CARE Ratings reaffirms ratings of Birlasoft at 'AA+/A1+'; maintains ‘stable’ outlook

The agency has also affirmed the company’s short-term rating at ‘CARE A1+’. CARE Ratings stated that the reaffirmation continues to derive strength from Birlasoft’s established position in the IT services industry, predominantly in MedTech, Cards & Payments, Asset Management and ERP Implementation services, its robust capital structure, healthy cash flow generation, and strong liquidity with cash and liquid investments of over Rs 1,900 crore as on 31 March 2025, supported further by unutilised working capital lines. The company also benefits from being part of the well-known and diversified CKA Birla Group (erstwhile CK Birla Group), which imparts financial flexibility and underscores its strategic importance. In FY25, Birlasoft reported decline in PBILDT margins by nearly 300 bps y-o-y amidst challenging demand environment in its key market (USA) with discretionary IT spending remained subdued. Weakness in demand is expected to continue in FY26 as well, marked by macro uncertainty with elongated decision cycles, and cautious client spends, and further exacerbated by the recent uncertainty around trade and tariffs, though there is no direct impact of the US tariffs on IT service industry for now. However, ratings draw comfort from its healthy order pipeline (total contract value; TCV of US$236 million), diversified service offerings and continuous focus on scaling up digital, cloud, and its initiatives around artificial intelligence and generative AI capabilities, provide medium term revenue visibility. Going forward, CareEdge ratings expects profitability levels to improve once global uncertainty moderates and corporate discretionary expenditure revives. However, these rating strengths are partially offset by Birlasoft’s presence in a highly competitive IT service industry with many prominent players limiting its pricing flexibility given the relative moderate scale of operations, its geographical concentration (largely in USA, approximately 86.5% of revenue in FY25), client concentration, foreign exchange fluctuation risk, employee attrition risk, and changes in policies/ macro environment across key operating markets, including America and Europe among others. Birlasoft, part of the CKA Birla Group, is a multinational global information technology solutions and services provider in software development, package implementation, application management, testing, enterprise and digital technologies. The company had reported 12.8% fall in consolidated net profit to Rs 106.4 crore on a 2.4% decline in revenue from operations to Rs 1,284.9 crore in Q1 FY26 over Q4 FY25. The scrip shed 0.35% to currently trade at Rs 367.85 on the BSE.