Birlasoft Limited (NSE: BSOFT) Q4 2025 Earnings Call dated May. 29, 2025
Corporate Participants:
Abhinandan Singh — Head-Investor Relations
Angan Guha — Chief Executive Officer and Managing Director
Kamini Shah — Chief Financial Officer
Analysts:
Ravi Menon — Analyst
Dipesh Mehta — Analyst
Harsh Chaurasia — Analyst
Sandeep Shah — Analyst
Abhishek Shindadkar — Analyst
Girish Pai — Analyst
Manik Taneja — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4 FY ’25 Earnings Conference Call hosted by Birlasoft Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touchstone phone. I now hand the conference over to Mr Abhinandan Singh, Head, Investor Relations, Birla Soft. Thank you, and over to you, Mr Singh.
Abhinandan Singh — Head-Investor Relations
Thank you and welcome folks. By now you have received or seen our results that were announced last evening India Time. Those are also available on our website www.birlasoft.com. Joining me on this call this morning are our CEO and MD, Mr Angan Rouha and our CFO, Ms Kamini Shah. We will begin the call today as usual with opening remarks from both Angan and. And after that, we will open up the floor for your questions. Before I hand over the floor to Angan, a quick reminder that anything that we say on this call on the company’s outlook for the future could be a forward-looking statement involving significant uncertainty. And therefore, that must be heard or read in conjunction with the disclaimer that appears in our investor update, which you would have received and is also uploaded, as I said on our website and also filed with the stock exchanges.
With this, let me hand over the floor now to Mr Angan Goa, our CEO and MD. Over to you, Anand.
Angan Guha — Chief Executive Officer and Managing Director
Thank you,. So good morning and good evening to everyone wherever you are, and thank you for joining us today as we share some perspectives of our 4th-quarter and full-year FY ’25 performance. But before I begin, I just wanted to apologize that I’m slightly under the weather. So my voice modulation may be an issue, but if you have any questions, then I will step-in and-answer as and when the — as and when the time comes in. So at, you will recall that over the past couple of years, we have undertaken and initiated several actions aimed at securing our long-term profitable growth objectives.
The key among them has been investing in scaling up opportunities and capabilities that will drive our future growth. A classic example of that is our early adoption on emerging technologies like Gen AI, where we have created a solid framework and a tool that helps us to deliver to our customers. We are also using our specialized domain expertise within each of our verticals and sub-verticals together with our technology capabilities to create an offering and use cases that are very relevant for our customers and prospects.
Nother key element of our culture has been to drive greater accountability and swiftware action. And towards that end, we’ve obviously changed a lot of leaders who have not delivered for us and we are willing to make further changes to our teams if the need comes in. We will become a very performance-driven organization, which we have always been and we want to continue that scale. So some of the changes that we’ve had in the past few months is we’ve refreshed our leadership in manufacturing. In the MedTech segment under Life Sciences, we have had a new leader. We’ve also promoted a new leader internally to take-up our digital and data business.
The GCC opportunity clearly presents a very big opportunity for us. We’ve hired a senior leader in India in India to look at the GCC opportunity and how can we drive that as we go-forward. Our investments in the ROW business is finally paying-off. As I’m sure some of you would have noted from our deal flows, we’ve been able to win one large deal, a reasonable size deal considering the size of our company in the ROW region and we have a couple of more deals in the offering that are looking very, very good.
So with that, let me talk a little bit about our full-year and Q4 performance. Now FY ’25 has been a steady year for us, but it has clearly been disappointing, as I’m sure all of you have noted. In the face of soft demand environment owing to sustained macroeconomic challenges and as a business, we’ve structurally seen lot of projects — project-based businesses come under a slight amount of pressure because the discretionary spend is very, very muted at this point in time. With that backdrop, our consolidated revenues for the year have grown 1.8% from the preceding year to about INR5,375 crores. In dollar terms, this is about INR635 million, which is, as you will note, is flattish over FY ’24. You may recall that we — we witnessed large amount of furloughs that we have ever witnessed in Q3 and that also was in Q4.
In addition to that, as I had mentioned in our last earning call, we are all — we also saw some project closures and ramp-downs in a couple of customer accounts. But I would like you to note that we have not lost any customers. Some of our large customers, we have seen ramp-downs, we have seen some in-sourcing, but we have not lost customers. We still continue to serve those customers and work with those customers for their future tech spend. As a result of our revenue during Q4 has declined to INR1,316 crores, which translates to INR152.2 million in dollar terms. On the margin front, however, actions on the operations front and some one-offs have enabled the EBITDA margin to rise to 13.2% in Q4, a sequential expansion of 119 basis-points.
As a result, our post-tax profit was up 4.4% quarter-on-quarter to INR122 crores. For us, a year under review also continued to be characterized by strong cash-flow generation and will provide more color in both the margin uplift and the cash flows in her remark. On the deal front, I am pleased to observe that after a significant spike in total TCV volume in Q3, we recorded another quarter of sequentially increased TCV during Q4. We have signed — deals worth $236 million during Q4, which is 4% higher than what we signed in Q3. More encouragingly, the quantum of new deals in TCV is up 75% quarter-on-quarter in Q4, showcasing the fact that we are winning new logos and new deals. So almost half of our Q4 total deals in TCB have come in from new deals, which augurs well for our future growth trajectory.
Among the deals which we have closed during the quarter is a significant multiyear engagement with a new customer that we’ve added in the UK that comes under the ROW region. You may since being secured that is reflected in our Q4 deals TCV. For this global communication major, will deploy advanced AI-powered capabilities, including AI and intelligent diagnostics AI to deliver the next-generation IT services model designed to transform the customers’ global technology operations through the integration of AI-driven innovation across Americas, EMEA as well as the APAC regions.
As we look-ahead and as you know, over the past few quarters, the demand environment has been challenging, marked by a lot of macro uncertainty exasperated by the recent news flow around the trade and tariffs. There are also been some logic closures that I talked about in my earlier discussion and we’ve seen ramp-downs as well as we’ve seen some in-sourcing, which could affect our growth performance in the coming quarter as well. However, we feel our growth will be back-in the company starting Q2.
At this point, I will ask, our Chief Financial Officer, to share her perspectives on the quarter and the year under review.
Kamini Shah — Chief Financial Officer
Thank you,. Good day, everyone. Thank you for joining us. It’s a pleasure to talk to you again. Let me take you through the financial highlights for quarter-four of ’25 and then for the full-year of FY ’25. As you would recall that in our last earnings call, we had called out a couple of factors that were expected to have a near-term impact on our performance. One was — one was the usual higher-than-usual furloughs that was extending into January and having some residual drag into our Q4 revenues. Secondly, as Angan mentioned, we have witnessed project closures and ramp-downs in a couple of customer accounts. Given the soft demand conditions, the customers have been tending to hold back on discretionary spends, it has been challenging to meaningfully mitigate the impact of some of the headwinds.
Consequently, for the quarter under revenue, we have registered a 5.4% decline quarter-on-quarter in dollar terms to about $152.2 million. Among all our verticals, energy and utilities registered a sequential growth of 1.8% during the quarter. The other verticals witnessed a degrowth on account of the reasons that I just mentioned. Margin performance has been better. It is also reflected some actions that we have taken to drive operational efficiencies as well as some tailwinds on account of currency and certain one-offs. The margin tailwind has largely been account of lower variable pay and even cash mean for our senior executives and currency benefits together accounting to about 200 bps.
As a result, EBITDA for the quarter increased to INR20.1 million from INR19.3 million in Q3. This translates to a 13.2% EBITDA margin, which is an expansion of 119 basis-points quarter-on-quarter. This has been achieved as we continue to invest into our business and demonstrate our commitment to optimizing and overall trying to improve our margin profile. Consequently, PAT for the quarter has increased from 13.8 million in Q3 to about INR14.1 million in Q4. If when we reflect back on the full year’s performance, we have reported a consolidated revenue of about INR635.4 million, representing a flattish growth and a marginal degrowth of about 0.3%. In rupee terms, the revenue for the year was up by about 1.8%. As you would recall, during the course of the year under review, we have made significant investments in our business, successfully secured some consolidation deals that required pricing flexibility.
We have also grown our infra business that takes some time to catch-up on the overall business level margins. This has had a tempering effect on our EBITDA for the year, which stood at INR82.4 million, translating to an EBITDA of 13% for the year. PAT for the year stood at about INR61.1 million, lower than million in the preceding year where we also had the benefit of a one-time insurance claim. The effective tax-rate for the year was 25.8%. When I reflect back on the balance sheet, I’m happy to note that we ended the year with cash-and-cash equivalents of $259.9 million, which has grown by 24% year-on-year. Compared to the preceding quarter, our cash-and-cash equivalents was up by 8.1%. This reflects consistent good cash generation, which is evident by our operating cash-flow, which for the year FY ’25 has been at about 88.3% of our EBITDA.
You would agree that our DSO at 54 days is probably among the best-in class. We remain committed to staying focused on sustained robust cash-flow generation. In continuation to our track-record of prudent capital allocation and rewarding shareholders, the Board of Directors has proposed a final dividend of INR4 per share subject to shareholders approval. This combined with the interim dividend that we had paid out after our Q2 Board meeting takes our total dividend for the full-year to 6.5 bps per share, translating to a payout of about 35%. So we have ended the year with a robust balance sheet. We are generating strong cash flows given our ability to make more investments necessary in the business to drive growth going-forward.
Thank you very much. Back to you, Abhi.
Abhinandan Singh — Head-Investor Relations
Thank you, Angar and. Moderator, can you please open up the line for questions-and-answers?
Questions and Answers:
Operator
Yes, sir. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles thank you. Our first question comes from the line of Ravi Menon with Macquarie. Please go-ahead.
Ravi Menon
Hi, thanks for the opportunity. Again, good deal wins, but we have seen this, I’d say the offshore revenue decline from Q2 FY ’25 where we were expecting this sharp shift onsite to actually start reflecting offshore revenue increase. So-far that doesn’t seem to have happened. Could you talk a bit about this? This is because we’ve seen some other deals that are ramping down, is it still a margin benefit that we expect later on? And then could you talk a bit about why we’ve seen this decline? That’s fairly broad-based across the three verticals and even like top-five, top six to 10 and beyond the top-20 customers.
Kamini Shah
Okay. So Ravi, let me pick-up your question in terms of offshore that you know, we’ve seen in fact, some of our discretionary demands largely in onsite that was coming into play, which is the reason why you’ve seen in this current quarter an increase as far as our onsite, but we largely remain equally balanced between onsite and offshore in terms of the differences. You had mentioned earlier saying that our offshore would increase as we translate — as we kind of consolidate, but I think that consolidation has taken a little bit time in terms of moving work offshore. So which is why you see us operating in this range at this point of time.
Angan Guha
And just to add to what said, Ravi, for us, this trend will continue for maybe one more quarter and Q2 towards the back-end of Q2, you will start seeing the movement back to offshore, really.
Ravi Menon
All right. Thank you. And that I guess should be margin-accretive, but again kind of revenue head — it will be a revenue headwind, right, at that point.
Angan Guha
So on the revenue, it is hard for me to comment right now in terms of how things will shape up because there is uncertainty. So Ravi, for us, the two big issues that have hit us, one is like I was saying in my commentary, we’ve not lost the account, but in some of our larger accounts, especially within manufacturing as well as healthcare, we’ve seen some amount of in-sourcing and some amount of project closures because our clients are also looking at the situation with a little bit of caution and that has resulted in our — in our revenue downtick, if you will. So we are watching the space. We feel currently as we stand, our Q1 revenues will also be muted. We are trying to keep it flat. There could be minor de-growth as well. We don’t know that yet. But our endeavor would be that we get growth back-in the company by Q2.
Ravi Menon
Thank you. One follow-up question to come the unbilled revenue is up a little bit came by about 3 million Q-o-Q here. Should we see this come down over-time or what could affect us?
Kamini Shah
No, I think the reason why unfilled revenue has come down is also we are really pushing a lot of our fixed-price projects. We have started reaching our milestones and liquidating that as far as our customers are concerned. So it is more in terms of increasing the efficiency from a milestone delivery standpoint and also cash generation, eventually converting into cash. That’s only reason.
Ravi Menon
Sorry, but this is up to Q-o-Q.
Angan Guha
Sorry, Ravi, we hear your question please.
Ravi Menon
Isn’t it up unbilled revenue? Isn’t that up Q-o-Q this quarter by about $3 million?
Kamini Shah
Okay. I was looking at it from a year-on-year basis. Sorry, Ravi, when I explained that to you, right? Yeah. So though it is part of a normal trend, Ravi, nothing to be very specific about, right? We will essentially liquidate the revenue as we go along, right? So there’s nothing very exceptional from that part.
Ravi Menon
All right. Thank you.
Operator
Thank you. Our next question comes from the line of Dipesh Mehta from Emkay Global. Please go-ahead.
Dipesh Mehta
Yeah. Thanks for the opportunity. Just want to understand about — first about margin. Now I think you indicated about certain one-off in the margin. And if I look at your employee benefit expenses, absolute termit has declined sizably. So if you can provide what was the one-op in the quarter-four? And do you expect it to continue in-quarter one or it can provide headwind to quarter one margin? That is question one.
Second question is about the overall revenue growth trajectory. Let’s say, if you look FY ’25, out of four, 3/4, we have sequential decline and exit is also fairly weak for us. Now entering into FY ’26, are we confident about, let’s say, growth to resume for full-year perspective. Considering whatever pipeline we have seen built-up conversion and overall client conversation what you have with the major clients, if you can provide some sense about the growth trajectory?
And last is about, now we have a sufficient case, payout is still 35 percentage, so we are generating good case. How you plan to use it, particularly for M&A perspective and how — what is broad thought process around it? Thank you.
Angan Guha
Yeah. So Dipesh, let me talk about the deal flow as well as let me talk about the revenue, the way you see it today and then I’ll hand it over to to talk through the cash utilization as well as on the margin. So Dipesh, if you really look at it and you are right, in the last one year, 3/4 out of four, we saw revenue declines. Some of them were little unexpected. We couldn’t take that at the start of the quarter and it happened because we got ramp-down notices from our clients. I feel that this quarter two — the quarter one, we will have muted revenue growth. Now the deals that we are winning that will start generating revenues from Q2, which is why, Dipesh, I said, we at least believe today that Q2 onwards will get some growth. I don’t know-how much, but Q2 will see some growth.
Overall, from an FY ’26 perspective, our endeavor would be to deliver FY ’26 better than FY ’25. But Divesh, you must also realize, which you said you yourself said that our base revenue starts at 152, right? So we have lot of headwind. So for me, even to stay flat for the year, it will need exceptional quarter-on-quarter growth going-forward. How much of it we can deliver is Q2 starting, I don’t know. But the management team’s endeavor will be to at least have FY ’26 better than FY ’25, but that could be only slightly better because of the headwind that we see getting into this financial year. On the margin front, I will ask to talk about what we have done and what we intend to do going-forward.
Kamini Shah
Yeah. So Deepesh, on your specific question, right, as far as the margins are concerned and overall on the employee benefit cost, you would see a reduction in our overall employee base. So I think that’s a reflection of that benefit from a lower-cost standpoint that we have seen. Of course, I’ve also mentioned the one-offs that we had in terms of reduction in variable pay. So that is — that is for a onetime benefit through which we are seeing a reduction as far as our employee-related cost is concerned. Some of it is structural in terms of the fact that they will continue as long as our employee base remains at the same level to that extent, but some of that may come back next quarter as we restore variable pay to the normal levels.
From a margin standpoint, our would be to remain flattish as to where we are at this point of time. Given the current revenue profile that we are in, we are really working to make sure that we take actions on other place to keep it at the same levels. As far as cash is concerned, sorry, on the third question, as far as cash is concerned, see, we have, if you really look at it from our cash allocation policy of capital allocation policy, we — our dividend range is typically between 25% to 35% of our payouts, and that’s what we have done over the last two years. We do intend to retain cash for our business investments at this point of time. So I think we will continue to operate in this policy unless there is something — there’s anything different that comes into play. So that’s where we would be at this point of time.
Dipesh Mehta
So two follow-up question. First on EBITDA margin. Now earlier, we always used to aspire to operate 15% to 16 percentage EBITDA margin trajectory. We are lower this year. Even, let’s say your commentary indicate we will be flattish. So roughly around 13 percentage is what we aspire to deliver in ’26. So by when you expect, let’s say, to revert back to our aspirational margin trajectory, which is above 15 percentage?
And second question is about case accrual. Now investment is obviously there are two-ways investment. One is organic, second is inorganic. So where you expect intensity to increase in terms of next 12 to 24 months and the area identified to make those investments? Thank you.
Angan Guha
Correct. So Dipesh, first, let me tell you on the margin front. See, the reason we want to keep the margin at a flattish level is because the entire company’s focus is now to win deals and get revenue. We have really, really lacked in terms of revenue growth. We have to get the company back to growth and that will be our endeavor over the next three to four quarters. We will try and keep the margins at the 13% because we want to win more market-share. I feel if we can get back to good growth trajectory, which of course, as you can tell, arithmetically, it can’t happen in FY ’26. It will happen in FY ’27. So FY ’27 onwards, as the growth comes back, you will see an uptick of margins.
So though we don’t give any guidance, we feel that FY ’27, FY ’28, you will see far more increased margins once the growth comes back. Second is our entire intensity will be organic, correct? We will continue to make investments. We are changing a lot of leaders. We are looking at newer capability. We are looking at newer partnerships and those will deliver a lot more organic rhythm.
From an inorganic perspective, Dipesh, we are obviously generating a lot more cash and hopefully, we’ll continue to generate cash. At some point in time, when we get a great asset, we will definitely look at it. But our endeavor first rhythm will be to organically fix the company even before we look at an inorganic kind of a buy.
Dipesh Mehta
Thank you.
Operator
Thank you. Our next question comes from the line of Harshtor with Capital. Please go-ahead.
Harsh Chaurasia
Good morning, sir. I had couple of questions from the vertical perspective. So first of all, on the BFSI, where the broader IT is very positive on BFSI and this is the only vertical which is going for most of the peers. Why it has — the growth has started to deaccelerate for Birla? That was my first question. And second question is on Healthcare life sciences. You mentioned earlier about the in-sourcing as well. But in the prior quarter, you called out that there would be some quarter of softness, but after we have even hired senior users for medtech and some other verticals beneath healthcare. So wanted to understand when this will start to kick-in for growth in healthcare licenses.
Angan Guha
Okay. Yeah. So Harsh, thank you for that question. So first, let me talk about BFSI. If you recollect Harsh, our BFSI business predominantly is a cards and payments business and an asset management business. We don’t work with banks or we don’t work with meaningful insurance companies, we probably have just one or two insurance clients, right? Our majority of our focus and our client base is either banks — cards and payments or asset management companies. So 12 months ago, 15 months ago, when all the other companies were not doing well in BFSI, we were doing well because the banks were not spending, whereas the cards, etc, the card companies, etc., were spending.
Now the situation is reversed because the banks spending has gone up, which is why you will see all the other companies who serve banks doing well. But a specialized company like ourselves are having a couple of quarters of a degrowth or couple of quarters of muted growth. Harsh, you will also remember, even in the last call, I had said that BFSI now has grown for us for almost nine quarters sequentially. It will see a couple of quarters of little muted performance and then even BFSI will come back to growth.
Now on Life Sciences, Harsh, you must also appreciate that again, just like BFSI, Life Sciences for us is predominantly a medtech business. I mean, we don’t work with payers or providers or any of them. We are a very specialized med medtech company. And more often than not is a manufacturing business rather than really a life sciences business, which is where because of the trade as well as the tariffs, etc., we have seen a little bit of cautious spending by the customer. But, we have not lost a single account, that is a positive. And I hope that over the next two quarters, you know, healthcare LSS will also start showing growth. But you have to give it a couple of quarters, we hire a very new leader from a Tier-1 company, give them a couple of quarters to settle down, but I’m reasonably confident that we will drive growth in our med-tech portfolio very soon. Just to let you know, we’ve been down-selected as a preferred partner for a large med-tech company in America and I’m very positive that as the quarters go by, you will see some good uptick there.
Harsh Chaurasia
Got it. Thank you. Thank you very much, sir.
Operator
Thank you. Our next question comes from the line of Sandeep Shah from Equirus Securities. Please go-ahead.
Sandeep Shah
Yeah, thanks. Thanks for the opportunity. Then the question is more strategic. So I think you joined two years back and we have already done a significant amount of restructuring in terms of churning the leadership, investing in capabilities, expanding partnership. But the revenue growth has been really marginal over the last two years if I compare FY ’25 with FY ’23. So in your analysis and post modem, what is going correct and what is going wrong? And how do we plan to change? Because I think leadership churn has already happened in the last two years. So is it more industry-specific or is it more a of specific where correction is still need to be done in a significant fashion going-forward to avoid such kind of a year ahead because FY ’25 has been one of the weakest year for.
Angan Guha
Yeah. So Sandeep, thank you for that question. So look, FY ’23 and FY ’24 were reasonably good years for us, right? I mean, we delivered good growth. It is only in FY ’25 that we’ve had a flattish growth. And of course, since the operating leverage did not play-out, our margins showed a negative trend, as you know. But look, Sandeep, I mean I’m here to only build the company for the long-term, we will continue to invest. We’ve made a lot of changes. We’ve made a lot of changes in the leadership level at the account manager level, at the capability level. We are also building a lot of partnerships. It will take a little bit of time. Unfortunately, because of everything that is happening in the macroeconomic situation, all our investments are not yet playing out, right?
Like I said, some of our customers and I can’t name them, but at least three of our customers between manufacturing and healthcare have decided to ramp-down a lot of projects, in-source a lot of work that is affecting us. But I still feel our investments are in the right area. Of course, we have to continue to hire some leadership, as you know. I mean, we have some leadership vacancies that we will continue to hire, but we will not cut-back on investments, Sandeep, because I feel our investments are in the right area. We may take a little bit of a hit on margins for a year or so, but our entire endeavor is to get the growth back. That is what we’ll be focused on. I hope Q2 onwards the growth comes back, but we will see. We will see how this thing shapes up.
Sandeep Shah
Yeah. Just a related question. If I look at the deal TCV, this year in terms of both total as well as new business has not been that great, though Q4 has been really good. So don’t you believe we need to be proactive in terms of A, increasing the deal pipeline; B, in terms of converting the pipeline into deal wins, which will help us in terms of compensating a leakage in the existing book. So are we doing any restructuring in terms of creation of large deal pipeline, converting pipeline into deal wins and to actually avoid such unforeseen circumstances?
Angan Guha
Yes, Sandeep, very good question. So if you look at our Q4 deal wins, out-of-the 236 million that we delivered, almost $12 million is new, new, right? So — and that is unprecedented. We’ve never had almost 50% of our deal wins with new, new. So that gives me a lot of confidence that the future will look bright, not maybe the immediate future, but over-time, we can fix the company because structurally we are a strong company.
To your second question, we’ve identified existing very senior leader to take the mantle of opening accounts and we’ve identified about 19 or 20 accounts that we’re going to go after, so that we can create pipeline and close them. Obviously, that will take a little bit of time, but we are well within that direction. So some — so, our entire endeavor over the next four to eight quarters is just to focus on the market pipeline and deal closures. That is important. If we can get that right, the others will get fixed.
Sandeep Shah
Okay. Okay. And just a last follow-up question. I think in the earlier quarter earnings call, you said there are two or three larger deals. One, we have already closed in the 4th-quarter. Any update and progress in the balance one or two large deals which we are chasing?
Angan Guha
Yeah. So Sandeep, thank you for asking that question. And I want to make it very clear. See, another large deal with a high-tech company in the US we’ve closed that is also in the range of about $30 million to $40 million. We are very close to closing another financial services deal in Europe, which will also be another $25 million to $30 million. So these two deals, you will see in Q1. The only thing I would say is in Q1, since we don’t have any renewals, the overall TCV will look muted, right?
So for example, overall TCV in Q4 is 236 million. I don’t believe in Q1 overall TCV will deliver 236. If you remember, typically in our kind of company, the first-quarter, we delivered about 140 to 150 kind of deals. This year, it may be slightly better because of the two new deals that we have closed. But I’m reasonably confident that this year, my overall year TCV will be better than last year’s TCV. And last year also, Sandeep, we do deliver about $735 million worth of TCV to FY ’24 at $837 million. That was pretty much one deal, $100 million deal that we had got. So I’m confident that we’ll do better than $735 million for the year when it comes to signings, but it will gradually ramp-up. Q1 will be slow, Q2 will be better, Q3, Q4 like always will be much better.
Sandeep Shah
Okay. Thanks. I will come in the follow-up if I have more.
Angan Guha
Thank you.
Operator
Thank you. Our next question comes from the line of Abhishek Shindadkar with InCred Capital. Please go-ahead.
Abhishek Shindadkar
Hi, thanks for the opportunity. My first question is regarding we historically had a high percentage of project nature of the business. And can you quantify what that number is today and is it also a reflection of our revenue volatility because of the discretionary spending challenges?
Angan Guha
Yeah. So Abhishek, look, our — if you look at our overall business, right, roughly our discretionary spend and project-based business contributes to about 70% of our overall revenues. Now that is why when the discretionary spend gets cut, we are in the situation that we are in. But if you look at the last quarter, I mean, we won lot of multiyear deals, right, which is more — which is more annuity-based deals and the two deals that we will win this quarter will also be annuity-based deals. So it will change our situation a little bit. Our — but our project-based business will not go away. It will still continue at that 50% 60% range. It is 70% today. Our endeavor will be to take it down to at least 50% and 50% business, which is more annuity-based, right?
So that will be our endeavor now, but that will be a journey, Abhishek, it will take a couple of quarters to get there, but at least the initial indications are the kind of deals that we are winning are all multiyear annuity-based deals.
Abhishek Shindadkar
That’s helpful. Just a follow-up to the answer. If I remember it correctly, you know when around 21 2021, the numbers that were shared that the annuity component has slowly risen from 50% to 65%, but the number that you’re sharing today is that project is 70%. Did I miss anything or you know, maybe those numbers don’t time?
Angan Guha
Yeah. So Abhishek, look, 2021 was a very different year because of the COVID year, you know, we got a lot of — a lot of annuity work at that point in time. It all depends upon how you classify. Today, we are classifying annuity work-in more in terms of where we will be using AI to kind of disrupt and deliver new-age delivery to our customers to help them. So I was more different from that perspective, right?
So over ’21 to ’25, absolutely. Our annuity business has actually gone down. The project business has gone up. If you remember, even in ’23 and ’24, we talked about the projects that we were able to win, which is short-term projects where we would deliver for about six months-to nine months and walk away. Now slowly, we are trying to get away from that and win more annuity work. But it is also a manifestation of the kind of clients we serve. If the client wants us to help them in a particular project, which is six to eight months, then we definitely go in and work with them. So you’ll have to give it some time, Abhishek. We clearly understand that we have to get more annuity work and probably get it back to the 70% 60% that we once were and we are working towards that.
Abhishek Shindadkar
Very helpful. Just the last question from my side. So you know, given that you’re reporting now, you must-have seen in the first two months, how have they played in terms of a conversion in the pipeline? Many of your peers when they reported in April, highlighted that a mark from March onwards, they have seen a material slowdown in terms of conversion or there have been pauses. Given you know things have improved both from an administration perspective, given that they are more reconciliatory right now, what is your assessment of the past two months, especially the May of month of May, has it seen any changes in terms of you know, conversions of the booking maybe for you and also for the industry?
Angan Guha
Yeah. So Abhishek, again, thank you for asking that question. See, like I was saying, our manufacturing business is roughly about $160 million, $170 million and our MedTech business, which is also manufacturing is roughly about $100 million. So technically about $300 million, give or take, is very manufacturing dependent, which is prone to tariffs and everything. Which is why I said that for us, at least the clients that we serve are trading cautiously though the administration’s views have softened a little bit, but it’s a wait-and-watch policy because people have not seen it, which is why, Abhishek, we also felt considering that we are already closer to 1st of June, I don’t see Q1 being a growth year for us.
We — like I said, I think to Depesh earlier, we’ll try our best to stay flat, but I must say that we may also deliver slight negative growth. But I’m confident that Q2 onwards, the growth will be back only because based on our client conversations, people are hoping that in another couple of months, things will become far more clearer and the projects that we have won or are winning will start showing revenues Q2 onwards.
Abhishek Shindadkar
Very helpful. Just a quick follow-up. For the industry, you think that the pipeline of conversations would be high, but are the conversions changing after you know the administration or the soft stance of the administration, especially in the US?
Angan Guha
Yeah, I feel — and for us, US is very important because it’s 87% of our business. I feel that will probably take a couple of more months-to get a lot of clarity on. I can’t talk about the industry in general because it also is a manifestation of the clients that they serve. But the 40, 50, 60 clients that we serve, which are our bigger clients and the other 150 200 smaller clients that we serve, at least a sense that I’m getting that there is some amount of cautious optimism, it will take a couple of quarters to get full clarity.
Abhishek Shindadkar
Perfect, very helpful. I’ll get back-in the queue. Thanks, sir.
Angan Guha
Thank you.
Operator
Thank you,. Ladies and gentlemen, a reminder to all participants. If you wish to ask a question, please press star and one on your touchstone telephone. Our next question comes from the line of Girish Pai from BOB Capital Markets. Please go-ahead.
Girish Pai
Yeah. Thanks for the opportunity. Angan, you mentioned that there are still some gaps in leadership and gaps in new capability building. Where exactly are these gaps?
Angan Guha
So one is, Girish, we are spending a lot more in our front-end sales. We will ramp-up our SG&A a little bit, though we will look at the cost-reduction in our functions, but we will clearly be investing in sales. So we will put in more focus there. I think like Sandeep was asking, we will focus on-net new. So we are hiring a team to focus on accounts that we are not present in. We’ve identified about 19 or 20 logos in the US and some logos in Europe that we will — that we will go after. Some of the deals we can talk about as we close between — between June and July. So that’s another area that we are going to — we are going to keep investing in.
From a capability perspective, clearly, our ERP business has not done well. The two businesses have done reasonably okay are digital and data and infrastructure. But infrastructure is a margin diluter. It is very important that our ERP business comes back on-track. So we are making some more investments on our ERP space. And when I’m ready to talk about it, we’ll announce it.
Girish Pai
Okay. I had a question for Kamini. You mentioned about 200 basis-point of a positive impact in the quarter, if I remember that number correctly, because of lower pay currency and I think some pay due to senior employee-related senior employees. Can you kind of break this down as to what is one-off and what will kind of be there in 1Q?
Kamini Shah
Yeah. So Girish, thank you for the question. If you really look at it from a currency benefit standpoint, it’s about 50 bps that we’re talking about. Currency has been a little soft. So maybe part of it would continue into Q1. And if you look at the remaining part of it, it’s by virtue of low variable pays to senior executors. So we do expect half of it to be one-off and maybe half of it may come back on it. Some benefits of leave and cashmen that we’ve also got in the last quarter, that may actually be one-off in the $0.2. If you ask me, effectively, I would expect that we might be able to recoup back maybe 50%, the balance of it would be through the one-off.
Girish Pai
Okay. There was also some mention about consolidation deals that you won because of some pricing flexibility that you’ve shown. Does this mean that project profitability on these deals will be lower than corporate margins at least say for the next few quarters?
Kamini Shah
Yes. Yes, Girish, and we had spoken about that in one of our earlier calls, right, because you know, from a consolidation standpoint, we had taken in some of these deals in-place and it would take us some time. That was one of our strategy to move them a little bit offshore to improve the margins, but that has been a little slow. So yeah, for the next couple of quarters, it would be a little soft compared to the overall corporate margin. And then we do expect to use AI and some other technology to be able to recoup the margins back.
Girish Pai
Okay. My last question, Anand US has changed the China tariff from 145% to 30%. Has that changed anything in your customer conversations? Is there slightly higher amount of optimism around demand.
Angan Guha
Yeah. So, Girish, obviously, it is cautious optimism because the trade tariffs is also limited to a particular time, we need to see how it goes. But again, like I said, as the companies that we serve, some of the companies who’ve got a larger China exposure are feeling a little better about it. So we believe the demand will come back-in Q2. But you should have to wait-and-watch because these things can change dynamically very, very quickly.
Girish Pai
Okay. Thank you.
Operator
Thank you. The next question comes from the line of Manik Taneja from Axis Capital. Please go-ahead.
Manik Taneja
Hi, thank you for the opportunity. While you’ve clarified on the one-offs in Q4 and you’re talking about the intent to essentially invest in your sales team to essentially open certain must-have accounts. In that backdrop, Angan, basically just wanted to understand, should probably we be thinking about further dilution in margins in FY ’26 from the current levels? That’s question number-one.
The second question was with regards to the client metrics. Over the course of last few years, you’ve kept on cutting the long-tail of your customer accounts and trying to focus on a smaller subset of customers. Now is that intent to essentially once again to open certain must-have accounts, should we be thinking about an expansion in terms of the client base and how should we be thinking about it?
Angan Guha
Yeah. So Manish, from our perspective, you know, we still serve almost about 200 or 250 odd accounts, right? So the new must-have accounts that I spoke about is a combination of certain accounts where we have an MSA already. We have to just go and mine those accounts, we integrate the MSA and start doing business with them. So that is one.
And second would be that some of the large logos that we do not work with, we want to start working with. But our overall set of accounts will still come down. I don’t think we want to serve more than, let’s say, 250 logos in the long-term. So while in the short-term, we may add some logos, but we will also drop some logos, which are unprofitable. Like you mentioned, over the last 24 to 36 months, we’ve really pruned down our account list almost — we had 600, now we have 250. We’ll continue to prune them down. But certain logos that we think that we want to work with, we will add — we will add-on to add-on to our list.
Manik Taneja
Yeah, sure. And just one last one.
Angan Guha
But the overall list will not change. Overall, the number will still keep coming down.
Manik Taneja
Okay. Okay. And if you could ask for that question on margin outlook, then I have another follow-up question as well.
Kamini Shah
Yeah. So Manik, I think your question was as we invest, would there be a dilution of margins? There might be a temporary dilution here is to create space for these investments within our current margin profile. So you know, we’re not going to let that significant impact our margin. Maybe a quarter or so, it might take some time when the investments happen while the reductions happen elsewhere. So largely from an overall philosophy standpoint, it will not be at a dilution of margins. That’s what I wanted to call-out.
Angan Guha
And just to add to what said, Manik, we do not want to dilute margins further. Like said, we may have some margin impact in the immediate quarters when the deals come up and we start executing. But our overall direction is clear that we need margin upliftment as we as we go-forward.
Manik Taneja
Okay. So the other question that I had, if I’m looking at your client metrics, if I’m looking at your revenue performance by vertical, it appears it’s almost a very broad-based revenue decline that you’ve seen across industry segments over the course of second-half of this year as well as in terms of your top client revenue performance. So it would be great to understand what exactly is it some amount of altering in terms of execution that’s cost us because in the course of last, 18 24 months when you were doing well for a certain amount of time, you credited the success to your in-quarter execution. So where have you basically altered in the course of the last two, 3/4 to essentially put up a broad-based decline across industry segments or across client portfolio.
Angan Guha
Yeah. So Manik, great question. So let me clarify this. I don’t think we’ve lost any client or any project due to execution issues. I mean, of course, there are delivery challenges, which happens in every company in various areas. But broadly at a company-level, I think most of our customers are very satisfied the way we work with them and what we deliver to them, right? So that is point number-one.
I also mentioned that while we have — have — projects have come to a close, the ramp-downs have happened and in certain cases, as companies build-up their own GCCs in India, some of the work has got in-sourced, but that is because of their strategic reasons, not because of our execution reasons. On the topic of broad-based revenue ramp-downs, that is like I said, about $300 million out of our $650 million is really manufacturing in nature. In fact, a little bit more, even in our high-tech business, probably some of the accounts that we work with are manufacturing.
And manufacturing is a large part of our business, which has had the biggest biggest headwind, if you will, in their own businesses. Now BFSI, I feel is a spot problem. Over-time, BFSI will be back to growth. Energy utilities like said, is still growing. We just have to fix this manufacturing bit to get this back to growth. If we can get that back to growth, I think our goals will go away. And that is what we are focused on.
Manik Taneja
Sure. Thank you and all the best for the future.
Kamini Shah
Thank you.
Operator
Thank you. Before we take the next question, a reminder to all participants, you may press star and one if you wish to ask a question. Our next question comes from the line of Sandeep Shah from Equirus Securities. Please go-ahead.
Sandeep Shah
Yeah. Thanks for the follow-up. Coming, just a clarification. So out of 119 bps impact on the margin in the first-quarter, we are saying roughly half of that could be a headwind and may not repeat because of one-off nature in the 1Q of FY ’26. Is it right?
Kamini Shah
So Sandeep, just to clarify that, I was talking about the 200 bps that we said were one-time. So out of it, maybe 100 bps may not reoccur from a structural standpoint, though we will see how we can make that up as far as Q1 is concerned. So it’s not out of 119, it’s out of 200 bps.
Sandeep Shah
Okay. Okay. So directionally, 1Q margin could be slightly lower on a Q-on-Q because of this.
Kamini Shah
Yes. Yes, yes, Sandeep, as of now. But like I said that we are driving operational efficiencies to see how we can make that happen.
Sandeep Shah
Okay, okay. And, just the last question, if I look at the practice-wise revenue growth. So the major drag in the revenue in FY ’25 has been through ERP, which has declined by closer to 6.4% on a Y-o-Y. So while most of your larger peers are talking about increasing demand in terms of upgradation of on-premise to the cloud version of the ERP, both on SAP and Oracle, so while same is not witnessed by us, so is it a portfolio-specific issue or is it we work with more of Tier-2, Tier-3 in terms of ERP versus Tier-1 accounts and that is not driving the growth.
Angan Guha
Yeah. So Sandeep, it’s a combination of both. First, you’re absolutely correct. We work with Tier-2, Tier — well, not Tier-3, but Tier-2 and slightly lower with the Tier-1 manufacturing companies. And the uptick that you see in SAP and Oracle movement to cloud-like S4HANA or Oracle Fusion is probably helping the larger companies to begin with. But I can tell you, slowly over the quarters, over the next year or so, it will start affecting — it will start improving the smaller companies like ourselves, which are very heavily ERP focused. That’s point number-one.
Point number two, while our ERP business for two years have actually de-grown not one, two years, we are making some structural changes here, Sandeep, and I would like to probably take that offline in terms of what we will do, but there is a lot of focus to get the ERP business back on-track. And over the next two, 3/4, I will come back and update you what we are doing there.
Sandeep Shah
Okay. Thank you and all the best.
Operator
Thank you. Our next question comes from the line of Ravi Menon from Macquarie. Please go-ahead.
Ravi Menon
Thanks for the opportunity. Again, the whole Invocare deal had been, I think, a great client reference possibly at that time here and that was the largest multi-year deal that you guys had won. Are you looking at something like this where the significant cost takeout, total IT outsourcing sort of opportunities, even if that is with these companies outside the Fortune 500.
Angan Guha
Yes. So Ravi, we have a couple of deals in the hopper where we will — we are doing cost takeout deals. But look, our endeavor right now apart from cost takeout is to do a lot more domain related deals. I don’t think we’ll have too many deals in the $100 million to $100 million range. The industry is also changing. We have a lot of $30 million, $40 million deals now, which is in our sweet-spot, which we are winning, where we are working with our customers to deliver services using AI and the customers are going to pay us on story points rather than pay us on fixed-price outcome of people. So that’s a big shift that we are seeing. But to answer your question, we have got a couple of deals which are large and which are cost takeout. I don’t know whether we will win them or not, but at least we are pursuing them.
Ravi Menon
Thank you.
Operator
Thank you. Ladies and gentlemen, that was the last question for the day. As there are no further questions from the participants, I now hand the conference over to Mr Angan Goa, CEO and MD, Birlasoft Limited for closing comments.
Angan Guha
Yeah. Thank you. So first of all, I would like to thank each one of you for your interest in for the time that you have taken to spend with us today and for the questions, which I always find very, very insightful. The only message I want to leave on the table is, look, I know that FY ’25 was a bad year, we accept it. But my only commitment to all of you is we will try and make FY ’26 better than FY ’25, even though if it is slightly better.
Second is, the other message I want to leave on the table is that fundamentally and structurally, we are a solid company and our cash-flow generation year-over-year proves that. Our DSOs are at a meaningful level. So — and we have no debt on our books. So fundamentally, we are a very, very strong business. And all we need to do is to get the growth back into the company. And on behalf of the management team, I can commit that that’s the only focus that we have going-forward. But thank you for your time and I look-forward to speaking to you next quarter. Thank you.
Operator
[Operator Closing Remarks]