an opportunity for us to offer solutions that help manufacturers to optimize their operations and drive productivity gains. 

We believe that the manufacturing sector has significant potential for growth in the coming quarters, fuelled by technological advancements, market demand, and evolving consumer preferences. We are well-prepared to navigate the industry's dynamics by closely observing the economic conditions, geopolitical developments, regulatory changes, and technological advancements. To adapt to these dynamics, we continuously monitor the industry landscape, adjust our strategies, and seize opportunities for success.

What is the current competitive landscape for your company, and what are your plans for enhancing your competitive position? 

We are currently undergoing a significant cultural and organizational transformation to enhance our competitiveness. This involves focusing on specific verticals and service lines while striving to become a more agile and execution-oriented organization with a strong customer engagement focus.

As part of this transformation, we are revamping our organization to achieve better synergies, increased efficiencies, and deeper customer engagement. Our cultural transformation is guided by six principles, with "Organization First" as the main principle. In terms of our focus areas, we are prioritizing four industry verticals including Manufacturing, BFSI, Energy and Utilities, and Life Sciences. Additionally, we emphasize four strategic service lines: Digital & Cloud, Data Analytics, Infrastructure, and ERP. By concentrating on these sectors and service lines, we aim to leverage our strengths and deliver exceptional value to our clients.

We believe in investing in our front-end, our domain, and service lines capability, and we will utilize this opportunity to continue to invest in the future. Further, we have seen strong growth in our financial services and manufacturing business, and we will continue to invest in innovation and build our expertise to grow the business over the next couple of quarters. 

What is your outlook on the Indian IT sector for the next few quarters? 

Over the last three decades, the Indian IT sector has matured in its approach as well as its capabilities to be a reliable partner to enterprises across the globe. It is noteworthy how Indian IT has adapted to various technological disruptions to build new and better capabilities. 

The tech industry would continue to demonstrate resilience and adaptability, positioning itself for long-term growth. For most enterprises, IT is now at the core of their businesses, an essential element to run and grow their business. It is clear that continuous investments in IT aren’t optional but a necessity to deliver business value. Customers are actively seeking ways to reduce operating expenses, driving a heightened focus on efficiency, automation, and offshoring. 

By adopting these strategies, organizations can optimize their resources and achieve financial efficiencies. While economic challenges may necessitate adjustments and a cautious approach, the overall sentiment towards technology and growth prospects remains positive. The tech industry is well-positioned to navigate the current landscape, leveraging innovation to overcome challenges and drive progress in the digital era.

In the near term, we do expect to see a softness in the Indian IT Industry due to the macroeconomic situation, but we are confident of the long-term potential of this industry.