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CK Birla Group company Birlasoft is eyeing consistent segment growth with new deal wins and improved annuity-based revenue flows in the coming quarter.
The company witnessed a 3 per cent growth in its new deal pipeline for the nine-month period ended December 2020. The firm said there are enough indications of improving demand conditions across key markets such as the US, Europe and APAC region.
It is also confident of reporting 15-plus per cent EBITDA margins, even as direct costs, such as that for travel for employees, are being restored post the Covid lockdowns. The company reported over 16 per cent EBITDA margin for the quarter ended December 31, 2020.
Deal pipeline
According to Dharmender Kapoor, CEO and MD, Birlasoft, new contracts/deals are being pursued aggressively in the January-March quarter, and there has been an increase in contract size from existing clients. The company is expected to end the fiscal with nearly 70 per cent annuity revenues.
Apart from annuity-based revenues — which stand at 67 per cent for the Q3FY21 period — contract wins from existing clients account for another 20-25 per cent. The remaining 5-10 per cent is new client deals.
“Markets are improving post the lockdown, and discounts on existing contracts are being done away with. Demand for digital solutions across segments such as ERP (enterprise resource planning), emerging tech and platforms are on the rise. We are pursuing some new deals that may materialise soon. Our business strategy of focussing on annuity business and larger contracts from existing clients is working out well,” Kapoor told BusinessLine .
Birlasoft won deals to the tune of $180 million, $274 million and $109 million in Q1, Q2 and Q3, respectively, of FY21.
“With significant deals coming our way and the market opening up, we are confident of revenue growth in Q4 and in the coming fiscal,” he added.
Platform tie-ups with companies such as Microsoft, Salesforce, AWS (Amazon Web Services) and even Google are being strengthened and explored in a bid to boost revenues.
In terms of markets, the US continues to drive the company’s revenues. Demand in Europe remain soft, but APAC is witnessing recoveries.
Acquisitions
Once revenues and growth stabilise, and the effects of the pandemic wear off, the company will explore acquisitions across its prime verticals that include manufacturing, energy and utility services, life sciences, and BFSI (banking, financial services and insurance).
Acquisitions will be large-ticket ones targeting companies that have tech know-how and a market share (including a dedicated clientele).
“The immediate focus for FY22 is revenue stabilisation and organic growth. Acquisitions will be explored and put in motion during this time.”
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