Birlasoft downgraded, target cut after weak Q4; near-term outlook bleak

Shares of Birlasoft

Ltd. will be in focus on Thursday, May 7, after the company reported a weak March quarter performance, prompting brokerage firm Nomura to downgrade the stock and trim its price target.

Nomura downgraded Birlasoft to 'Neutral' from its earlier rating of 'Buy' and also reduced its price target to ₹380 per share from ₹390 earlier, citing weak revenue growth and limited near-term earnings visibility.

The brokerage said that Birlasoft reported a weak Q4FY26 revenue performance amid client-specific issues and a challenging demand environment shaped by macro uncertainty, trade tensions, tariffs and geopolitical risks.

Management said it remains focused on improving deal wins and strengthening the pipeline to ensure FY27 returns to a growth trajectory.

However, Nomura believes the company's efforts to revamp its sales organisation and deepen engagement with large accounts may take time to translate into meaningful growth.

The brokerage added that sluggish deal wins over FY25 and FY26 have amplified the impact of weak demand on revenue growth. With a book-to-bill ratio of 1.43x, timely closure of large deals in Q1FY27 will be critical for improving the company's growth outlook.

Nomura has lowered its dollar revenue estimates by 5-7% for FY27 and FY28 and now expects growth in the range of -0.8% to 3.5% over the two years.

For Q4FY26, constant currency revenue declined 3.7% sequentially and 5.1% YoY. Despite the weak topline, EBITDA margin improved for the third straight quarter to 18.5% from 18.2%, aided partly by one-off gains and foreign exchange benefits.

Profit after tax rose 47% sequentially, supported by lower tax expenses and the absence of labour code-related costs that had impacted the previous quarter.

Geographically, revenue from the US market declined 4.4% QoQ in dollar terms, while the Rest of the World segment remained largely flat.

The offshore revenue mix improved further to 57.5%, while the fixed-price project mix declined 150 basis points sequentially.

Client metrics remained soft, with the top five clients remaining flat, while revenue from the top 10 and top 20 clients declined 1.9% and 2.5% respectively on a sequential basis.

Headcount fell 2.4% QoQ, while utilisation declined 70 basis points to 81.5%. Attrition eased marginally to 13%.

Birlasoft shares ended 0.7% higher at ₹372.50 on Wednesday, though the stock remains down 14% so far this year.