Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Sonata Software Ltd (NSE: SONATSOFTW) Q4 2026 Earnings Call dated May. 11, 2026
Corporate Participants:
Unidentified Speaker
Shrika Reddy — Executive Vice Chairman
Jagannathan CN — Chief Financial Officer
Rajshekar Dutta Roy — Chief Executive Officer
Sujith Mohanty — Chief Executive Officer
Analysts:
Dipesh Mehta — Analyst
Amit Chandra — Analyst
Unidentified Participant
Presentation:
Unidentified Speaker
Today’s session welcome to The Sonata Software Limited analyst and investor conference call for the fourth quarter and FY 2026 ended March 31, 2026. We have with us today on the call Mr. Shrika Reddy, Executive Vice Chairman of the company. Mr. Rajshekar Dutta Roy, CEO of International Services. Mr. Sujith Mohanty, CEO of Domestic Business. Mr. Jagannathan CN Chief Financial Officer. We also have our extended leadership team on the call. Please note that there will be an opportunity for all the participants to ask questions after the management’s opening remarks.
Please note that this call is being recorded. During the call, please note that the management may make certain forward looking statements that involve risk assumptions and are based on information currently available to the management. Sonata does not undertake any obligation to update any such forward looking statements that may be made in course of this call. We advise participants to exercise discretion while making any investment decisions. We will begin with the opening remarks from the Executive Vice Chairman followed by a business overview and financial highlights.
After that we will open the floor for questions. With that, I hand over the call to Mr. Shrika Reddy for his opening remarks. Over to you sir.
Shrika Reddy — Executive Vice Chairman
Good evening everybody and thanks for attending the call and welcome to the analyst call. Before you hear from the management team on the financial performance and the their view of the future outlook and the plans. We felt that’s important from a Board’s perspective to share our views on the leadership transition. Since Sameer D expressed his inability to extend his contract beyond the current contract period, the board had to take a call on the succession. As you know, the board has appointed Rajshekha Datta Roy as the CEO with the main focus on the international business.
The reasons are many. Raj has been with the company for greater than 30 years, understands the culture and the DNA of the company focused on customers, employees and investment in new technologies. Raj has also held multiple roles in the organization including business development, as the Chief Technology Officer and as the Chief Delivery Officer. He’s also been a primary architect of Sonata’s AI strategy built on the Harmony concept. As the tech world is adopting itself to the new paradigm shift to the AI space, we believe Raj is the right leader to lead the company into the new world of AI.
The Board is extremely confident on his leadership and the rest of the leadership of the company to take it to the next level in terms of transforming the company and adapting and adopting the new strategies aimed on AI. The Board is also fully supportive of the management and will continue to assist help guide the management wherever required. Thank you for your continued support. I’ll now hand over the mic to the management to make their presentations. Thank you all again.
Jagannathan CN — Chief Financial Officer
Thank you. Good morning, Good afternoon, Good evening everyone. I will provide the key updates on Q4.26 and FY26 business and financial performance starting with international business. During the fourth quarter we benefited from few growth drivers. We clocked AI led order book of 16.9 million in Q4.26 and for the whole year it was USD $49 million of order book. AI led audible and now contributed to around 18% of overall order book. AI led pipeline is $280 million. As on Q4.26 we are actively pursuing a opportunities across 100 plus clients helping them unlock the value through operational efficiency, gain time to market through enhanced velocity and customer experience.
Transformation of Business model we secured two large deals in Q4 FY26. The total large deals in FY26 was about eight large deals with a major global fintech company As a part of the program Sonata will execute their modernization of the core banking platform. Am I audible now?
Unidentified Speaker
Yes sir. You may continue speaking.
Jagannathan CN — Chief Financial Officer
Okay. We secured two large deals in Q4FY26 for total of financial year 26. We had total of eight large deal with a major global fintech company As a part of program Sonata will execute their modernization of core banking platform and AI led implementation to unify their users experience, enable better institutional customer experience and faster outcomes for their clients with Sonata with software holding company backed by a PE firm focused on acquiring and scaling founder owned vertical B2B SaaS companies.
This is a multi gear managed services cloud support contract across geography. We added seven new customers in Q4 26 in FY26 total 23 new customers have been added. Top 10 clients contributed revenue share of 54 percentage number of clients greater than 5 million run rate stood at 12 in Q4 26 number of clients greater than 3 million to 5 million revenue stood at 9 in Q4. 26 up by one number from Q3 26. Q4. 26 order book stood at $95 million with book to bill ratio of 1.166. We remain confident that our investment verticals healthcare, HLS and banking financial services together these two verticals now contribute 30% of our total revenue in Q4.
26. Total headcount to that 6283. Q4. 26 again 6404 in Q3 26 with attrition of 11 percentage 90% of workforce are AA trained on site offshore revenue mix 32 to 32% to 68% in Q4. 26 against Q3 of 37 is to 63. Utilization reported at this quarter is 91.8 percentage in Q4 compared to 90% in Q3. 26. Let us now walk through our financial performance for the fourth quarter and the financial year 2026 for international services in Q4. 26 USD revenue stood at 82.4 million Platic Quatron quarter in constant currency term it represents a growth of 0.6% quarter on quarter.
Rupee revenue stood at 779.2 crores growth of 5.5% cross quarter on quarter. EBITDA before other income and Forex for the quarter 426 improved to 20.2% up 70 basis point Q on Q from 19.5% in Q3.26. This EBITA accretion is primarily driven by operational improvements across delivery SB and A reflecting better delivery efficiency and cost optimization. Utilization improved to 91.8% up from 90% in Q3. 26. As informed previously, our utilization and count levels were driven by sustainable productivity improvement and operational efficiency in delivery enabled by A adoption differentiated a solution agentic implementation across project.
Our offshore revenue mix improved to 68% from 63% in Q3. 26. We also benefited from permanent optimization and price increases. Forex fluctuation was beneficial in quarter one quarter and all these levers were partially offset by higher AI led CSP bundle deal cost. EBITDA after other income and forex for Q4.26 stood at 183.8 crores growth of 25.2% quarter on quarter and 50.9 percentage around here in Q4.26 PAT stood at 84.2 crores growth of 40.6% quarter on quarter and 35% year on year reported ROC and RONW for the quarter stood at 24.5% and 30.3% respectively.
International services DSO for Q4.26 reported at 64 days against 71 days in Q3.26. In the financial year 2026 our international services dollar revenue stood at 328.4 million had the growth of 2.1% year on year. Rupee revenue stood at 200948 crores growth of 4.2% year on year. EBITDA before other income and Forex for the financial year 26 stood at 18.4% 1.4% accretion compared to 17% in FY25. EBITDA after other income and forex for FY26 stood at 607.7 crore growth of 18% year on year. FY26 PAT stood at 292.7 crore growth of 18.7% year on year.
Now let me provide an update on domestic business. Despite headwinds from one large client renewal this year due to direct Ms. Relationship with we continue to make a good progress in financial performance. Revenue for Q4.26 stood at 1,759.2 crores. This may reflect a degrowth of 25% Q1, QR and 8.3% year on year growth. Gross contribution for Q4.26 stood at 75.3 crore degree growth of 1% quarter on quarter and degrowth of 3.9% year on year. PAT for Q4.26 to date 46.3 crores de growth of 3.9% quarter on quarter growth of 2.5% year on year.
DSO for Q4.26 is 47 days compared to 42 days in Q3.26 reported ROC and RONW for the quarter stood at 43.5% and 39% respectively. Domestic business revenue for FY26 proved at 7772.1 crores growth of 5.9% year on year. Gross contribution for FY26 stood at 288.7 crores de growth of 3.5% year on year. Back for FY26 looked at 171.7 crores deep degrowth of 3.6% year on year. Update on the Consolidated business Now for the quarterly update. Consolidated revenue for Q4.26 stood at 2,536.2 crores degrowth of 17.7% each quarter on quarter and de growth of 3.1% year on year.
PAT for Q4.26 stood at 130.5 crores, growth of 25% Q on Q and 21.4% year on year, reported RoC. RONW for the quarter stood at 28.1% and 32.5% respectively. Consolidated revenue for the financial year 26 stood at 10,701.2 crores with growth of 5.4% year on year. Back for financial aid 26 stood at 464.4 crores in FY26 compared to 424.7 crores in FY25. Consolidated EPS reported for FY26 stood at 16.74 per share against last year 15.3 per share. We have recommended a final dividend of 4.15 per share.
Update on Cash Flow Cash generation remains strong during the year with the closing cash balance of 606 crores and a net cash position positive of 31 crores, a significant improvement from Q3 FY26 to conclude in a difficult year characterized by macroeconomic challenges and climb ramp down. Sonata displayed a resilient performance by growing path 18.7% year on year for international and 9.3% for consolidated business for FY26. We also were able to win and ramp up few large deals during the year, which gave us some tailwind as we enter the new financial year.
Our Q4 26 performance continued to reflect disciplined execution and continued progress across our strategic priorities. The benefits from a LED productivity initiatives are becoming increasingly visible across delivery and enterprise operation. Concerning our confidence in driving sustainable efficiency over a long term period, our endeavor will be to maintain EBITDA at similar level. While the macro environment continues to remain dynamic and client decision cycles remain elongated. We are encouraged by momentum in our pipeline, especially among our own digital and ALA transformative initiative.
We remain cautiously optimistic and expect gradual improvement in growth over medium term. I now hand over to Raj for his commentary on international business.
Rajshekar Dutta Roy — Chief Executive Officer
Thank you Jagan and thank you everyone for joining us today. It’s an absolute honor to address you for the first time as the Chief Executive Officer of of this company, focusing largely on the international business. Having spent three decades here at Sonata and have worked in various roles from business development, technology delivery and recently as a Chief Technology Officer and Chief Delivery Officer, I fairly understand the business, the clients, the employees and the culture very well and I think it provides a unique opportunity for all of us to build on the foundation that has already been laid and what the opportunity is presented in front of us.
I think we proudly inherit a company with very strong customer relationships, depth of engineering, operational discipline which has been at core culture with people and how we operate and these strengths will remain central as we move forward and will also continue to guide us as we go to the next phase of growth. At the same time, I think it’s important to also appreciate the context in which we are operating. One, I think is the technology shift that we are seeing with AI and the various opportunities as well as the headwinds it presents and I think how that’s an interesting area and how we and we’ll talk more as we go along.
Second is the macroeconomic environment and the uncertainty that it presents. But one thing is for sure is that that AI is now on top of the agenda of every enterprise and how they’re trying to utilize, to leverage in each of their business context. Our point of view is that that all organizations will reimagine how they operate, how they use technology with AI, right? And the need to adapt and evolve will be faster than before. The speed will go up in the midterm in terms of the velocity, what we call the enterprise velocity.
And that will lead to demand. Especially where organizations move from system of record intelligence to system of autonomous action. This presents multiple opportunities for Sonata and I think we are well positioned today because of few things that I want to mention. Number one, I think is our strategic and long term relationship with client which we intend to strengthen partner. We are working with many of them already on their AI initiatives and I think that will only benefit us going forward.
Number two, our mix of business, I think predominantly we have a larger part of engineering versus managed services. And we see the need for engineering and the speed that it needs from delivering value to customer, driving more demand in that space. Third is our size that gives us a uniquely positioned to have more headroom to grow even in this situation. We also have invested over the last year or more on building capabilities. I think our people have largely been certified about 90%. We have built differentiated capability with Harmony AI and Origin Bridge that shows in the pipeline increase that we have in the AI LED opportunities.
We also have a strong partnership ecosystem, Microsoft of course and AWS and others. And that also gives us confidence that we are well positioned going forward. I think there are value pools where I think we can be very well positioned and one is to how to reimagine the business processes in the context of AI. Second is the legacy modernization and how do we modernize legacy applications and platforms also around SaaS, around environments that is going to unlock value for our clients. And how do you transform our delivery into an AI LED delivery?
We have made progress on that already and I think we need to accelerate, we can accelerate that much faster. And of course the responsible first AI services that is needed more and more as people adopt AI. So these are important value pools that Sonata can distinctly operate in. And going forward, I think we’ll strengthen this further and you will see us looking at new ecosystem partnerships and in focusing on certain verticals and subsegments and at the intersection of subsegments and. And the partnership will have a fairly differentiated potent capability to take to the market and that will be a focus as we build on this, we’ll continue to invest on our capabilities, workforce readiness, ecosystem partnerships to enable this.
And my focus lies that is that in the understanding of the where the market is headed and remain confident on how we can proactively position the company to get best of the opportunities that lies ahead of us. My immediate focus is to first ensure continuity and that we have the we continue to be deeply focused on our short term priorities, strengthen further our client relationships, accelerate the delivery transformation to be AI led and build a roadmap for the AI capabilities. And not the last, but one of the most important is to continue to drive our operational improvement momentum that we have built in recent times.
I thank you very much for your continued trust and partnership and look forward to the next chapter together positively. Thank you.
Unidentified Speaker
So may we open the lines for questions now? Hey Shilpa here. Ima, we have Mr. Sujith is going to take a few minutes to talk about domestic business post that we can open the line. Please go ahead.
Sujith Mohanty — Chief Executive Officer
Thanks everybody for joining this call. Our domestic product business continue to demonstrate resilience and relevance in a dynamic market environment. You know, despite facing the headwind due to one of our OEM partners starting direct billing with some selected large customers, we continue to make good progress in our business. Revenue for Q4FY26 stood at 1759 crores, Gross contribution is at 75.3 crores and PAD for Q4FY26 stood at 46.3 crores which is a growth of 3.9% quarter on quarter. We are making steady progress across the strategic pillars which you have spoken before.
We are expanding our market coverage and we are having a sharper focus on the SMC and corporate segment. We have grown this business around 27% year on year. We have broadened our partnership with other hyperscalers and OEM partners. We are executing multiple GTMs with each of these hyperscalers. We are also expanding our business related to tools and platform offering from OEM partners other than the hyperscalers. We are also focusing on large hybrid system integration deals that integrate physical server storage and other ISP infrastructure including IT security with leading cloud platforms.
These strategic bits are core to building a more diversified, resilient and future aided business for us. In accordance with the current interest for the use of artificial intelligence in most of the enterprises along with our OEM partners their AI tools and platform offerings. We are working with most of our customers in their initiative. We are setting up their AI infrastructure, implementing and helping them in using the AI tools and working with them in building the AI user cases and POCs. Over the first few quarters we have remained focused on strengthening the quality of our revenue mix, deepening strategic customer relationship and building scalable cloud led managed services capabilities.
Overall, we remain confident in the direction of the domestic business. Our focus is not only on the growth but on building a diversified, scalable and future a business with sustainable value creation for customers, shareholders, employees and partners. With this, let me hand over to the moderator for question and answer session. Thank you.
Unidentified Speaker
Thank you very much sir. Ladies and gentlemen, we will now move to the Q and A segment to ensure we provide space for as many participants as possible. We request you to limit yourselves to two questions per turn for participants connected on zoom. Please click on the raise hand icon located at the bottom toolbar on your screen. When called upon, you will receive a prompt to unmute for participants connected via telephone call. To join the queue, please press star9 on your telephone keypad. When it’s your turn, you will be prompted to unmute by pressing Star six.
Please state your name and company name before asking your questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We’ll take the first question from Dipesh Mehta of MK Global. Please go ahead.
Questions and Answers:
Dipesh Mehta
Yeah, thanks for the opportunity. A couple of questions just first want to get sense about the tweaking in the strategy planned in IITs business. Can you help us understand what would be the focus area of investment? Partly you covered in your prepared remark but if you can elaborate further in terms of vertical and sub vertical where you I think indicated some of the sub vertical kind of strategy. So vertical sub vertical where we intend to make investment and how one should look at it from medium term perspective.
And if you can touch upon also M and A in that part, how M and A fit into overall growth strategy. Second question is about the IITs growth performance perspective. I think last four quarter largely remained flattish between 0 to 1 percentage kind of growth rate. How one should look growth trajectory there earlier we growth was impacted for couple of client specific issues as well as RMD vertical kind of challenges. Can you provide some update on those some of the challenges how we expect it to play out.
And last question is about the overall. If I look let’s say last four quarter there is a significant movement across vertical and GTM or service line so there is a sharp volatility kind of thing. Can you provide broad sense on near term demand trend and any specific headwind across this vertical in GTM which we report and which vertical likely to lead the growth. Thank you.
Jagannathan CN
Yep. Raj will you take the call?
Rajshekar Dutta Roy
Yes, yes thank you Jagan and let me give you A quick commentary I think on where we are thinking. You will appreciate that it’s about I think 15 days since I have just taken over. But I’ll give you a preliminary direction on where we are looking at. I think we will continue to have the verticals that we have so we’ll have continuity on the verticals. What we will do is we’ll sharpen focus on particular areas of the vertical where we are strong and where we see the demand growing. I think that’s what it is.
The exact specificity of which areas is something that we’ll formulate in the next couple of months and then we’ll provide you an update in detail about that. Number two is on investments that you work. I think we will expand on building our offerings and capability both in terms of what go to market capabilities that we have that we will invest in aligned to this strategy of sub verticals. We’ll look at new partnerships as we go forward. While it might take some time to fructify but the new partnerships.
And third is how do we build on differentiated capabilities in delivering with AI. I think there are three large buckets that we are looking on going forward but as I said we’ll provide more specific thing in couple of months from now. The second thing was around growth. I think we continue to maintain resilience in the short term and have the current momentum continuing for now as we move forward and as we move forward and make some of these changes we’ll come back and update you on further. The good part of this is that we we see a healthy pipeline on AI led opportunities that’s coming up and our focus will be that how to quickly convert them and convert them into revenues.
But despite the macroeconomic and general challenges that we face with clients in terms of decision making and stuff, the third point that you mentioned is about how we look at our what’s driving which verticals are going to drive. I think we still see growth being driven by our technology BFSI and HLS in the short term as we try and see how to bring back RMD into the growth path. Thank you.
Jagannathan CN
So to add to Raj’s update on the business on the M and D print we are we are looking for in case there is an opportunity come for us with a good prospect in the particularly new technology area we may evaluate for it. But at present we don’t have any plan specifically to grow the business through the M and day leverage. We will wait for a couple of more quarters and and in the medium term we may open up this Further.
Dipesh Mehta
Thank you. I have one a couple of more I will come up and follow. Thank you.
Unidentified Speaker
Thank you. We’ll take a next question from Amit Chandra of HDFC Securities. Please go ahead.
Amit Chandra
Hello, I’m audible.
Unidentified Speaker
Yes.
Amit Chandra
Yeah yeah. So thanks for the opportunity. So my first question is in the continuation of what the earlier participant asked. So last year last few quarters there were few client specific issues specifically in the retail also in healthcare and largely in the BFSI vertical that we’re facing and that impacted the growth for the full year. FY26BFSI was the vertical which had the maximum damage and we have seen some stability there. So if you can elaborate more on how we are planning to scale up the bfsi.
And also you mentioned about the subverticals within bfsi. So which subverticles are we focusing and we also had some deal wins in the BFSI vertical. So how to. How to look at the growth coming back in the bfsi Is it. Is it also coming from existing clients or we are hunting for new clients in the. In the vertical?
Rajshekar Dutta Roy
I think three questions Amit on that we had. I think yes I think we had issues in the past with some of the verticals RMD BFSI that you mentioned some client specific issues. I think we are largely behind us today on on those those issues and we need to build it. But that said I think BFSI and is still under pressure and we we need to be be clear that there might be further pressures in existing clients for contraction if any but not very significant as we say seen. The second thing is on your sub vertical focus like I mentioned that we’ll work on this further.
We have a view today but we want to validate that and then we’ll come here and provide you those inputs as we as we get build further clarity amongst ourselves. The number three is I think on. On how do we see growth. So I think in the short term looking at all the decision making cycles and what we have I think we’ll continue to win in a similar growth trajectory in the short term as we build for future the I think the new wins is in a very interesting financial services space in largely in payments area and that remains interesting opportunity for us because we are helping them modernize some of their core system in providing a unified client experience and that definitely will be something that will help us consolidate in the payment space.
So that’s. That’s the quick summary.
Amit Chandra
Okay and answer. You know we have seen like TMD coming back in this quarter and obviously you know it has been the Strength of Felix Fanata So how are we seeing this spending from the top 10 there? If you can give some picture in the sense that how do you see spending coming back there or the AI LED benefits that or the pass throughs is now behind or we can see some increased spends or some increased engagement with the top client in the TMP vertical.
Rajshekar Dutta Roy
I think interesting question Amit on the top client in the TMT vertical. Yes, I think we see a little bit of upturned now from them and I think we should look at it on that client. But as you know with some of these clients I think it changes and there are some recent developments. So we need to watch out how much of that is sustainable. We are watching this very, very carefully that that whatever we are seeing the upturn is actually sustainable. Number two is we are trying to pivot to areas where the spends are going up versus the spends which were getting cannibalized so as to speak.
And I think that’s working out. But we still need to see as you might know that some of these things the their financial year and our funds is shortly coming up and we need to see what this means and is this sustainable. So we are watching this out carefully but we have a slight upturn.
Amit Chandra
Okay so the last question is on the margins. Obviously we have been able to scale up the margins that we have talked about earlier and in terms of utilization we are operating at the max utilization levels. So now that we have reached the margins that we desire to so know can we expect some increased investments in the business for growth or we are planning to keep the margins at this level unless we have the clarity for growth and what is the medium term margins that we are likely to operate in.
Jagannathan CN
I’ll take this call Amit the margins we will be. We are evaluating the options for the investment. We will continue to do investments because the growth, particularly the transformation into aid will continue to happen for us and which has got a very good traction. If you see the the order book levels have become 18 percentage of our total order book. We have progressed very well. We will continue to invest on this. Our efficiencies have and utilization have reached the best possible place where it can be.
We will continue to invest, we’ll continue to monitor. We will for the short run we’ll have a similar kind of margin. So we’ll see based on the requirements for the future growth we will definitely be open for investments and for the growth to come in in future.
Amit Chandra
Okay so thank you and all the best.
Unidentified Speaker
Thank you. Before we take Our next question, we’d like to remind participants to ask a question. You may click on the raise hand icon or if you’ve connected via telephone call, you may press Star nine. We’ll take our next question from Praveen Kumar from Equitas Capital Advisors. Please go ahead.
Unidentified Participant
Hello. Thanks for the opportunity. I had a couple of questions. The first one was on the disclosure on the large deal pipeline. If I compare the current quarter’s number at 11 to the previous quarters which used to be in the 28 to 32 kind of a range, that seems to be a sharp drop off in the large deals pipeline on the international business. So can you throw some light on what’s happening there? Why this sharp drop off and is there any specific issue that you would like to call out here? That’s the first question.
Thank you.
Unidentified Speaker
Hi. Hi. Am I audible?
Jagannathan CN
Yeah, I am.
Unidentified Speaker
Yeah. So if you look at the large deal pipeline continues to be strong, I think the overall trajectory hasn’t changed. The reason pipeline would have come down is because we have announced two large deals this quarter. If you see in one of the prepared commentaries. So that is the reason in the short run there will be a, you know, drop there. But overall pipeline momentum and the count of large deals as you can see on that, you know, investor day continues to be strong. Thank you.
Unidentified Participant
Sorry, I’m confused a little bit because in the previous quarters the number used to be around 2832 or in that range. Right now even if I account for a couple of deals converting the large deal pipeline which I’ve disclosed, the numbers add up that is 11. So that’s quite a sharp drop off. Right. So I’m not 100% clear on what you’re implying.
Jagannathan CN
No, this is just to add a flavor to is not particular point of time. What is the open large deals. We are just reflecting on this. The number from this time March 31st to now, it is already changing that for the during the year end time you would have converted many of the deals into a large deal and then subsequently it is getting added more and more on this. It is just a point of time. It doesn’t reflect anything on a pipeline now over.
Unidentified Participant
Understood, understood. Second question was on the domestic business. So we understand the challenges that are there from the large, you know, from, from the large client going direct etc. But so how do we see that panning out and when do we see the domestic business returning to growth on a, on a gross contribution basis and on an EBITDA basis.
Sujith Mohanty
So hi pr, this is Sujith So if you have seen, you know, last financial year we started with this little bit of headwind where we lost one of our largest customer. But if you have seen over the last four quarters, we have almost cover up the whole loss. And as we stand today, we believe that during this fiscal year we should be back to our growth trajectory. Thank you.
Unidentified Participant
Understood. Thanks for the clarification.
Unidentified Speaker
Thank you. Thank you. We’d like to remind our participants, if you wish to ask a question, you may click on the raise hand icon. Again, participants connected via telephone call may please enter star and nine. We will wait for a moment while the question queue assembles. We take the next question from Bharat Gulati from Dalal and brochure. Please go ahead. Mr. Gulati, could you please unmute your microphone and ask your question?
Unidentified Participant
Hello, Am I audible? Yes.
Unidentified Speaker
Yes sir. Please go ahead.
Unidentified Participant
Yeah, thank you for the opportunity. Just a couple of questions from my side. So firstly, just wanted to understand on the margin trajectory on the international business in the short term you said it would be stable. So do we expect these utilization levels to sustain at this 91.8, 92% range or just trying to understand what is going to drive this constant margin trajectory. Yeah,
Jagannathan CN
So we have guided that we’ll be in the similar kind of a margin on with respect to utilization. Depending on the business requirements, utilization may come down a little bit because we have reached the best possible situation for us in the utilization for it. But going forward also there if the operational improvements because of the adoption FA and Agent KA will continue to help us to maintain the margins in the in the business trajectory. What is coming in our onsite offshore mix is also one of the best at present situation.
So we will be able to maintain the similar margin over a period of time. Over a period of time. In case if requires additional investments for the growth, we are open for it.
Unidentified Participant
Got it, got it. And just on the domestic business, just wanted to add on to the last participant’s question. What I just wanted a clarification on. Are we in keeping our, you know, outlook intact to get the growth that we historically had in that segment of our business and how do we look at, you know, our existing business in that segment given that direct competition has come in and how are customers, you know, panning out? Yeah,
Sujith Mohanty
This is sujith. So on the. On the direct competition from the OEM partners, I think see, you know, as a policy they have not given anything in writing. But as for our understanding, we don’t see that we’ll be losing any of any further of our large customers. That is point number one. Point number two, even if now some customers are going to be directly built because they are not in the top 2030 list materially, it will not impact that much if at all it happens. But as I said, as for our understanding of the current situation, our understanding though we are Microsoft India talking about their future policies, we don’t see any further shit in the coming quarters.
In fact in the recent past there are 2, 3 customers who were in discussion regarding direct billing. But we worked with Microsoft and customers and jointly we made sure that those customers finally signed through in a partner route through us. So this is where we stand. So from direct billing point of view we are not expecting to lose much hope. I have answered your question.
Unidentified Participant
And so just on, you know, how do we see growth, I mean new customers, how do we see that addition and how do we see just on the growth front, do we see that historical growth come back or will there be a slight impact to growth going forward?
Sujith Mohanty
No, I think in, in one or two quarters we’ll be back to our old growth rate and see the, you know, during this whole four quarters it’s not that we are not winning other customers or not adding business. It’s just the fact that such a large customers who are with US almost for 15, 16 years we had built up a huge business. You know, the impact was such high that you know, we took few quarters to cover it up. And I just mentioned in the, you know, few minutes back we have almost covered it up. So we are hopeful and we are very confident that this financial year will be back to our business.
Thank you.
Unidentified Participant
Fair enough. Thank you. Thank you for your answer.
Unidentified Speaker
Thank you. Our next question is a follow up from Dipesh Mehta of MK Global. Please go ahead.
Dipesh Mehta
Yeah, thanks for the opportunity. Just want to understand the domestic business. Earlier we indicated about one client impact in last November onwards and another client in H2 of FY27. Are we indicating that under client hit which was supposed to happen is unlikely to play out now and that gives us confidence about growth on sustainable basis from here on. And second question on the margin, how should one should look that business? Because when we indicated earlier about expansion to new client as well as new partnership, usually it start at either breakeven or loss.
So which could have a ramification on margin trajectory. So if you can address both of these questions. Thank you.
Sujith Mohanty
Thanks. So as I just mentioned, you know for the previous question we we are not anticipating to lose any further customers to direct billing. That is you know, just to answer your first part of the question, now coming to the growth and you know, and the future business. So we’ll, we’ll, you know, we’ll continue to have our GTMs, we’ll continue to have our existing customers, we have our plan to get new customers. So the future business will be as usual and we don’t expect any further hit. Is that, is there anything
Dipesh Mehta
Margin? I was more interested because the new business may come at lower margin. That was the expectation.
Sujith Mohanty
Yeah. Sir. Yeah, sorry Deepak, I just missed that. Okay, so from the margin point of view, you know, in our business when you go for very large deals, as you said very rightly that when you enter to the contract, there is a chance that you work or you operate at a very, very low margin or almost nil margin. But that is built into our business plan and we have a mix of existing customers, what we call the farming. And then we have a plan every year for new additions which you go for the hunting. So this is a, you know, we have a mix of these two businesses and the earning of low margin for the new business which comes from new acquisition and compete accounts that is already built into the business.
So when we say that we are going to have a regular growth during this financial year, that has already been taken into account. And the second point is that also we keep changing our business nature in terms of from a pure play resale to get into a little bit of system integration, you know, multi cloud management. So this is how the business is also changing until these are the requirements from the customers as they are also becoming much more experienced in operating under multi cloud situation.
So multi cloud management, security management, all this become a part of additional services which we have already started providing. So because of all these things we are very confident that the margin situation from the market we can handle it.
Jagannathan CN
Just to add a point to that, what it is highlighting is this is not changing the business model substantially what it was last year to current year. This is the situation for us for a long period of time and we know how to handle it over a period of time. And the entry level margin will not reflect the sustained margin for the business later. We add services, we add other components of it and keep expanding on and mine the account much, much deeper. So in this business is is the current situation exists in the past and this exists that current situation also
Dipesh Mehta
Understand and last question is about the IITs just want to get sense on the dynamics part that business remain relatively weak through the year and the same on data part so if you can provide on the revenue by GTM what we disclose data. It was expected it to be very strong growth kind of thing but somehow it remained under pressure. So if you can give some perspective on data and dynamics, these two gtm. Thank you.
Rajshekar Dutta Roy
Okay. No, thank you. Dipesh and I think two questions. I think Dynamics growth remains very, very important to us and we continue to be in the top level partnership with Microsoft. And as we go forward we’ll further strengthen our Dynamics go to market as AI business solution. And so that remains our key focus as a part of the go forward strategy. We have interesting pipeline which has come up with Dynamics with AI recently and we are looking forward to convert them to get some tailwind as we move forward.
As far as data goes, it’s largely been contributed by the bfsi one particular client Ramdown and a little bit by that RMD client ramp down. But thereafter I think we are building go to market with data. I think one of the things with AI the opportunity is that what the data for AI and. And we are creating a data product for AI as a data source and that will help drive further momentum as we go forward. But that also remains a focus.
Unidentified Speaker
Thank you. We now move to our next question. That’s a follow up from Praveen Kumar of Acitus Capital Advisors. Please go ahead.
Unidentified Participant
Yes. Hi. Thanks for the opportunity again. I had a quick follow up on the international business. I think over the last several quarters the management has called out lengthening deal decision cycles and broader macro and today again Raj and his commentary has called it out. So just wanted to understand that given that Sonata has had a significant AI focus and significant AI readiness over a period of time and given the modest size of that business, what are the hindrances in terms of getting more traction even in this kind of an environment?
If you could throw some light on that. Thank you.
Rajshekar Dutta Roy
Yeah, I think all the three points. I think AI definitely presents an opportunity at our size and I called it out when we made the initial commentary. The decision making cycles is I think to for clients largely on AI has been on to take the larger plunges rather than experimentation. We are trying. We are seeing green shoots of that coming up especially in the engineering space. But yet I think the decision making is continues to be elongated not so much by technology or what it can do, but the macro environment in which the client is.
I think that’s the inhibiting factor. That said, we will continue to further strengthen our capability because at the end of this I think AI will demand will grow up in the medium term and Sonata will be more ready its focus areas to address that growth opportunities.
Unidentified Participant
Thank you.
Unidentified Speaker
Thank you. Our next question is from Ashish Das of Mirai Asset Securities India. Please go ahead.
Unidentified Participant
Hi. Thank you for the opportunity. I would like to understand your thoughts around FY27 growth outlook. So in previous call basically we highlighted that in TMT vertical the non engineering segment continues to face the budget pressure. And also we saw that if in FY26 BFSI declined significantly and you know the basically the companies in IT services space basically talking about there is spending is remains healthy in the BFSI side. So I would like to understand the the outlook of BFSI and TMT as well as the overall growth outlook for FY27.
Rajshekar Dutta Roy
So I think on the BFSI it was largely affected by one large client ramdown and that showed rather than the BFSI in other other customers continue to be in similar trajectory. Two part that is of the answer. One part of the answer. I think the recent deal win in the BFSI should further help us grow in bfsi. And we are also seeing some client ramp ups especially as they modernize their application landscape with AI. I think that’s a positive. But we also notice that some large clients have the economic situation is also leading to some contraction.
So we are watchful about it. But I think there is a slight tailwind because of the ramp ups and the new win that we have that’s on BF side as far as TMT goes. Yes, I think we are seeing a increased traction in tmt. But I think we need to see how much sustainable it is as we grow and that’s what we watch out for continuously that it needs to be sustainable growth and so that it can be seen to continue as we go forward. Largely I think we see tmt, HLS and BFSI still driving our gold as overall growth in the FY27 as well as RMD continues to recover.
Unidentified Participant
Okay, thank you so much for answering my question. Thank you.
Unidentified Speaker
Thank you. Our next question is from Susho Van Nayak of Anandra. So could you please unmute your connection and ask your question? Misses Sushoban Nayak, you may enter Star 6 and unmute your mic. Miss, could you please unmute your microphone?
Unidentified Participant
Hello. I hope my voice is audible.
Unidentified Speaker
Yes sir.
Unidentified Participant
Yeah, just two bookkeeping questions. One is on the Capex, right? I think there’s almost a 70% increase in the absolute value of the Capex. Any particular reason on what’s the. What’s exactly there and what do you expect as a steady State that’s one and on the IT services business the margins also I think they have gone up to 20%. What do we expect to be the steady state? Do you expect some improvements over and above this? I think these were the two questions thank you.
Jagannathan CN
I’ll take this question Both the CAPEX is because we had launched a new facility in Chennai for one large BFSA customer. This is like one time activity so hence there is an increase on the CAPEX for the current quarter. However this will not continue and we don’t have any plans of growing another facility at present. So if there is any updates we will come back to you. This is a very smaller facility kind of a situation. Earlier quarter we didn’t have anything we have optimized the facilities also as possible earlier the next one is on a margin.
Our endeavor is to maintain the EBITA at the similar levels. We will continue to strive for it. However, if there is an opportunity for growth and that requires a investment we we are very much open for that.
Unidentified Participant
So can we take the first half CAPEX annualized as the fair number for the CAPEX going forward? Is that fair?
Jagannathan CN
Yeah yeah we can share that separately not expected to be in the similar levels of previous year overall year not for the 1/4 1/4 into 4 is not the number full year financial
Unidentified Participant
Sure. Thanks.
Unidentified Speaker
Thank you. That was the last question for today. I turn the call back to Mr. Jagannathan CN for closing comments.
Jagannathan CN
Thanks. Thanks for that. In a difficult peer characteristic macroeconomic challenges and client ramp down so not a display resilient performance by growing PAT by 18.7 percentage year on year for international business and 9.3 percentage on consolidated business level. We also were able to win and ramp up large very few large deals during the year which gave us some tailwind as we enter the new financial year. Our Q4 26 performance continued to reflect the disciplined execution and continued progress across our strategic priorities.
The benefit from our AI led productivity initiatives are becoming increasingly visible and across delivery and enterprise operation strengthening our confidence in driving sustainable efficiency over long term period. Our endeavor is to maintain the EBITDA at similar level while macroeconomic environments continue to remain dynamic and client decision cycles remain elongated. We are encouraged by the momentum in our pipeline especially around digital and AI led transformation initiative. We remain cautiously optimistic.
Expect gradual improvement in growth over medium term. Thank you all for joining for the call. Once again thanks for all the support and continued confidence in Sonata Software. Thank you.
Unidentified Speaker
Thank you very much sir. Ladies and gentlemen, on behalf of the leadership team I would like to thank you for your time and for your continued interest in Sonata Software. Should you have any follow up queries that were not addressed, please feel free to reach out to the Investor relations team@investoratesonatasoftware.com you may now click on Leave button to exit the meeting. Thank you for your participation. Goodbye.