ESDS Software shares in 5% lower circuit for second straight day - Here's why the stock is falling

Shares of ESDS Software Solutions Ltd.

are down in a 5% lower circuit for the second day running on Monday, September 28, extending their losses after announcing their quarterly results last week.

For the June quarter, ESDS reported a 20% revenue drop on a sequential basis, while its profitability declined by 56.7% from the previous quarter. Its profitability of ₹29 crore was well below the Choice Broking estimate of ₹250 crore.

Why Did ESDS Shares Fall?

During the earnings call last week, the management of ESDS stated that the fourth quarter of financial year 2026 included a one-off design services revenue which was booked in a subsidiary.

The street was expecting large revenue accruing from the Australia deal, but the CMD said that the September date has slipped by a month and a half, and it is now expected by the first week of November, with revenue accruing from the third quarter of financial year 2027.

Choice Broking now expects ESDS to report revenue of ₹1,876 crore in financial year 2027, compared to its earlier estimate of ₹2,263 crore. The management also did not give any guidance for the current or the next financial year.

Nearly 20% of the company's financial year 2026 revenue and profitability was led by one-off components, which was not disclosed by the company during its IPO.

In just a few days of listing, shares of ESDS had surged more than 4x from its issue price of ₹429, taking its market capitalization past the ₹20,000 crore mark, higher than many of its other listed peers, including Tata Elxsi, Firstsource, and KPIT Tech.

Just a few days after initiating coverage with a "buy" rating, Choice Broking downgraded ESDS to "sell" but kept its price target unchanged at ₹1,550.

Shares of ESDS Software Solutions are trading 5% lower at ₹1,672.5.