BSOFT - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 3.9
| Stock Code | BSOFT | Market Cap | 11,830 Cr. | Current Price | 425 ₹ | High / Low | 541 ₹ |
| Stock P/E | 37.7 | Book Value | 60.2 ₹ | Dividend Yield | 1.53 % | ROCE | 23.5 % |
| ROE | 18.6 % | Face Value | 2.00 ₹ | DMA 50 | 414 ₹ | DMA 200 | 420 ₹ |
| Chg in FII Hold | -0.34 % | Chg in DII Hold | 2.19 % | PAT Qtr | 96.0 Cr. | PAT Prev Qtr | 101 Cr. |
| RSI | 53.1 | MACD | -2.91 | Volume | 9,96,678 | Avg Vol 1Wk | 13,32,931 |
| Low price | 330 ₹ | High price | 541 ₹ | PEG Ratio | -122 | Debt to equity | 0.07 |
| 52w Index | 44.8 % | Qtr Profit Var | 65.8 % | EPS | 10.2 ₹ | Industry PE | 23.9 |
💹 Financials: Birlasoft (BSOFT) demonstrates solid fundamentals with ROE at 18.6% and ROCE at 23.5%, reflecting efficient capital usage. Debt-to-equity at 0.07 indicates a strong balance sheet with minimal leverage. Quarterly PAT declined slightly from 101 Cr. to 96 Cr., but YoY profit growth of 65.8% shows strong momentum. EPS at 10.2 ₹ supports earnings visibility.
📊 Valuation: The stock trades at a P/E of 37.7, higher than the industry average of 23.9, suggesting premium valuation. The P/B ratio is ~7.1 (425/60.2), which is elevated. PEG ratio of -122 indicates distorted valuation metrics due to inconsistent earnings growth. Dividend yield at 1.53% is decent, offering moderate income return.
🏢 Business Model & Advantage: Birlasoft operates in IT services, focusing on digital transformation, cloud, ERP, and enterprise solutions. Its competitive advantage lies in niche expertise, strong client relationships, and diversified service offerings. The company benefits from global IT demand, particularly in digital and cloud adoption.
📈 Overall Health: Financially stable with low debt and strong return ratios, though valuations are stretched. RSI at 53.1 suggests neutral momentum, while MACD at -2.91 indicates mild bearishness in the short term. Long-term fundamentals remain intact, supported by IT sector growth and digital transformation demand.
🎯 Entry Zone: Attractive entry around 400–420 ₹ range, near DMA 200 support levels. Current price of 425 ₹ is slightly above fair value. Long-term investors may accumulate gradually, but caution is advised due to premium valuation multiples.
Positive
- Strong ROCE (23.5%) and ROE (18.6%) indicate efficient capital use.
- Low debt-to-equity ratio (0.07) ensures financial stability.
- YoY profit growth of 65.8% highlights strong earnings momentum.
- DII holdings increased by 2.19%, reflecting domestic institutional support.
Limitation
- High P/E (37.7) compared to industry average (23.9).
- High P/B ratio (~7.1) suggests stretched valuation.
- PEG ratio negative (-122) highlights distorted valuation metrics.
- Quarterly PAT declined sequentially from 101 Cr. to 96 Cr.
Company Negative News
- Sequential decline in quarterly PAT indicates near-term earnings pressure.
- FII holdings decreased by -0.34%, showing reduced foreign investor confidence.
Company Positive News
- YoY profit growth of 65.8% highlights strong performance.
- DII holdings increased by 2.19%, showing strong domestic institutional support.
- Strong positioning in digital transformation and cloud services.
Industry
- IT services industry continues to grow, driven by digital adoption and cloud migration.
- Industry P/E at 23.9 indicates Birlasoft trades at a premium valuation compared to peers.
Conclusion
Birlasoft remains a fundamentally strong IT services company with robust return ratios and growth potential. However, valuations are stretched, and sequential earnings decline is a concern. Entry around 400–420 ₹ is advisable for long-term investors, with cautious accumulation recommended given premium multiples.