Management Participants

  • Mr. Rajsekhar Datta Roy – Chief Executive Officer of International Services
  • Mr. Sujit Mohanty – Chief Executive Officer of Domestic Business
  • Mr. Jagannathan CN – Chief Financial Officer

Strategic Business Update

AI Strategy and Organizational Changes

Sonata is accelerating its transformation into an AI-native, engineering-led organization, branding itself as "engineering the AI enterprise." The strategy focuses on three dimensions: outcome-led business transformation, AI-first technology platforms, and AI-native service delivery, addressing six value pools.

The company launched its enterprise-grade agentic AI service delivery platform, Workbench, designed to transform the end-to-end software delivery lifecycle. Multiple clients have shown interest.

Key Leadership Appointments:

  • Mr. Hari Rebala appointed as Chief AI Officer to accelerate the AI transformation.
  • A strategic business leader with 30 years of experience was appointed for one of its largest clients.
  • A seasoned leader was onboarded for Southeast Asia and ANZ regions.

Partnerships and Ecosystem

  • Strengthened its 360-degree partner ecosystem, including collaboration with Microsoft.
  • Officially invited by Microsoft to join the Copilot Agents and Platform Engineering Depth Partner Program, a select global group of system integrators.
  • Collaborations with educational institutes like Wharton and IISc to understand technology trends.

Focus on Micro-Verticals and Talent

  • Focusing on nine micro-verticals (e.g., payments, mortgage and lending, healthcare, logistics) to concentrate investments and create market impact.
  • Investing significantly in talent transformation; 93% of the workforce is trained in AI via Sonata University.
  • Expanding the forward-deployed engineer talent pool to 100 people by August 2026.
  • Launched the Sonata Modernization Engineering Program for 2026 with AI at the center.

Q1 FY2027 Business and Financial Performance

International Services Business Highlights

  • AI-led pipeline improved by 21% quarter-on-quarter (QoQ).
  • AI-led order wins increased by 27% QoQ; AI order book stood at $21.4 million (18.2% of total order book).
  • Total order book stood at $97.4 million with a book-to-bill ratio of 1.18x (vs. 1.16x in Q4 FY26).
  • Order Wins: Secured seven new customers; one key multi-year deal won in Q1.
  • Client Concentration: Top 10 clients contributed 51% of revenue. Number of clients with >$10M run rate is eight.
  • Deal Examples:
  • A manufacturer of computer peripherals and software for AI-driven model engineering.
  • A quick-service restaurant for legacy modernization of applications.
  • An oil and lubricant major for an AI-driven payment reconciliation system.
  • A global beverage brand (800+ locations across 11 countries) for retail application and cloud modernization (multi-year deal).
  • A global fintech and payment solutions organization for modernizing core digital wallet platforms (multi-year large deal).

International Services Financials

  • Revenue: $82 million; represents 0.1% QoQ constant currency growth and 2.1% YoY constant currency growth. In reported currency: 0.5% QoQ degrowth, 0.2% YoY growth.
  • Rupee Revenue: ₹777.2 crores; degrowth of 0.3% QoQ, growth of 11% YoY.
  • EBITDA Margin: 15.4% (vs. 20.2% in Q4 FY26), a degrowth of 4.8% QoQ.
  • Reasons for EBITDA Dilution:
  • One-time benefit of compensation expenses in the previous quarter (~2% impact).
  • Utilization dropped to 88.5% from 91.8% due to an unexpected delay in a large deal ramp-up.
  • Significant investment in talent transformation and AI strategy advisory.
  • Detrimental cross-currency forex fluctuation (~50 bps impact).
  • Marginal increase in CSP bundled deal cost.
  • Partially offset by improved offshore revenue mix (70% from 68%).
  • PAT: ₹62.2 crores (includes a forex loss of ₹6.8 Cr); compared to ₹84.2 Cr in Q4 FY26 (includes a forex gain of ₹21.7 Cr). Forex fluctuation alone impacted PAT by ~₹28 Cr.
  • ROCE and RONW: 14.9% and 15.2%, respectively.
  • DSO: 60 days (vs. 64 days in Q4 FY26).
  • Headcount: 6,293 (vs. 6,283 in Q4 FY26); Attrition at 13%.
  • On-site/Offshore Mix: 30%/70% (vs. 32%/68% last quarter).

Domestic Product Business Update

  • Demonstrated resilience after headwinds from an OEM partner changing its business model to direct billing last year.
  • Successfully retained customer contract renewals that were probable for direct billing.
  • Strategic Pillars: Grow core platform and product business; broaden partnerships with hyperscaler OEMs; expand managed services and large hybrid system integration deals; focus on SMC and corporate segments (grown 82% YoY).
  • Expanding OEM partnerships in AI tools and platforms to support customer AI initiatives.

Domestic Business Financials

  • Revenue: ₹2,505.6 Crores; growth of 42.4% QoQ and 10.2% YoY.
  • Gross Contribution: ₹78.5 Crores; growth of 4.2% QoQ and 14.5% YoY.
  • PAT: ₹45.9 Crores (includes a forex loss of ₹0.6 Cr); compared to ₹46.3 Cr in Q4 FY26 (includes a forex gain of ₹6.3 Cr). Represents a degrowth of 0.9% QoQ and growth of 19% YoY.
  • Gross Contribution growth was offset by a net forex impact of ₹6.9 Cr between Q4 gain and Q1 loss.
  • DSO: 65 days (vs. 47 days in Q4 FY26), attributed to a seasonal impact.
  • ROCE and RONW: 57.7% and 42.7%, respectively.

Consolidated Financial Performance

  • Revenue: ₹3,279.1 Crores; growth of 29.3% QoQ and 10.6% YoY.
  • PAT: ₹108.61 Crores (includes a forex loss of ₹7.4 Cr); compared to ₹130.5 Cr in Q4 FY26 (includes a forex gain of ₹28 Cr). Represents a degrowth of 17.1% QoQ and 1.1% YoY.
  • Q1 PAT degrowth is primarily due to a net forex impact of ₹35.4 Cr.
  • ROCE and RONW: 21.9% and 20.9%, respectively.
  • EPS: ₹3.9 per share (vs. ₹4.71 per share in Q4 FY26).

Cash Flow and Balance Sheet

  • Cash generation remained strong with a closing cash balance of ₹567 Crores.
  • Net positive cash of ₹67 Crores (third consecutive quarter of positive cash balance).

Outlook and Guidance

  • Management expects the large deal ramp-up delay to be completed in Q2 FY2027.
  • Expects EBITDA to have a positive traction every quarter in this year, with one-time items normalizing.
  • Based on the improved AI-led pipeline, management remains optimistic and expects gradual improvement in revenue and EBITDA over the medium-to-long term.
  • The effective tax rate (ETR) is expected to be around 25% going forward, barring exceptional benefits like the R&D tax credit received in Q1.

Q&A Session Highlights

  • Domestic Business Growth: Management is confident in sustaining double-digit growth.
  • Top 10 Clients: Revenue share decline was due to stronger growth in the 11-20 client bracket, not discounts or productivity pass-throughs.
  • Vertical Performance: Percentage changes were due to outperformance in BFSI, not weakness in other verticals like Retail & Manufacturing.
  • Margin Trajectory: The large deal ramp-up issue is largely behind them. Investments in AI capability will continue for a couple of quarters, but a positive margin trajectory is expected from Q2 onwards.
  • Cash Balance: The quarter-end gross cash balance decline (~₹50 Cr) is normal for the business size and attributed to vendor payments based on turnover; net cash improved to ~₹65 Cr from ~₹30 Cr.