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Sonata Software Ltd. is banking on its international services business to deliver the goods in a global economy convulsed by macroeconomic headwinds.
"We delivered 18.7% YoY growth on our international business in FY23. I think it’ll be higher going into the next year," Samir Dhir, chief executive officer at Sonata Software, said during a post-earnings interaction with BQ Prime. "Of course, there are pockets of concern, especially in the hi-tech vertical, but overall, the business momentum continues."
The company’s quarterly results, however, tell a different story.
The net profit of the Bengaluru-based information technology services company fell 3.30% from the previous three months to Rs 113.77 crore in the quarter ended March 31, according to an exchange filing on May 13.
That came on the back of revenue that slumped 15.36% sequentially to Rs 1,913.50 crore. For the full financial year, the bottom line grew 34.13% to Rs 7,450 crore, even as the top line came in at Rs 452 crore.
Sonata Software Q4 Results: Key Highlights (QoQ)
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Revenue down 15.36% at Rs 1,913.5 crore.
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EBIT is down 6.98% at Rs 132.68 crore.
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EBIT margin at 6.93% versus 6.30%.
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Net profit was down 3.30% at Rs 113.77 crore.
Dhir attributed the lacklustre performance to seasonality.
"Ours is an India-based business, which is very seasonal in nature. We generally end up seeing a spike in revenue in the third quarter, and it moderates out in the fourth quarter," he said. "On the bottom line, though, there was a one-time expense relating to an acquisition the company made in Q3."
WATCH | Sonata Software CEO On Growth Prospects
Dealmaking
While Sonata Software saw some softness in deal-making in its hi-tech space, which contributes 30% of its total revenue, the rest of the business verticals remained robust, according to Dhir. The IT firm signed three large deals, including its largest ever, in the March quarter, as compared to four during the October-December quarter.
“The demand trend continues to be pretty secular, except for some weakness in hi-tech," the CEO said.
The financial services vertical, a sector otherwise roiled by the banking collapse in the U.S., was also reasonably insulated from macroeconomic headwinds.
That’s because Sonata Software is involved in the data privacy and digital wallet facets of the business, segments that continue to bring clients, Dhir said. In fact, the largest deal that the company signed in the March quarter was with a BFSI client.
The practice is also starting to see synergies from the recent acquisition of Quant Systems Inc., a U.S.-based IT services firm focused on the deployment of software solutions for banking, healthcare, and data privacy sectors.
“We are taking their existing capabilities and incorporating them into ours, which is helping us differentiate in our existing installed client base,” Dhir said. “We are very excited as to where this integration is leading.”
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