Birlasoft stock falls 17% in 3 days, investors on sell radar

Shares of IT firm Birlasoft have fallen 17 per cent in just three trading days, and are on investors' sell radar. Friday's trade was down 8 per cent to hit a low of Rs 250.35 on the BSE. The Birlasoft stock was down 17 per cent over January 31st of this year's closing of Rs 301.80. The IT firm came out on Thursday after the news of a key client filing weighed on the stock earlier in the December quarter, adding to the disappointment.

In December of this year, the analysts liked a healthy deal intake, a strong cash conversion and a moderate attrition. They did not like weakness in E&U and manufacturing segments, as well as weak operating performance, MSA termination by Invacare.

Nuvama Institutional Equities said Invacare, one of the top clients, accounts for 3 per cent of the revenue filed for bankruptcy in the US. Birlasoft had signed a $240 million 10 year deal with Invacare in 2019. Nuvama said that the company is unlikely to recover receivables because of the fact that future growth will be affected by this, as well as cash flows.

This adds to the already existing concerns of management transition. The recommendation is now HOLD with a target price of Rs 260 at 14 times FY 24 E P E, it said.

Emkay Global has cut its EPS estimates by 13 -- 34 per cent for FY 23 E-25 E, factoring in Q 3 performance and client-specific issue.

The stock's valuation is undemanding, but the stock's performance depends on clarity on the impact of Invacare, revenue growth acceleration and margin recovery in the coming quarters. We maintain BUY with a target of Rs 325 at 16 times December 2024 EPS earlier in the day Rs 380 based on reasonable valuation 6% FCF yield and anticipated turnaround in operating performance, it said.

The Birlasoft management expects revenue growth to bounce back due to the absence of furloughs and ramp-up in deal-wins, despite the impact of Invacare. It expects the Ebitda margin to go back to 15 per cent by March.

The company delivered weak results because of one-time provisioning related to the bankruptcy of one of its clients, according to Arihant Capital Markets.

We like Birlasoft at current levels after the correction of 18 per cent. It said that it was believed that one can accumulate the stock at current levels.