Any current/future new fundraising through debt or equity?

The company borrowed about $55 million during the acquisition of Quant, resulting in finance costs related to interest on this loan. This loan carries an interest cost of approximately Rs. 6.5 crores per quarter (~Rs. 17-20 crores impact including unwinding of interest), which will reduce as repayments are made. The loan is planned to be repaid sometime in the next year, with associated interest costs reducing substantially after payments in March 2024 and March 2025, and finally concluding with a payment in August 2025. There is no mention of any new or planned fundraising through additional

Any current/future capex/capital investment/strategic investment?

Sonata Software is continuing to invest in AI capabilities and related talent, as highlighted by ongoing AI-focused hiring despite some quarterly hiring delays. Investments are being made to support large deals and digital transformation programs, especially in modernization engineering with cloud and data focus. The company has made strategic acquisitions like Quant Systems to strengthen its offerings, especially in data privacy and cross-selling opportunities. Capital expenses relating to acquisitions include borrowings tied to Quant acquisition with associated finance costs over the next 2

Future growth expectations in sales/revenue/volumes?

International service business grew 40% YoY and 4.6% QoQ, with expectations to maintain high-teens YoY growth going forward. Continued strong order booking with a book-to-bill ratio of 1.24x and a large deal pipeline up 25% quarter-on-quarter. Large deals (e.g., $160 million deal) are fully ramped up; additional deals (like TUI) expected to ramp up further in H2 and next fiscal year. Growth driven by modernization engineering, cloud, data platforms, and new large enterprise clients (17 clients >$3M revenue, 11 clients >$5M). Expansion expected from Quant Systems acquisition and bundled

Future growth expectations in earnings/operating earnings/profits/EPS?

Sonata Software expects continued strong growth, targeting revenue of $1.5 billion by FY26. International business saw 40% YoY growth this quarter; management confident of maintaining high-teens growth YoY. EBITDA margin for international business to remain in the lower 20% range in the medium term, with ongoing investments. Consolidated EPS improved from Rs. 8.66 to Rs. 8.96 quarter-on-quarter; PAT grew 10.2% YoY. Large deal pipeline increased 25% quarter-on-quarter, with 32 large deals in the pipeline supporting future growth. Amortization and interest cost related to acquisitions will reduc

Current/ Expected Orderbook/ Pending Orders?

The international business order booking for Q2 stood at a book-to-bill ratio of 1.24x, which is industry-leading. The large deal pipeline has increased by 25% quarter-on-quarter. Sonata has 32 large deals in the pipeline currently. The large deal of $160 million announced earlier in the year is fully ramped up and the transition is complete. The company continues to see a strong pipeline and confidence in its value proposition across verticals and geographies.

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Sonata Software LtdQ3 FY23IT - Software

Sonata Software Ltd Q3 FY23 Earnings Call Analysis

Revenue, margin, capex, fundraise and order book outlook from management commentary.

Price: ₹284P/E: 14.7Market Cap: ₹7.5K CrSector: IT - Software

Management growth scorecard

Revenue

Category 3

Margin

Category 3

Fundraise

N/A

Order

Yes

Capex

Yes

2 of 4 growth signals are positive.

Full analysis

Revenue guidance

Category 3

→International service business grew 40% YoY and 4.6% QoQ, with expectations to maintain high-teens YoY growth going forward.
→Continued strong order booking with a book-to-bill ratio of 1.24x and a large deal pipeline up 25% quarter-on-quarter.
→Large deals (e.g., $160 million deal) are fully ramped up; additional deals (like TUI) expected to ramp up further in H2 and next fiscal year.
→Growth driven by modernization engineering, cloud, data platforms, and new large enterprise clients (17 clients >$3M revenue, 11 clients >$5M).
→Expansion expected from Quant Systems acquisition and bundled service offerings leading to accelerated growth on new clients.
→Optimistic long-term growth, targeting $1.5 billion revenue by FY26 with international EBITDA in low-20s.
→Headcount and investments in AI and key tech areas to support growth, with an improving utilization rate (84.2%).

Margin guidance

Category 3

→Sonata Software expects continued strong growth, targeting revenue of $1.5 billion by FY26.
→International business saw 40% YoY growth this quarter; management confident of maintaining high-teens growth YoY.
→EBITDA margin for international business to remain in the lower 20% range in the medium term, with ongoing investments.
→Consolidated EPS improved from Rs. 8.66 to Rs. 8.96 quarter-on-quarter; PAT grew 10.2% YoY.
→Large deal pipeline increased 25% quarter-on-quarter, with 32 large deals in the pipeline supporting future growth.
→Amortization and interest cost related to acquisitions will reduce significantly by next year, potentially boosting PAT.
→Employee costs may stabilize; headcount expected to rise with ongoing AI investments, supporting growth momentum.
→Management remains optimistic about long-term growth despite potential softness in certain verticals (e.g., TMT).

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Fundraise plans

→The company borrowed about $55 million during the acquisition of Quant, resulting in finance costs related to interest on this loan.
→This loan carries an interest cost of approximately Rs. 6.5 crores per quarter (~Rs. 17-20 crores impact including unwinding of interest), which will reduce as repayments are made.
→The loan is planned to be repaid sometime in the next year, with associated interest costs reducing substantially after payments in March 2024 and March 2025, and finally concluding with a payment in August 2025.
→There is no mention of any new or planned fundraising through additional debt or equity in the current call.
→The company appears to be focused on repaying existing debt rather than raising new funds at this time.

Order book

Yes

→The international business order booking for Q2 stood at a book-to-bill ratio of 1.24x, which is industry-leading.
→The large deal pipeline has increased by 25% quarter-on-quarter.
→Sonata has 32 large deals in the pipeline currently.
→The large deal of $160 million announced earlier in the year is fully ramped up and the transition is complete.
→The company continues to see a strong pipeline and confidence in its value proposition across verticals and geographies.

Capex plans

Yes

→Sonata Software is continuing to invest in AI capabilities and related talent, as highlighted by ongoing AI-focused hiring despite some quarterly hiring delays.
→Investments are being made to support large deals and digital transformation programs, especially in modernization engineering with cloud and data focus.
→The company has made strategic acquisitions like Quant Systems to strengthen its offerings, especially in data privacy and cross-selling opportunities.
→Capital expenses relating to acquisitions include borrowings tied to Quant acquisition with associated finance costs over the next 2 years due to deferred payments.
→Investments in platformization and modernization are core to Sonata’s strategy to win and scale large enterprise deals.
→The company indicated plans to maintain margin levels in the lower 20s internationally, balancing investments with profitability.
→No detailed breakdown of specific capital expenditure amounts was disclosed, but strategic investments are a key theme for growth and competitiveness.

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