CK Birla group IT firm, Birlasoft, is witnessing increased new deal wins as cross-selling picks up across key clients in the US and Europe – which account for 90 per cent of its turnover. There is also an increased appetite amongst existing clients to invest in emerging verticals like digitisation, according to the company.
For the mid-sized IT services company, the deal win or total contract value of deals stood at $140 million for quarter-ended September 30. Of these, nearly 75 per cent or $104 million came from new business (including cross selling to existing clients).
According to Dharmender Kapoor, MD and CEO, Birlasoft, there has been a jump in net new business (total deals less renewals and cross selling) which contributed to approximately 37 per cent of the total wins in the second quarter versus 13 per cent in the first quarter.
Revenue growth up
Of the total contract value won, a $20-million large deal was from a new client. As a part of regular tail account optimisation, the active customer client count dropped to 280 from 290; but revenue growth from large clients increased 21 per cent year-on-year, indicating higher cross selling of offerings.
“The share of digital deals and transformation programs are increasing post-Covid. Clients are also pushing for a deal structure that is modular – which means there will be a series of smaller deals – than monolithic large deals. So there will be an increase in the annual contract value revenues,” he told BusinessLine.
The company saw 50 per cent increase in its deals pipeline over the six-month period with solutions in segments like cloud and business technology transformation (digital) witnessing 51.8 per cent and 29.2 per cent y-o-y growth.
Predominant verticals like BFSI and Lifesciences grew 15 per cent annually, manufacturing grew 21.8 per cent annually and energy and utilities — which saw subdued growth last year due to factors like oil prices — are witnessing good pick-up at 12 per cent y-o-y with crude oil pricing stabilising at higher levels.
Margin pressure
According to Kapoor, the second quarter saw margin pressure, following a hike in wage bills, increased investments and subcontractor costs. EBITDA margins grew a little over one percentage point annually to 15 per cent in the second quarter ; but remained flat in absolute terms to $20.5 million.
While attrition was managed better than industry, the company is looking at more hiring of freshers rather than lateral hiring to have a lesser impact on its wage bills. Moreover, with overseas destinations opening up, off-site employee counts are likely to be increased, thereby bringing down costs.
“Attrition will start softening by the end of this quarter. It will soften to a good extent by end of fourth quarter of FY22 because the pent-up demand would have gone already. At the same time pent-up attrition would have also softened. That means the trend that we are seeing in which people are moving from one company to another will taper down,” he said, adding that a 15 per cent EBITDA margin was achievable in FY22; while the target is to get to 18 per cent EBITDA levels in the long run.
