Sonata Software Q2 Review — Long-Term Story Remains Intact, Says IDBI Capital Maintaining 'Hold'

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IDBI Capital Report

Sonata Software Ltd. demonstrated a resilience performance with reported consolidated revenue at Rs 2,119 crore, reflecting a 2.3% YoY decline but stable order book growth with a book-to-bill ratio of 1.28x. International services revenue grew 3.2% YoY to $82 million, driven by strong demand in Healthcare, BFSI, and TMT verticals.

Ebitda margin expanded by 70 bps QoQ to 17.3%, supported by higher utilization (87.3%), planned large-deal offshoring, and AI-led productivity improvements, partially offsetting salary inflation impact.

Sonata secured one large multi-year healthcare deal and several mid-sized AI/CSP deals, boosting the AI order book to 10% of total order book value.

Domestic business faced a 4.8% YoY decline but gross contribution improved marginally.

Sonata’s strategy focuses on AI modernization, scale in key verticals, and diversification across geographies, maintaining a strong pipeline despite headwinds from specific large clients.

The company declared an interim dividend of Rs 1.25 per share in line with quarterly payout policy.

Overall, Sonata is on a steady growth trajectory with continued AI integration fueling operational efficiency and client acquisition.

We maintain our rating to Hold, valuing the stock at 21.2x FY27E EPS with a same target price of Rs 435.

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