Birlasoft Limited Q2 FY23 Earnings Conference Call Insights

Key highlights from Birlasoft Limited (BSOFT) Q2 FY23 Earnings Concall

Management Update:

• [00:06:11] BSOFT said it hired 253 freshers in 2Q23 and plans to hire approx. 500 in 2H23. The company also said that with geopolitical issues and macro uncertainties, it remains watchful but expects opportunities in the digital and cloud ecosystem to remain resilient.

Q&A Highlights:

• [00:13:22] Shradha Agrawal from Asian Market Securities asked about the revenue growth trajectory in 2H23 given the macro environment. Dharmander Kapoor CEO replied that clients are taking longer than before to decide on awarding projects and extending timelines. However, BSOFT is still looking at double digit growth as the company has made significant wins in last couple of quarters and also attrition is dropping 4-5% in 3Q23.

• [00:19:18] Shradha Agrawal with Asian Market Securities also asked about reason for strong growth in BFSI, while Life Sciences declining. Dharmander Kapoor CEO replied that in BFSI there are some new deals and BSOFT is growing well with a couple of its large customers. The Life Sciences decline was due to some projects getting finished and also having a furlough in 2Q23.

• [00:21:21] Mohit Jain from AnandRathi asked about the company’s view on the Enterprise Solutions given the deal pipeline, and if any declines are expected. Dharmander Kapoor CEO said the company is not expecting any declines ahead.

• [00:25:33] Mohit Jain from AnandRathi enquired if there was any account transition from onsite to offshore during 2Q23. Dharmander Kapoor CEO replied that there were a few but nothing significant. However, there is one large account where BSOFT has moved significant number of people from onsite to off-shore due to compliance.

• [00:27:30] Mohit Jain of AnandRathi asked about margins being low vs. previous year and if it will go back to 16-17% in next few quarters. Dharmander Kapoor CEO replied that it will go back to that range. And also the quarter BSOFT attrition starts to come down closer to 20% then margins will see an upward trend.

• [00:30:06] Mohit Jain of AnandRathi enquired about the impact of the wage hikes planned for support staff in 3Q23. Dharmander Kapoor CEO said that the company believes it’s about 0.8% to 1%, and the impact was 2% in 2Q23, because a significant piece of about 65-70% hit BSOFT had already taken in 2Q23.

• [00:37:13] Dipesh Mehta from Emkay Global asked about the vertical or subvertical where BSOFT is seeing signs of weakness. Dharmander Kapoor CEO answered that the company feels it will remain strong in manufacturing and see good momentum coming from key clients. It’s the Life Sciences and Energy and Utility where BSOFT is seeing weakness.

• [00:38:21] Sandeep Shah with Equirus Securities asked about the definition of double digit growth aspiration for FY23, if it’s close to 10% or less than 15% as a whole. Dharmander Kapoor CEO replied that it will be higher than 10% and lesser than 15%.

• [00:39:27] Sandeep Shah of Equirus Securities also asked about the subcontracting cost in 2Q23 and 1Q23. Chandrasekar Thyagarajan CFO said the subcontractor spend in dollar terms was flat QonQ. While BSOFT did have a reduction in ship contractors at 2Q23 end, it expects to see an improvement in 3Q23.

• [00:49:31] Sandeep Shah of Equirus Securities enquired if it’s fair to say volume growth was higher than 1.1% constant currency revenue growth. Chandrasekar Thyagarajan CFO replied that it’s fair to assume because of the onsite offshore flip. The effective volume was higher related to the number of hours deployed, but revenues are low due to differential rates.