Birlasoft share price target cut by 45% by Macquarie after downgrade on margin worries

Shares of Birlasoft Ltd. fell as much as 4% on Friday, May 30, after brokerage firm Macquarie downgraded the stock and cut its price target by 45%.

Macquarie now has an "underperform" rating on the stock from the previous  "outperform" recommendation. It has also cut its price target on Birlasoft to ₹350 from ₹640 earlier. The revised price target implies a 6.9% downside potential from Thursday's closing price.

Macquarie said that Birlasoft's decline in revenue continued in the fourth quarter. The decline was broad-based across verticals and clients.

In August 2024, Macquarie had upgraded Birlasoft to "outperform" from "neutral" on expectations of accelerated revenue growth and earnings before interest and taxes (EBIT) margin improvement towards 15-16%. However, numbers on both of these metrics were disappointing.

Macquarie has reduced its revenue estimates for Birlasoft and believes that the company's margin will remain under pressure over financial year 2026.

The brokerage had expected Birlasoft's margin expansion from an offshore shift, but it seemed unlikely now. It expects growth and margin recovery only in financial year 2027.

Macquarie has cut Birlasoft's valuation multiple to 15 times financial year 2027 price-to-earnings, compared to the 27 times ascribed earlier.

It has also cut its Earnings Per Share (EPS) estimates for the financial year 2026 and 2027 by 30% and 28% respectively, given the reduced revenue projections.

The stock has declined 32% in the last one year and gained only 16% over the last three years.

Of the 16 analysts that have coverage on the stock, five have a "buy" rating, nine have a "hold" rating and two have a "sell" rating.

Shares of Birlasoft are currently trading 4.5% lower at ₹401.78. The stock is down 47% from its 52-week high of ₹760.

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