Birlasoft: Birlasoft eyes large clients to lead industry growth

Birlasoft is eyeing large clients in the banking, financial services and insurance (BFSI) space as the mid-size information technology services company aims to mark its place in the top quadrant of the industry, its chief executive told ET.

“Our endeavour is to start serving the top banks, or the top insurance companies and asset management companies. In fact, we have a large number of conversations that are going on with them,” Angan Guha said. “In BFSI, we (currently) don’t serve the top banks or insurance companies, but we serve a lot of the other players which are niche players and that’s worked well for us.”

Part of the $2.9 billion CK Birla Group, the Pune-based software services provider recently bagged a $100-million-plus deal which was the “first in about three or four years” for the company. “More and more we are getting invited to work on large deals, which is obviously very exciting and satisfying for us,” Guha said, adding that the firm has an aspiration to touch $1 billion in revenue over the next five years.

Organically, there’s no way the company could get to a billion dollars from $640 million today over the next three years, he said.

“I’m trying to buy a company … We also do not believe in doing a large acquisition. We may do a couple of tuck-in acquisitions but will definitely look at it when we find the right asset,” Guja said, adding: “But right now, there are no assets under discussion.”

Under Guha, the company has managed to turn around, with its net profit beating most analyst estimates in the last quarter ended December 31. Profit rose 10.4% from the previous three months to $19.3 million. A year earlier, it had posted a loss of $2 million. Revenue grew 1.8% quarter-on-quarter and 7.9% from a year earlier in constant currency terms to $161.3 million.

In rupee terms, revenue rose 1.9% quarter-on-quarter (q-o-q) and 8.7% y-o-y to Rs 1,343 crore. While profit rose 11% q-o-q at Rs 161.1 crore, the margin expanded to 14.4% despite a two-month wage hike impact.After an almost 29-year stint at top-tier IT major Wipro, Guha took charge of Birlasoft in December 2022. Since then, the company’s shares have gained 140%. Since April 1, 2023, the share price has increased 190%.

“Birlasoft, under the leadership of Mr Guha, has delivered better-than-expected growth and margin performance over the last three quarters. The outlook appears bright with the mammoth ERP and cloud opportunity – which should lead to strong earnings growth (18% earnings per share compounded annual growth rate over FY24–26E),” brokerage Nuvama said in a report after the announcement of its financial results.

“Mining of our top 10, top 20 clients is really now playing out … these clients have grown ahead of the company average, grown at about 3.2% sequentially … we’ve done an incredible job in terms of execution,” Guha said, adding that the macroeconomic outlook remained subdued and uncertain.

Besides its generative AI platform Cogito, Guha is bullish on the BFSI and healthcare segments with a broad focus on four verticals including energy & utilities and manufacturing. This growth is across four service lines – digital & cloud, data & analytics, ERP and infrastructure with an around 30% exposure in three segments and almost 10% in infrastructure.

With 86% of the current revenue coming from North America, Guha recently appointed Manjunath Kygonahally as CEO for the rest of the world region to diversify geographical business.