Sonata Software Ltd., a leading modernization engineering firm, has reported a consolidated net profit of ₹1.09 billion for the quarter ended June 2025. The company also declared an interim dividend of ₹1.25 per share, reinforcing its commitment to shareholder returns despite a challenging global tech environment. The results reflect Sonata’s continued focus on its proprietary Platformation strategy, digital transformation services, and operational resilience.
Key Highlights from Q1 FY26:
- Consolidated net profit: ₹1.09 billion
- Interim dividend declared: ₹1.25 per share
- Revenue from operations: ₹2.62 billion
- EBITDA margin: 6.87 percent
- Dividend yield: 1.07 percent
- Promoter holding: 28.17 percent
- Market capitalization: ₹11,583 crore
Financial Performance and Profitability:
- Sonata Software posted a net profit of ₹1.09 billion, marking a modest sequential recovery amid global IT spending moderation.
- Revenue from operations stood at ₹2.62 billion, down 8.2 percent quarter-on-quarter, reflecting softness in discretionary IT budgets.
- EBITDA came in at ₹690 million, with margins holding steady due to cost optimization and improved offshore delivery mix.
- The interim dividend of ₹1.25 per share signals confidence in cash flows and a stable payout policy.
Segmental Insights and Strategic Focus:
Sonata’s business is structured across two key verticals:
- IT Services: Focused on cloud modernization, Microsoft Dynamics, and managed services.
- Products and Platforms: Includes proprietary tools under the Platformation framework, targeting enterprise transformation.
- The IT services segment contributed 68 percent of total revenue, with strong traction in BFSI and retail verticals.
- Platformation-led deals grew 12 percent YoY, driven by demand for AI-integrated digital transformation.
- Sonata’s US and Europe operations remained stable, while APAC saw a slight dip due to delayed project starts.
Operational Efficiency and Cost Management:
- Employee costs remained flat, with Sonata maintaining a lean bench and high utilization rates.
- Travel and SG&A expenses were down 6.5 percent, reflecting hybrid delivery models and digital-first engagements.
- The company continues to invest in automation and AI tools to improve delivery efficiency and reduce turnaround times.
Dividend Policy and Shareholder Returns:
- The interim dividend of ₹1.25 per share follows a ₹4.40 dividend declared in Q4 FY25, maintaining a healthy payout ratio.
- Dividend yield stands at 1.07 percent, in line with industry peers.
- Promoter holding remains unchanged at 28.17 percent, while retail investor share has increased to 35.62 percent.
Market Sentiment and Stock Performance:
- Sonata Software’s stock closed at ₹403.70 on July 30, 2025, up 1.05 percent post-results.
- Analysts maintain a buy rating with a target price of ₹452.57, citing long-term potential in cloud and AI services.
- FIIs reduced their stake to 9.68 percent, while mutual funds hold 25.11 percent.
Strategic Outlook and Future Plans:
- Sonata is expanding its AI research partnership with Wharton AI Initiative to explore agentic AI in enterprise operations.
- The company plans to launch new vertical-specific solutions in healthcare and manufacturing by Q3 FY26.
- Management remains cautiously optimistic, projecting mid-single-digit growth for FY26 amid macro uncertainties.
Conclusion:
Sonata Software’s Q1 FY26 results reflect a balanced performance, with stable profitability, disciplined cost management, and continued investment in strategic initiatives. The interim dividend underscores its commitment to shareholder value, while its Platformation-led transformation strategy positions it well for long-term growth in a rapidly evolving tech landscape.
Sources: Moneycontrol, Screener.in, TradingView India, INDmoney, Sonata Software Investor Relations
