Debasis Mohapatra
Bengaluru, 13 December 2024
Mid-tier IT services company, Sonata Software is likely to see improvement in its revenue growth during 2025 with an anticipation of discretionary spend coming back in a big way next year.
Brokerage firms noted that growth moderation seen in the last three quarters is temporary, which will subside in the coming quarters.
“Revenue growth moderating in the last three quarters is, we believe, just a temporary blip and growth is likely to rebound strongly with improvement in the spending environment,” Brokerage firm, Emkay Global wrote in a note.
During the last three quarters, revenue growth has moderated owing to lack of discretionary spending and slower decision making.
“Management expects revenue growth and margin to rebound in H2 (FY25), and margin to ricochet to the low 20s by Q4FY25 /Q1FY26 owing to ramp-up of the recently signed healthcare deal and deal pipeline,” the report noted.
Sonata Software has shared its aspiration of achieving revenue run-rate of $1.5 billion within 3 years. Out of this, $1 billion will come from SITL (Sonata Information Technology Ltd), and $0.5 billion from the international business.
Notably, the DPS (domestic product and services) business is housed under wholly-owned subsidiary SITL and focuses on distribution of packaged software and applications, including resale of cloud hosting of tech majors like Microsoft, Oracle, and SAP.
“While SITL has non-exclusive arrangements for the distribution of these software/applications, the company benefits from its established position and long-tenure relationships with tech majors, among others. The company aspires to scale its India business driving market-share gain with end-to-end contracts, with data and cloud modernization opportunities,” the report noted.
According to the management, M&A remains an integral part of Sonata’s growth strategy. “Acquisitions helped the company acquire talent, expertise (expand its offerings/capabilities), scale, and access to clients and markets. The company has seen healthy new logo additions in its Quant and Encore acquisitions in FY24,” the report noted.
Share price of Sonata Software was trading at Rs 671 (11.15 AM) on Friday in NSE.
