Birlasoft Gets Antique Stock Broking's 'Hold' Initiation As Gradual Turnaround Seen — Check Target Price

Antique Stock Broking has initiated coverage on Birlasoft, an IT services provider, with a 'hold' rating and a target price of Rs 450, suggesting a potential upside of 4% on the counter. The brokerage anticipates a gradual turnaround for the company, after a challenging financial year 2025, but expects a recovery in growth from the second half of financial year 2026.

While management is prioritising growth over immediate profitability, Antique expects a modest margin improvement by financial year 2027, with a cautious yet hopeful stance.

Financial year 2024 proved to be a difficult period for Birlasoft, as its performance fell short of expectations amid a weak demand environment and macroeconomic headwinds. The company's project-based segments, specially came under pressure as clients curtailed discretionary spending, impacting overall revenue growth.

Despite this muted performance, Antique Stock Broking notes that Birlasoft's medium-term outlook remains strong. This stance is driven by the company's investments in capability building, strengthening partnerships, and sales functions, all aimed at gaining greater market share. Birlasoft continues to rebalance its business mix, shifting more towards annuity-driven revenue, which is expected to provide greater stability, according to the brokerage.

Margins were also under pressure, which was a consequence of the transition to annuity contracts, softer revenue, project ramp-downs, and pricing pressures from consolidation deals. While the fourth quarter of fiscal 2025 saw some margin improvement due to lower variable pay, leave encashment, and currency tailwinds.

The management expects financial year 2026 margins to remain relatively flat at around 13%. This is a deliberate strategy as the company prioritises revenue growth and market recovery over immediate margin expansion. Antique expects a 100 basis points margin expansion to 14% by FY27, driven by a better business mix and operating leverage.

Despite muted deal wins in fiscal 2025, Birlasoft's management is confident that the coming year will see stronger Total Contract Value momentum. This optimism is supported by initiatives such as the appointment of a senior leader to drive new account openings and a robust deal pipeline.

The first quarter of FY26 TCV may appear modest compared to the previous quarter due to the absence of renewals. But, two significant annuity deals—one valued at $30-40 million in US hi-tech and another at $25-30 million in European financial services—are expected to make the quarter stronger than a typically soft first quarter, the brokerage said.

Looking ahead, the analyst anticipates that growth will gradually improve in financial year 2026, supported by the ramp-up of new deals and a recovery across key verticals. Despite this, challenges include macro headwinds, specifically in the manufacturing and lifesciences sectors, a wind and high exposure to project-based revenue.

The brokerage expects Birlasoft's near-term performance to remain subdued, with growth likely to resume from the second quarter of financial year 2026 and accelerate from the second half.