Birlasoft sees no sign of demand pick-up in Q3, even in Jan

Guha said the company has been actively reducing its number of active customers who are not generating significant revenues

Mid-cap information technology (IT) company Birlasoft said it is yet to see any sign of a pick-up in demand for the quarter ended December, as weak macroeconomic environment persists. It said the situation has not changed much even in January 2024.

“The demand environment is not getting any better, which is why it is very hard to say in terms of how the business will shape up going forward,” Birlasoft CEO Angan Guha told Moneycontrol.

Demand has remained subdued for almost all IT firms as a result of macroeconomic uncertainty and anticipations of a recession in key markets.

For October-December, the Pune-based company’s consolidated profit rose by over 11 percent sequentially to Rs 161 crore. Revenue from operations grew by about 2.5 percent to Rs 1,342.5 crore quarter-on-quarter.

On the profitability side, the company said its operating margin will stay in the current 14 percent mark in the near term. This is because the company is investing in technology and to hire teams across the board.

Additionally, Guha said utilisation levels at 87 percent in the October-December quarter is at the optimal level. This implies utilisation rates will not go over and above the present levels.

Utilisation refers to the percentage of billable hours that employees are actively working on client projects.

Reducing smaller clients

Guha said the company has been actively reducing its number of active customers who are not generating significant revenues. “When you take that resource or capability out and invest in the larger accounts, you will more than make up right for the revenue loss in the small accounts,” he said.

The company will continue to invest in its top 100 accounts, Guha added.

As of quarter ended December, the IT services exporter reduced its active clients by 6 sequentially to 272. Year-on-year, active number of clients decreased by 27.

Guha said ambiguity exists as to how the company’s top clients will perform in the coming quarters, adding that it is “wait and watch” scenario for the company.

Generative AI

Guha said Birlasoft aims to use Gen AI first in the company itself to gauge the effectiveness of its models in driving productivity. The company has about 30 Gen AI use-cases deployed internally, Guha said.

Although external customer engagement is underway with 30-40 active use cases, Guha acknowledged that Gen AI is yet to translate into tangible revenue for the company.