Thread by @alphaspotcap

Birlasoft Limited Analysis!

A detailed thread below🧵👇🏻
#investing #StocksToBuy

(1/17)

• Birlasoft is a multi-shore business application global IT services provider with a presence in the USA, Europe, Asia-Pacific & India.

• It counts Fortune 100 enterprises across manufacturing, banking & financial services, insurance, media & healthcare as clients.

(2/17)

Backdrop -

• Global demand for IT services is experiencing huge tailwind
backed by increased spending on Cloud & Digital

• Gartner expects Outsourced IT services spend to grow at 8.6% CAGR over 2020-25

• Indian IT is exp to reach to $350bn by 2025 vs $198bn in FY21

(3/17)

• What led to the Turnaround of Birlasoft?

• GE was the anchor client of Birlasoft, & 55% of its revenue in FY15 came from GE only.

• In 2015, BSOFT reduced focus on GE business & gradually brought down its share to 25% of total revenue in 2018.

(4/17)

• In 1QFY18, BSOFT sold the remaining GE business ($45 mn in annual revenue) on a slump sale basis at ~$15mn to Genpact.

• During FY15-18, non-GE business continued to grow & rose to ~$100 mn in FY19.

(5/17)

• Merger of BSOFT & KPIT

• The merger of the two company happened in Jan 2019, where the ERP business of KPIT got separated & merged with
BSOFT.

• With this, an IT service company with full service capabilities got created.

(6/17)

• The new BSOFT posted revenue
of $464 mn & EBIT margin of 9% in FY20.

• In FY21, the company
reported revenue of $480 mn, up 3.4% YoY, with EBIT margin of
12.6%.

• It kept focusing on building a big entity by maintaining leadership in the enterprise digital space.

(7/17)

• Benefits of the Merger:

1) 10,000 Employees and $450mn+ market cap

2) Wider industry coverage

3) Extreme digital capability in Analytics, digital advisory, RPA & User experience

4) Expertise in auto engineering and mobility solutions

(8/17)

BSOFTs Key Verticals and Revenue Breakup:

1) Manufacturing : 42% of Revenue

2) Lifesciences : 25% of Revenue

3) BFSI : 18% of Revenue

4) Energy & Utilities : 15% of Revenue

(9/17)

• A major achievement of BSOFT is increased deal wins. In FY21, total TCV win by the company was
$888 mn with 50% coming from new deals

• ~97% of the deal wins in FY21 came from existing customers
& that indicates the cross selling & mining the company was
able to do

(10/17)

• Digital and Cloud business taking the lead:

Digital & Cloud business reported revenue of $81 mn in 2QFY22 bs $55 mn reported in 4QFY19, a 6.6% CAGR since the merger.

Digital contributes 60% to BSOFT topline & made the company more future ready.

(11/17)

• Focus on Global Partnership:

1) In August 2020, SOFT announced Global Strategic Cloud Alliance with Microsoft to help its clients accelerate their digital journey.

2) They also became AWS partner recently and planning to penetrate Google in the same fashion.

(12/17)

• Expect BSOFT to maintain industry leading growth, margins and revenue CAGR.

BSOFT, with its balanced presence in Digital & ERP, competent
leadership, and focused growth approach, is expected to be in a
sweet spot to capture the opportunity.

(13/17)

• Key Risks:

1) Deterioration of demand in the wake of Covid

2) Loss of large clients

3) Cut throat competition in the market

4) Currency Fluctuation

(14/17)

• Management commentary:

1) Revenue growth is exp to be better in FY2023 vs FY2022

2) Management aims to reach $1 billion revenue by FY25, implying a CAGR of 20% over FY21- FY25

3) Management is optimistic of an EBITDA margin of over 15% in the coming quarters

(15/17)

• Shareholding Pattern of BSOFT:

1) Promoters - 41%
2) DII - 23%
3) FII - 19%
4) Others - 17%

• Top 10 Shareholders of BSOFT:

(16/17)

Conclusion:

BSOFT should keep focusing on platform/solution-based delivery, dedicated team to mine large clients & balance Digital & Enterprise Solutions.

This will make it a very strong contender among its peers to capture the growth in tech over the next 2-3 years.

(17/17)

What do you think about Birlasoft’s business and future?
Comment down below 👇🏻

@datta_arvind @caniravkaria @Jitendra_stock @Anshi_________ @RajarshitaS @SahilKapoor @saketreddy @Atulsingh_asan @WealthEnrich @SwarnashishC

Happy Reading!🙂