Birlasoft shares declined during early trading on Tuesday after the firm reported a a modest sequential growth in its topline, leading brokerages to lower expectations.

What Happened: The company’s revenue for the quarter stood at ₹1,362.54 crore, reflecting a 1.45% quarter-on-quarter increase, while the net profit rose by 11.81% to ₹180.8 crore.

Although the revenue growth was robust from the top five clients, the total number of active clients decreased to 259, as the company continued its client mining and pruning initiatives.

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Analyst View: Nomura expects a continued pullback in discretionary and transformation demand, coupled with weak total contract value, to limit near-term revenue growth for Birlasoft. Consequently, the international brokerage revised its target price down to ₹860 from ₹950 and downgraded Birlasoft to “reduce”.

Similarly, Nuvama Institutional Equities downgraded Birlasoft to “reduce”, setting a price target of ₹610 per share, down from ₹810 earlier.

Despite a better-than-expected performance in FY24, flat TCV and no margin expansion are anticipated to keep earnings growth subdued in the near term, leading to an unfavorable risk-reward ratio. However, the brokerage remains positive on the company's long-term prospects, particularly driven by its strong capabilities in enterprise resource planning and healthcare segments.

HDFC Securities, on the other hand, maintained its “add” rating for the stock but cut the price target to ₹800 from ₹815. The brokerage said that the IT company’s results aligned with its revenue and margin estimates.

Price Action: Birlasoft’s share price was down 1.66% at ₹663.5 in morning trade on Tuesday.

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