Birlasoft : Transcript of Analysts/Institutional Investor Meet/Con. Call

October 25, 2022
BSE Limited	National Stock Exchange of India Ltd.
Phiroze Jeejeebhoy Towers,	Exchange Plaza, C/1, G Block,
Dalal Street,	Bandra - Kurla Complex, Bandra (E),
Mumbai - 400001.	Mumbai - 400051.
Scrip ID: BSOFT	Symbol: BSOFT
Scrip Code: 532400	Series: EQ
Kind Attn: The Manager,	Kind Attn: The Manager,
Department of Corporate Services	Listing Department

Subject: -Transcript of Earnings Call held on October 21, 2022

Dear Sir/Madam,

Pursuant to Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find attached the transcript of the earnings call of the Company held on October 21, 2022.

The same is also available on the Company's website at the link https://www.birlasoft.com/company/investors/policies-reports-filings, under the head - Quarterly Reports  Earnings Call  Transcript.

Kindly take the same on record.

Thanking you.

Yours faithfully,

For Birlasoft Limited

Sneha Padve

Company Secretary & Compliance Officer

"Birlasoft Limited Q2 FY23 Earnings Conference Call"

October 21, 2022

MANAGEMENT MR. DHARMENDER KAPOOR --CEO AND MD,

BIRLASOFT LIMITED

MR. CHANDRASEKAR THYAGARAJAN - CFO,

BIRLASOFT LIMITED

MR. ROOP SINGH --CHIEF BUSINESS OFFICER,

BIRLASOFT LIMITED

MR. SHREERANGANATH KULKARNI --CHIEF

DELIVERY OFFICER, BIRLASOFT LIMITED

MR. ARUN RAO --CHIEF PEOPLE OFFICER,

BIRLASOFT LIMITED

MR. ANIRBAN THAKUR - HEAD, TREASURY &

INVESTOR RELATIONS

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Birlasoft Limited

October 21, 2022

Moderator:Ladies and gentlemen, good day, and welcome to Birlasoft Limited Q2 FY '23 Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing "*"then "0" on your touch tone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Anirban Thakur. Thank you, and over to you.

Anirban Thakur:Thank you, Faizan, and welcome, everyone. This is Anirban from Investor Relations team. And joining us on this call, we have our CEO and MD - Mr. Dharmender Kapoor, DK as we call him; our CFO - Mr. Chandrasekar Thyagarajan; Chandru as we call him; Mr. Roop Singh - joining from U.S., our Chief Business Officer; Mr. Shreeranganath Kulkarni, SK, as we call him

• our Chief Delivery Officer; and we also have with us Mr. Arun Rao - our Chief People Officer. We will begin the call with opening remarks from Mr. Kapoor and then Mr. Chandru.

Please note that anything that we say on this call on the company's outlook for the future is a forward-looking statement and must be read in conjunction with the disclaimer mentioned in our Q2 FY '23 investor update, which has been sent to you and also uploaded on the stock exchanges. I now hand over the call to DK. Over to you, DK. Thank you.

Dharmender Kapoor: Thank you, Anirban. Good evening, everyone, and welcome to Birlasoft's Second Quarter Financial Year '22-'23 earnings call. We continued our steady performance in the second quarter with revenue at $148.8 million, registering a sequential growth of 0.1% and a year-on-year growth of 8.7%. Sequential growth in constant currency terms is at 1.1% and year-on-year terms to constant currency growth is at 11% for Quarter 2.

New deal momentum continues to be good with new deal wins at $138 million in quarter 2, up by 32.6% on a year-on-year basis. In fact, this quarter is probably the best quarter in the last 4 or 5 quarters that we have seen from the wins perspective. The TCV for the quarter was also healthy at $166 million.

EBITDA margin stood at 14.8%, up 9 bps quarter-on-quarter. Chandru will provide more color on the margins later. In Quarter 1, we had switched to reporting attrition, which is more in line with the industry. The good news is that we have seen a further drop in our LTM attrition number, which fell from 27.9% in quarter 1 to 27.4% in Q2, a drop of 50 bps. While it still remains elevated, we expect to see further improvement going ahead, this will help to support our margins in the future. When I look at the impending attrition for the current quarter, which is quarter 3, it is already showing very healthy sign with respect to that attrition lowering down to the level where it will start getting comfortable for us.

Profit after tax stood at $14.4 million and was up 2.9% year-on-year and down 7.6% quarter-on- quarter. When we look at the PAT in rupee terms, it was at Rs. 1,151 million, up 11.6% year- on-year and down 4.7% quarter-on-quarter.

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Birlasoft Limited

October 21, 2022

In terms of verticals, the growth was led by BFSI and CMT under manufacturing, BFSI was up 15% year-on-year and 7.7% quarter-on-quarter while CMT was up 19.4% year-on-year and 5.6% quarter-on-quarter. Horizontal growth was led by business and technology transformation with high growth of 17.5% year-on-year and 3.4% quarter-on-quarter. And cloud and based services with high growth of 10.4% year-on-year and 6.2% quarter-on-quarter.

So, if you really look at the services or the Horizontal, it is very much on the expected lines. And the trend that we are seeing in the industry, and we are able to align ourselves very well with the industry. Growth continues to be driven by larger accounts. With top 5, top 10 and top 20 customers continue to grow at 13.8%, 13.4% and 13.1% on a year-on-year basis, respectively.

Our year-on-year customer count of $5 million plus revenue improved by 7% and that of $10 million plus improved by 2%. Active customer count remains steady at 301. The head count at the end of 30th September stood at 12,758 and saw an addition of 193 professionals quarter-on- quarter and 693 professional on year-on-year basis. We have hired 253 freshers in Q2 and plan to hire approximately 500 in the next half of the financial year '23.

Birlasoft continues to get various recognitions. Birlasoft has been recognized as a U.S. mid- market leader in the SAP S/4HANA system transformation in the ISG Provider Lens SAP ecosystem report. This is the second consecutive year for Birlasoft to be positioned as a leader in the U.S. mid-market in SAP S/4HANA System Transformation space. Birlasoft has strengthened its relationship with SAP by leveraging the rise and SAP to transform its digital landscape on to the cloud with enterprises adopting a cloud for strategy. This move will enable us to accelerate our clients' transformation journey substantially.

In conclusion, as the uncertainty around the macros have increased with respect to the impending recession and the geopolitical issues, we continue to remain watchful. However, we expect opportunities in the digital and cloud ecosystem to remain very resilient.

With this, I would like to hand it over to Chandru. Chandru, over to you.

T. Chandrasekar:Thank you, DK. Good morning, good afternoon, good evening, everyone. Hope you're doing well. Let me take you through some financial highlights for the quarter Q2 FY '23. Revenue, as DK said, was at $148.8 million, growth of 10 basis points quarter-on-quarter, 8.7% year-on- year. In rupees terms, the revenue was Rs. 1,192 crore, a sequential growth of 3.3% and a year- on-year growth of 17.8%. Our constant currency revenue growth was at 1.1% for Q2 sequentially. Year-on-year, the revenue growth was 11%.

EBITDA for Q2 was at $22 million versus $21.9 million in Q1, which resonated growth of about

70 basis points quarter-on-quarter and 7.2% year-on-year. In INR terms, EBITDA was Rs. 176 crore versus Rs. 170 crore in the prior quarter, and that's a growth of 3.9% quarter-on-quarter and 16.2% year-on-year. EBITDA margin stood at 14.8% as DK said, and that's an improvement of 9 bps on a quarter-on-quarter basis. Margin improvements were aided by lower cost of service delivery, lower travel cost based on the various actions that we take. We took internally higher

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Birlasoft Limited

October 21, 2022

	offshore mix and productivity improvement overall. Margins were impacted by higher cost
	hiring, which continue due to the attrition, 4 points that DK made. We also had some retention
	cost. And in addition, we had increment stack kicked in effective July 2022.
	We have had significant improvement in our operating cash flow and free cash flow in the
	previous quarter. Our operating cash flow was $20 million, and that represents around 92% of
	EBITDA as against a negative EUR 0.2 million in the first quarter. Our free cash flow was $16.8
	million, 78% of EBITDA, and it was a negative number in Q1 as well.
	Our Q2 PAT stood at $14.4 million versus $15.5 million in the prior quarter, it was down 7.6%
	quarter-on-quarter, and up 2.9% year-on-year. The call-off here I wanted to make was, one, we
	did have lower finance income because of the payouts that we made towards buyback in the past
	quarter. In addition, there was an impact on account of exchange translation on a quarter-on-
	quarter basis and that cost reduction in PAT for the quarter.
	In rupee terms, the PAT stood at Rs. 115.1 crore versus Rs. 120.7 crore in Q1. The ETR in the
	past quarter was lower at 21.8% versus 25.7% in Q1, and this was because of some tax refunds
	that we got in the U.S. for prior period. We expect the steady state ETR to be between 25% and
	26%.
	DSO stood at 56 days, that's an improvement of 2 days sequentially. As I said, we did have good
	cash collections and our cash performance last quarter reflecting a DSO as well. Cash and cash
	equivalents, including investments, stood at $97.7 million, that is Rs. 794.7 crore for Quarter 2
	versus $152.5 million or Rs. 1,204 crore in Q1. The reduction is largely in account of the share
	buyback program that we completed in the second quarter.
	In conclusion, I believe that we are building on our steady performance. We've been seeing
	healthy new wheel wins, improved DSO and moderating attrition. At the same time, we're
	closely tracking the macro and geopolitical development across markets. With it, let me turn it
	open for questions. Thank you.
Moderator:	Thank you very much. We will now begin the question and answer session. The first question is
	from the line of Shradha Agrawal from Asian Market Securities. Please go ahead.
Shradha Agrawal:	The question was given the demand environment that we are in, how do we look at the revenue
	trajectory in the second half? And also, do you expect the usual seasonality of 2H to play out?
	And if that is the case, then we might fall short of doing double-digit growth in '23 versus earlier
	expectations of doing 15% growth. So, of your comments on demand environment and how do
	you see 2H stacking up?
Dharmender Kapoor:	Yes. Thank you, Shradha. If I look at the demand environment, so far the discussions that I have
	been having with our clients and the response that we have seen so far, I would say that the
	clients are being cautious, I would say that. They know that the initiatives that they have to take,
	those are very, very important initiatives for their business.

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