Birlasoft says discretionary spending still tight, will continue for some more quarters

Birlasoft

Birlasoft chief executive officer Angan Guha has said discretionary spending is still tight and is likely to continue for a few quarters, signalling a prolonged rough patch for mid-tier firms even as large-cap information technology companies are seeing green shoots.

“I don't think discretionary spends are back on the table yet. So to that effect, there is an industry-wide challenge when it comes to growth,” Guha told Moneycontrol.

The challenge might continue for a couple of more quarters, with an added event of the US presidential election in November, he said. The banking, financial services, and insurance (BFSI) vertical, however, has performed well, in keeping with the large sectoral trend.

Guha said the company’s performance in the June quarter was below the company’s expectations, as tepid discretionary spending weighed on performance.

The CK Birla Group company’s revenue increased by 5.1 percent year-on-year to Rs 1,327 crore, while the profit was up 9.2 percent at Rs 150 crore. Birlasoft’s deal wins were at a five-quarter low at $160 million, with new deal wins worth $94 million.

The company’s first-quarter results should be seen in the backdrop of the fact that it has had six quarters of consistent sequential and YoY growth, Guha said. While the year-on-year results remained positive, the sequential performance did not meet expectations.

“We are looking at how we can deliver a better Q2. So the entire management team is focused on delivering for Q2, Q3, and Q4,” he said.

The BFSI sector showed positive signs. The vertical was up 8.4 percent, the energy and utilities vertical was up 3.7 percent sequentially, while the manufacturing and life sciences vertical registered a sequential decline.

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AI and GenAI

Guha said there is an AI conversation with all clients. Birlasoft Cogito recently launched its GenAI platform, which would help accelerate building, deploying, and running enterprise use cases.

While these conversations are promising, they are not yet generating significant revenue. “So eventually, you know we will be in the market reporting GenAI revenue sooner or later, but right now, let me tell you we are very encouraged with the conversations that we are having,” he added.

Birlasoft added about 300 people, including 65 freshers, in the first quarter, Guha said.

He also said the company has identified several operations that could be automated. “Optimus programme is supposed to drive a lot of automation. We've identified many processes. Some of these processes could be eliminated, some of these processes could be automated, and some of the processes could be simplified,” he said.