A brokerage firm has reiterated its BUY rating on the company while increasing the target price to Rs 6,615. Despite a 20% year-on-year revenue growth, the company reported a net profit decline to Rs 352 crore, impacted by acquisition-related costs, wage hikes, and lower utilization. The company is nearing completion of the Nagarro acquisition and maintains a long-term revenue target of $2 billion by FY27.
Brokerage Maintains BUY Rating with Raised Target of Rs 6,615
Q2FY27 Revenue: US$487.6 Mn (+20% YoY); Net Profit: Rs 352 Cr (-25.4% YoY)
Reader Takeaway: Strong revenue momentum and acquisition synergies support a BUY, while integration costs and margin pressures remain hurdles.
What just happened
An equity analyst firm has maintained its BUY rating for the company, lifting the target price to Rs 6,615 from the previous Rs 6,400. This update follows the company’s Q2FY27 performance, where net sales climbed 30.3% to Rs 4,664 crore, though net profit fell significantly by 25.4% to Rs 352 crore.
Why this matters
The profitability dip stems from temporary factors including acquisition-related expenses, an 180 bps impact from wage hikes, and lower resource utilization. Management is actively navigating the integration of the Nagarro acquisition, having secured 94.04% of shares. The company plans to fund the deal through a combination of equity and debt, including a US$450 million raise via QIP or FCCBs.
Management Commentary and Guidance
Despite current margin pressures, management retains a medium-term margin aspiration of 16-17%. The company is focused on its $2 billion revenue goal for FY27 and has outlined a broader path to $5 billion by FY31, supported by entry into manufacturing and retail verticals alongside AI-led service contracts.
Risks to watch
Investors should monitor the integration risks associated with the large-scale Nagarro acquisition. Margin volatility is expected to persist in the near term due to high subcontracting costs, currency fluctuations, and deal-related expenses. Additionally, global economic uncertainty remains a macro risk factor for demand.
What to track next
The final regulatory approvals for the Nagarro deal and the company's ability to scale margins back toward their 16-17% target remain the primary focus areas for market participants.