About the company:
- Incorporated in 1990, Birlasoft Limited (formerly KPIT Technologies Ltd) combines the power of a domain, enterprise, and digital technologies to reimagine business processes for customers and their ecosystem.
- The CK Birla Group Company has unique, industry-leading capabilities from the Enterprise Product and Cloud solutions domain such as SAP, Oracle, JD Edwards, Salesforce.com, Service Now, etc.
- Birlasoft also possesses significant ‘Digital’ capability in Analytics, RPA (Robotic Process Automation), Digital portals, User Experience, and Digital advisory services.
- The company is a service company primarily engaged in providing information technology and related services.
- The company caters to sectors like Banking, Manufacturing, Capital Market, Insurance, Media, Energy, Life Science, Healthcare, etc.
- In 2019, Birlasoft and KPIT Technologies merged together to create a $700-million company, which then split into two specialized IT publicly-traded companies in a complex procedure.
| Headquarter | Pune, Maharashtra |
| Sector | IT – Software |
| CEO & MD | Dharmender Kapoor (June 2019 – Present) |
| Chairman | Amita Birla |
Board of Committees:
Parent Company:
CK Birla Group:
The CK Birla Group is a growing conglomerate that has a history of enduring relationships with renowned global companies. The Group’s businesses are present across five continents and operate across six industries: Automotive, Technology, Home and Building, Infrastructure, Healthcare, and Education. Some prominent companies under this group are Orient Electric, Orient Cement, Avtech, Birla Institute of technology, etc.
Subsidiaries:
- As of March 31, 2021, the company has 15 subsidiaries including step-down subsidiaries. Some of them are:
- Birlasoft Solutions France
- Birlasoft Solutions Inc.
- Birlasoft Computer Corporation
- Birlasoft Consulting Inc.
- Birlasoft Solutions Ltda.
- Birlasoft Technologies Canada, etc.
Competitors:
- Happiest Mind Technologies Ltd (Market Cap of Rs 15,736 cr.)
- Tata Consultancy Services Ltd (Market Cap of Rs 1,338,909 cr.)
Shareholding Pattern:
Top Shareholdings:
- National Engineering Industries Limited – 38.70%
- Abu Dhabi Investment Authority – Behave – 2.27%
- ICICI Prudential Long Term Equity Fund Tax Savings – 3.29%
- Axis Mutual Fund Trustee Limited A/C Axis Mutual Fund A/C Axis Small Cap Fund – 3.28%
Industry Overview:
- The global sourcing market in India continues to grow at a higher pace compared to the IT-BPM industry. India is the leading sourcing destination across the world, accounting for approximately 55% market share of the US$ 200-250 billion global services sourcing business in 2019-20.
- The IT industry accounted for 8% of India’s GDP in 2020. According to STPI (Software Technology Park of India), software exports by the IT companies connected to it stood at Rs. 1.20 lakh crore (US$ 16.29 billion) in the first quarter of FY22.
- India is the topmost offshoring destination for IT companies across the world. Having proven its capabilities in delivering both on-shore and off-shore services to global clients, emerging technologies now offer an entire new gamut of opportunities for top IT firms in India.
- Indian IT & business services industry is expected to grow to US$ 19.93 billion by 2025.
Profit and Loss Statement:
Consolidated P&L (in Rs. Crores)
| Mar-16 | Mar-17 | Mar-18 | Mar-19 | Mar-20 | Mar-21 | |
| Revenue from Operations | 3,224 | 3,320 | 2,250 | 2,551 | 3,291 | 3,556 |
| Expenses | 2,790 | 2,971 | 1,967 | 2,244 | 2,899 | 3,026 |
| Operating Profit | 435 | 349 | 283 | 306 | 392 | 529 |
| Profit before tax | 365 | 299 | 322 | 346 | 336 | 455 |
| Net Profit | 281 | 239 | 253 | 289 | 224 | 321 |
| EPS in Rs | 14.22 | 12.08 | 12.80 | 10.56 | 8.11 | 11.57 |
Key Pointers:
- Expenses of the company majorly include 60% Employee cost and 20% Manufacturing cost.
- The company is registering a slow revenue growth rate through their expenses growth rate is comparatively good.
- Weak profit margins compared to its peers.
- Negative EPS Growth in the past 5 years.
Balance Sheet:
Standalone Balance Sheet (in Rs. Crores)
| Mar-16 | Mar-17 | Mar-18 | Mar-19 | Mar-20 | Mar-21 | |
| Equity Capital | 38 | 38 | 38 | 55 | 55 | 55 |
| Reserves | 1,348 | 1,545 | 1,779 | 1,659 | 1,837 | 2,124 |
| Borrowings | 250 | 387 | 310 | 38 | 145 | 128 |
| Trade Payables | 118 | 131 | 159 | 215 | 190 | 132 |
| Total Liabilities | 2,183 | 2,528 | 2,733 | 2,498 | 2,687 | 2,994 |
| Fixed Assets | 630 | 671 | 829 | 588 | 751 | 698 |
| Investments | 12 | 79 | 129 | 191 | 33 | 55 |
| Other Assets | 1,505 | 1,641 | 1,743 | 1,719 | 1,901 | 2,234 |
| Cash Equivalents | 395 | 390 | 505 | 377 | 630 | 1,043 |
| Loans n Advances | 268 | 285 | 307 | 542 | 443 | 611 |
| Total Assets | 2,183 | 2,528 | 2,733 | 2,498 | 2,687 | 2,994 |
Key Pointers:
- A decrease in borrowing is because of a reduction in lease liabilities.
- Made huge investments in different mutual fund schemes.
- The rise in the cash equivalent is because of increased bank balance due to unclaimed dividends.
Cash Flow:
Standalone Cash Flow (in Rs. Crores):
| Mar-16 | Mar-17 | Mar-18 | Mar-19 | Mar-20 | Mar-21 | |
| Cash from Operating Activity | 410 | 163 | 407 | -72 | 310 | 558 |
| Profit from operations | 487 | 335 | 479 | 503 | 481 | 540 |
| Payables | -11 | -4 | 31 | 306 | -27 | -55 |
| Receivables | 2 | -82 | -83 | -539 | -22 | 159 |
| Working capital changes | 5 | -105 | -13 | -537 | -91 | 84 |
| Direct taxes | -82 | -67 | -59 | -38 | -80 | -67 |
| Cash from Investing Activity | -146 | -150 | -193 | 123 | -42 | -444 |
| Fixed assets purchased | -124 | -189 | -116 | -90 | -54 | -25 |
| Investment Purchases | 0 | -66 | -52 | 0 | 0 | -22 |
| Other Investing Items | -66 | 95 | -43 | 4 | -159 | -414 |
| Cash from Financing Activity | -307 | 80 | -128 | -116 | -180 | -97 |
| Dividends Paid | -26 | -50 | -50 | -55 | -100 | -55 |
| Financial Liabilities | 0 | 0 | 0 | 0 | -39 | -39 |
| Repayment of borrowings | -2 | -1 | 0 | -45 | -38 | 0 |
| Net Cash Flow | -42 | 93 | 86 | -64 | 88 | 17 |
Financial Ratios:
Stock Price:
| 1. Current Price | ₹ 453.00 |
| 2. Market Cap | ₹ 12,656 Cr |
| 3. Yearly fluctuation | ₹ 215 – 585 |
Ratios:
| P/E | ROCE | ROE | Op. Margin | Rev Growth | |
| BirlaSoft Ltd | 21.86 | 22.98% | 15.76% | 15.42% | 8.04% |
| Happiest Mind Technologies Ltd | 47.16 | 36.55% | 42.37% | 27.89% | 10.77% |
| Tata Consultancy Services Ltd | 36.25 | 52.56% | 38.55% | 30.26% | 4.61% |
Strength:
The company is part of a growing conglomerate with a strong area of operation. MF houses are showing strong interest. Increased their investment in the last PY by majorly investing in different mutual fund schemes. Healthy dividend payout.
Weakness:
Negative EPS Growth in the past 5years. Decent revenue growth trend line. Negative growth in Net Cash Flow. The overall financials seems decent with negatives dominating over positives.
Opportunity:
India is the topmost offshoring destination for IT companies across the world and the industry is expected to grow to US$ 19.93 billion by 2025. With the kind of business portfolio and management team, the future seems healthy and growth-oriented.
Threat:
There are too many big and small players which makes this segment a highly-competitive market. Financial ratios are on the much lower side when compared to their peers.
Disclaimer: This shouldn’t be construed as a stock recommendation, investors discretion is advised while investing.
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