Saksoft Ltd - Broadly in-line; maintain buy | Q1FY27 Company Update

Saksoft’s Q1FY27 performance was broadly in line with our expectations. Revenue stood at Rs 2.5bn, down 0.2% YoY , due to continued demand softness and cautious client decision-making while EBITDA margin remained resilient at 18.3% despite muted growth environment. The management highlighted continued pressure across some top clients, with decision-making and deal conversions getting delayed; however, the pipeline remains strong and has improved from USD 25mn to USD 28mn QoQ. The company is deliberately moving away from headcount-led contracts toward managed services and outcome-based engagements. The management maintained its FY27E revenue guidance and expects growth recovery from H2FY27E. We remain constructive on the long-term outlook, supported by AI-led productivity gains, improving pipeline quality, client diversification and increasing focus on higher-value outcome-based engagements . We maintain our earnings estimates and target multiple of 18x, resulting in an unchanged TP of Rs 225. We retain our BUY rating.

Saksoft Ltd. Stock Price Chart

Revenue remains muted amid delayed client decision-making:

Saksoft reported Q1FY27 revenue of Rs 2.5bn, down 0.1%/0.2%  QoQ /YoY, as demand softness continued from Q4FY26 and customers remained cautious on spending. The management indicated that some top clients continue to face near-term pressure, impacting renewals and timing of new engagements. The US remained the largest market at 52% of revenue, followed by Europe at 27% and APAC & Others at 21%. Emerging Verticals remained the largest vertical at 45% of revenue, followed by BFS at 30%, Logistics at 16% and Commerce at 9%. The company had 16 clients contributing >US$1mn revenue, while employee utilisation remained healthy at 83%. The management expects Q2FY27 to remain muted but remains confident of growth recovering in H2FY27E.

EBITDA margins remain resilient despite weak growth:

EBITDA stood at Rs 454mn, down 0.9% YoY, while EBITDA margin remained broadly stable at 18.3% vs 18.4% in Q1FY26. The stable margin profile despite flat revenue was supported by lower employee costs and productivity gains. The management highlighted that AI-led productivity in engineering and managed services, along with increasing use of AI agents across internal functions such as recruitment, invoicing and payables is enabling the company to operate with a leaner workforce. The management expects employee and contractor costs to decline over time as the business shifts toward outcome-based contracts.

Outlook:

The management reiterated its FY27 revenue guidance of Rs 12.0–12.5bn, implying ~20+YoY growth. While near-term demand remains challenging and Q2 is expected to remain muted, the management remains confident of growth recovery in H2FY27E as customer spending improves and the strong pipeline begins converting. Emerging Verticals is expected to be the strongest growth driver, followed by BFS and Logistics, while Digital Commerce continues to face the highest headwinds. The company also aims to increase the US contribution from the current 52% to ~65% over the next 2–3 years, providing an additional growth lever.

Valuation, View and Risks:

We remain positive on Saksoft’s medium- to long-term growth prospects, supported by its strong pipeline, increasing exposure to AI-led engineering and managed services, improving deal quality and potential operating leverage from AI-driven productivity. We maintain our earnings estimates and target multiple, while expecting growth to recover in H2FY27. We expect Saksoft to deliver 8.8%/5.9%/9.0% Revenue/EBITDA/PAT CAGR over FY26-29E. We roll over our estimates to Q1FY29E EPS of 12.7 and arrive at a TP of Rs 225 (unchanged). We retain our BUY rating. Key Risks: Prolonged weakness in technology spending, further delays in pipeline conversion, continued pressure from top clients.

Company website: https://www.saksoft.com/

*CMP is as per report published date

Click to download the full Saksoft Ltd Q1FY27 Company Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

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FAQs on Saksoft Ltd Q1FY27 Company Update

Here are key investor questions addressing near-term challenges, growth outlook and valuation based on our institutional equity research perspective.

How did Saksoft perform in Q1FY27?

Saksoft reported revenue of ₹2.5 billion, broadly stable year on year. EBITDA stood at ₹454 million, while the EBITDA margin remained resilient at 18.3%.

Why was Saksoft's revenue growth muted?

Revenue was affected by continued demand softness, cautious technology spending and delays in client decision-making, renewals and new engagement conversions.

What is supporting Saksoft's margins?

Stable margins were supported by lower employee costs, AI-led productivity improvements and increasing use of AI agents across engineering and internal business functions.

What is Saksoft's growth outlook?

Management expects Q2FY27 to remain muted but anticipates recovery in H2FY27 as client spending improves and the pipeline converts. Emerging Verticals, BFS and Logistics are expected to support growth.

What is Saksoft's target price?

The supplied research report maintains a Buy rating and a target price of ₹225 versus the reported CMP of ₹166. This target represents an analyst estimate and is not a guarantee of returns.

What are the key risks for Saksoft?

Key risks include prolonged weakness in technology spending, delayed pipeline conversion and continued pressure from major clients.

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