Sonata Software Faces Stock Decline Amid Revenue Warnings

On Thursday, shares of Sonata Software experienced a notable decline, plummeting by up to 12% after the company issued a warning regarding reduced revenues from its international segment for the quarter ending in March. This announcement has sparked concern among investors, highlighting the volatility of the tech sector in today’s economic climate.

Revised Revenue Expectations

In a filing with the stock exchange on Wednesday, Sonata Software revealed that its international business revenue is projected to fall short of previous estimates, primarily due to disappointing returns from its largest client. By the end of the trading day, the stock settled at Rs 315.2, reflecting a 6% drop on the National Stock Exchange (NSE).

• Key Points:
  • International business contributed 25% to Sonata’s total revenue in the December quarter.
  • The decline is attributed to cost containment measures by a major client, which has impacted revenue streams.

CEO Insights on Business Performance

During a recent earnings call, Samir Dhir, the Managing Director and CEO, noted that while the company enjoyed substantial growth in the first half of the fiscal year, challenges emerged in the latter half due to the large client’s efforts to cut costs.

Dhir explained, “We faced a ramp-down starting from mid-November through early December, and we expect to see the full impact reflected in the upcoming quarter.” He reassured investors that this situation is temporary, stating, “This is not a permanent setback but rather a short-term challenge we are navigating.”

Financial Outlook and Market Conditions

C.N. Jagannathan, the Chief Financial Officer, projected a revenue decline ranging from 2.5% to 3.5% for the fourth quarter in their international IT services business, factoring in seasonal variations. This revenue shortfall is compounded by the ongoing trade tensions, particularly those stemming from recent U.S. tariffs, affecting the company’s largest client.

As Sonata Software navigates these turbulent waters, investors are keenly watching how the company adapts to the shifting market dynamics and what strategies will be employed to mitigate future risks.

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