Birlasoft share tanks 6%, hits 52-week low as analysts cut targets post Q3

On the bourses, Birlasoft share price plunged 6.39 per cent to hit a fresh 52-week low of Rs 472.40 per share on Wednesday, February 12, 2025

Software company Birlasoft's December quarter of financial year 2025 (Q3FY25) results largely missed expectations, prompting several brokerages to revise their target prices downward. 

 

Despite a stronger-than-expected earnings before interest and taxes (Ebit) margin performance, the company's revenue declined by 1.1 per cent Q-o-Q, primarily due to higher furloughs and project ramp-downs, which raised concerns about its growth outlook, analysts said. 

 

Deal wins were weaker than anticipated, with a notable drop in net new deals, further dampening confidence in the company's near-term prospects.

 

As a result, brokerages have cut their FY25-27 earnings estimates and lowered their target prices, reflecting a more cautious stance on Birlasoft’s growth trajectory, particularly given the uncertain demand environment and weak visibility for FY26.

 

 

On the bourses, Birlasoft’s share price plunged 6.39 per cent to hit a fresh 52-week low of Rs 472.40 per share on Wednesday, February 12, 2025.

 

Overall, Birlasoft’s consolidated net profit dropped 27.4 per cent year-on-year (Y-o-Y) to Rs 116.9 crore in Q3FY25, from Rs 161 crore in Q3FY24. The profit also declined 8.31 per cent Q-o-Q from Rs 127.5 crore in Q2FY25.

 

Revenue rose merely 1.5 per cent Y-o-Y to Rs 1,326.7 crore in Q3FY25, from Rs 1,342.9 crore in Q3FY24. However, revenue dropped 0.4 per cent sequentially from Rs 1,368.2 crore in Q2FY25.

 

At the operating level, earnings before interest and taxes (Ebit) plummeted 26.4 per cent Y-o-Y to Rs 142.2 crore in Q3FY25, from Rs 193.2 crore in Q3FY24. Ebit margin squeezed 400bps to 10.4 per cent in Q3FY25, compared to 14.4 per cent in Q3FY24.

 

Meanwhile, here’s what top brokerages said about Birlasoft post Q3:

 

Nomura

 

Analysts at Nomura have cut their FY26-27F EPS by 3.2-3.4 per cent, primarily driven by lower revenue growth estimates. Their FY26-27F EPS estimates are ~11-12 per cent lower than Bloomberg consensus. 

 

Moreover, they have lowered the target price to Rs 560, from Rs 590 previously, based on an unchanged multiple of 22x FY27F EPS. However, the brokerage has maintained its ‘Neutral’ rating.

 

Analysts believe the company needs to improve the predictability of its revenue growth profile for a re-rating to take place. Key upside risks, analysts believe, include higher-than-expected revenue growth and margin improvement. Key downside risks, they said, include a prolonged period of low growth and delay in margin recovery.

 

Emkay

 

Emkay analysts noted that Birlasoft’s Q3 performance was a mixed bag, with revenue missing expectations and margin beating estimates. Revenue fell due to higher-than-usual furloughs (a 150bps hit). Despite salary hikes and planned investments, the Ebit margin decline was curbed to 10bps Q-o-Q, backed by operational efficiency and rupee depreciation. Management guided for a soft Q4 due to extended furloughs in healthcare (till January) and ramp-downs of a few projects.

 

The management believes margins have bottomed out and should recover, but the pace of improvement depends on revenue acceleration. Deal intake stood at $226 million in Q3, with a book-to-bill ratio of 1.4x — the strongest as of FY25TD. Management observed signs of a pickup in BFSI and emerging green shoots in discretionary spending, but remains cautiously optimistic about the growth uptick.

 

Thus, Emkay cut FY25-27E EPS by 0.9-5.5 per cent, incorporating the Q3 results. It also trimmed the target multiple to 22x (from 25x), maintaining an ‘Add’ rating with a revised target price of Rs 570 (down 15 per cent) due to undemanding valuations.

 

Nuvama 

Nuvama noted that Birlasoft’s revenue was lower than the estimate, while Ebit margin was ahead of the estimate. New deal TCV was soft at $226 million (+4 per cent Y-o-Y), with net new at $64 million (-32 per cent Y-o-Y).

 

Analysts said Birlasoft continued to disappoint on growth and deal wins, with revenue expected to decline further in Q4 due to extended furloughs and client ramp-downs. The weak exit rate, along with soft TCV, paints a dismal picture for FY26. 

 

Consequently, analysts have sharply cut FY25E/26E EPS by -5 per cent and -10 per cent, respectively, on lower growth and margin expectations. They have also reduced the target valuation to 18x (from 20x) as they roll forward to Mar-27. They maintained a ‘Reduce’ rating with a target price of Rs 465 (down from Rs 540).

 

HDFC Securities

 

Those at HDFC Securities noted that Birlasoft reported lower-than-estimated revenue with stable margins in Q3. The revenue was impacted by higher-than-usual furloughs and project ramp-downs in the manufacturing and life-sciences verticals. 

 

The company indicated extended furloughs in Q4, resulting in a weak exit growth rate for FY25E. The demand environment remains uncertain, with clients taking a ‘hold and wait’ approach to IT spending.

 

However, there are green shoots in the BFSI vertical (24 per cent of the revenue). Growth will be led by BFSI and E&U, while manufacturing and life-sciences will continue to struggle for a couple of quarters.

 

Given these factors, analysts have lowered EPS estimates, primarily due to weak Q4 and a protracted rate of recovery. However, they maintained an ‘Add’ rating on Birlasoft with a revised target price of Rs 510 (down from Rs 620).