The shares of the leading modernization engineering company gained up to 4 percent after the company bagged a multiyear contract from a Fortune 500 manufacturing company.
With a market capitalization of Rs 17,021.79 crore, the shares of Sonata Software Ltd were trading at Rs 607.00 per share, increasing around 3 percent as compared to the previous closing of Rs 584.40 apiece.
Reason for rise:-
The shares of the company have seen positive movement after Sonata Software Ltd bagged a multiyear AI-powered managed services contract from a Fortune 500 manufacturing company. Under the multi-year deal win, Sonata Software will deliver a reliable and scalable operating model that will support the company’s global business growth and its ongoing digital transformation journey.
Furthermore, for over 50 years, the Fortune 500 firm has collaborated with clients to create, design, and produce innovative packaging goods with a focus on the circular economy. The corporation has grown through a series of acquisitions, increasing its market footprint over time.
Moreover, the client is partnering with Sonata Software to modernize its operations and deliver a homogenous, unified user experience at scale. Powered by AI, the collaboration will leverage industry best practices to drive operational efficiencies and profitable return on investment.
Financial performance:-
Looking into Sonata Software’s performance, revenue increased by 25 percent from Rs 2,016 crore in Q1FY24 to Rs 2,527 crore in Q1FY25. During the same period, net profit decreased by 12 percent, from Rs 120 crore to Rs 106 crore.
In Q1, international services revenue reached $82.7 million, reflecting a 1.3% quarter-on-quarter growth. EBITDA before other income and forex improved to 18.7%, up from 17.3% in Q4 FY ’24, while domestic business revenue surged by 22.1% quarter-on-quarter.
Large Deal Wins:-
In Q1 FY ’25, the company secured three major deals: a U.S. healthcare provider for cloud infrastructure modernization, an Australian manufacturer for legacy system migration to Microsoft technology, and a U.S. banking corporation for cloud migration. High-value opportunities make up 47% of the active pipeline.
Growth in AI Services:-
The company anticipates 20% of revenue from AI services in three years. Its AI pipeline is valued at $65 million across 110 clients, with recent wins adding about $1 million. They are investing in an AI cross-functional organization to enhance adoption and implementation.
Management Comment:-
Management is optimistic about long-term growth despite current challenges, focusing on large deals, AI adoption, and strengthening client relationships across targeted verticals. Emphasizing modernization engineering and strategic partnerships, they anticipate these initiatives will significantly drive future growth and enhance market positioning.
The company aims to become one of the fastest-growing modernization engineering firms by leveraging the Platformation framework. It targets $1.5 billion in revenue by FY ’26, with an EBITDA projected in the low 20s, emphasizing growth and operational efficiency in its strategy.
Company Profile:-
Sonata Software Limited provides modernization services using its trademarked Platformation approach. It specializes in cloud and data modernization, Microsoft Dynamics modernization, digital contact center setup and administration, managed cloud services, and digital transformation services.
Written by:- Abhishek Singh
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