Birlasoft leaps 18%, hits 52-week high as it inks pact with Microsoft

The Strategic Cloud Alliance with Microsoft will further strengthen Biralsoft's digital offerings and will allow them to complement their industry expertise, the company said in a statement

Shares of Birlasoft zoomed as much as 18.4 per cent to hit fresh 52-week high of Rs 177.8 on the BSE on Tuesday after the company partner with US-based Microsoft to drive cloud-based Digital Transformation for customers. 

"Birlasoft has plans to scale its current Microsoft cloud business to $100M. Building on the current collaboration, Birlasoft will focus on delivering end-to-end services on Microsoft Azure, Microsoft 365, and Microsoft Dynamics 365, to its clients. Together with Microsoft, Birlasoft will create innovative industry solutions and enable customers in focus industries to adopt Microsoft cloud technologies and services," it said in a statement. READ HERE

Birlasoft helps customers in manufacturing to accelerate their Industry 4.0 adoption; in BFSI to leverage Open APIs and automate both front-office and backoffice transformation; in Energy & Utilities sector to enhance field collaboration and real-time service excellence, optimize operations and improve asset performance; and in Life Sciences vertical to innovate faster, provide rich insights to achieve commercial excellence, and automate drug discovery and pharmacovigilance processes. "The Strategic Cloud Alliance with Microsoft will further strengthen Biralsoft’s digital offerings and will allow them to complement their industry expertise with the power of Microsoft clouds, to accelerate their clients’ digital transformation journey," it said.

“This collaboration combines Birlasoft’s industry expertise with the power of the Microsoft cloud platform. Together we will help our customers accelerate their digital transformation with new and innovative solutions across industries,” said Gavriella Schuster, Corporate Vice President, One Commercial Partner at Microsoft Corp.

At 12:37 pm, the stock was quoting at 172 on the BSE, up 14.5 per cent, as against 0.64 per cent gain in the benchmark S&P BSE Sensex. The counter saw massive spurt in volume as soon as it made the announcement. A combined 13.94 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report. 

In the past one month, the stock has surged 38.35 per cent on the BSE, as against 2.7 per cent rally in the benchmark S&P BSE Sensex. 

The CK Birla Group IT firm reported a 34.8 per cent increase in profit after tax at Rs 56 crore for the quarter ended 30 June, 2020, down 18.4 per cent sequentially. Revenues for the quarter, however, grew 17.7 per cent YoY at Rs 915 crore, up 0.8 per cent sequentially. 

In dollar terms, PAT was up 24.3 per cent at $7.5 million and revenues up 8.5 per cent at $121.2 million. That apart, the company reported new deal wins worth $180 million during the quarter. “Our Q1 results were better than what we had expected at the beginning of this pandemic quarter. Our healthy deal wins of $179.7 million and good pipeline across verticals and horizontals, coupled with strong cash collections is a testimony to the trust shown in us,” said Dharmender Kapoor, Managing Director and Chief Executive Officer, Birlasoft.

In a post result note, analysts at Emkay Global Financial Services said client metrics continue to reflect the underlying positive thesis of the company, with the number of $10 mn+ clients increasing from 7 to 8 QoQ as the long-tail rationalization continues. Top 10/20 client revenue performance continues to benefit from strong growth in the Lifesciences segment, they said.

"We raise FY21-23E EPS by 7-19%, driven by the June’20 quarter beat and increase in revenue/margin assumptions. Retain Buy with a revised TP of Rs150 vs. Rs125 earlier, as we roll forward to June’22E (Mar’22E earlier)," they wrote in the report dated August 5.

Sharekhan, meanwhile, noted that improving execution in last three consecutive quarters indicates the major challenges relating to corporate restructuring are behind now. "Though the revenue growth in Q1FY2021 was impacted in the wake of COVID-19, we expect recovery in revenue growth from coming quarters on the back of deal wins, healthy deal pipeline, strong client mining activities and defined incentives for cross-sell/up-sell," the brokerage noted. 

"At current levels, the stock trades at 10x/8x of FY2022E/FY2023E earnings, which is significant discount to peers. Further, net cash on balance sheet stood at Rs. 819 crore (24% of market capitalisation). Hence, we initiate viewpoint coverage on Birlasoft with a positive view and expect a 28-30% upside in the next 10-12 months," it said in a recent report.