Despite the highest ever attrition rate, margins were not affected for the company | Birlasoft Q3 FY22 Conference Call Highlights

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  • Revenue from operations in the Q3FY22 quarter grew 21.7 per cent to Rs 1,071.9 crore as compared with Rs 880.8 crore in the year-ago quarter. An 18.2 per cent jump in Profit after tax (PAT) to Rs 114 crore in Q3. Revenue was up 5% QoQ in constant currency.
  • Revenue growth was broad based with improved margins despite supply side constraints
  • EBIT Margin of 15.2%, despite wage hike, furlough, supply side constraints, higher attrition and retention cost
  • Margin Performance: Volume growth +90bps, QoQ one time +50bps, an addition month of wage hike (-70bps), increase in subcontractor QoQ (-50bps)
  • Among verticals Manufacturing led the growth. Energy & utility growth was led by stable oil price and large deal wins.
  • US$1.2bn sales pipeline vs ~US$750mn in FY21. Year to date deal stood at US$474 mn of which US$319 mn was new deal wins, new deal ratio is improving indicating healthy growth.
  • Growth is expected to continue as company is working in hi-tech, digital space, where there is significant opportunities in platform business
  • During the quarter attrition was at +31.4% YoY and +30% QoQ which is highest ever. Management expects attrition to cool off in next few months. Offshore was at 49.9%, which is also at all-time high.
  • Company added ~ 300 fresher’s in Q3FY22 and expects to add ~900 in FY22 and ~1500 fresher’s in FY23. The company witnessed decline in headcount due to optimization of bench, higher fixed price projects and reallocation of resources.
  • Outlook: The company is witnessing higher spend in digital technologies, strong demand over next 2-3 years.  Strategic partnership with hyperscalers, geographic expansion and deal pipeline suggests a good organic revenue growth from long term perspective. Margins to improve in the long run Birlasoft has reported improvement in margins despite headwinds of wage hikes and sub con cost.
  • Guidance: Company has maintained its guidance of US$1 billion in revenues by FY25 (implying CAGR of 20%) and margins above 15%.

Disclaimer: The information here is provided for reference purposes only and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell stocks or MF.

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