Zensar Technologies Ltd. A Quick Perspective- 18 April 2022

Highlights

• Additions to senior leadership plugged the gaps with performance improvement from Q1FY22. In Jan’21, Zensar Technologies (ZT) underwent a change in leadership as ex-CEO and MD Mr. Sandeep Kishore departed and paved the way for Mr. Ajay S. Bhutoria– erstwhile Chief Executive of L&T NxT
• Strategy Refresh was introduced in Q1FY22 with the aim of delivering predictable, sustainable and profitable growth in 4-8 quarters
• Zensar transformed its operating and reporting structure from a traditional 333 format into a very sharp structure focused on 5 Strategic Growth Opportunities (SGOs)
• Revenue de-growth stalled in Q4FY21 and trajectory reversed to upwards and onwards
• Onsite: Offshore mix has shifted favourably from 29.3%:70.7% in Q1FY20 to 22.6%:77.4% in Q3FY22
• Robust client additions indicating “Strategy Refresh” is gaining pace
• Order Booking fairly stable
• Q3FY22 Revenue growth aided by macros recovery, while margins impacted adversely by lower utilization and impact of furloughs.

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Zensar Technologies has invested in Go to Market (GTM) initiatives. With the roll-out of 5 SGOs and the training of sales teams, GTM process has become smoother and deal win visibility has improved. Its portfolio has witnessed multiple challenges over the past five-six quarters, initially impacted by Retail, then by the pandemic and now by softness in top Hi-tech clients. While there have been continuous challenges, the lead indicators of deal wins and pipeline continue to look strong. The company is now experiencing healthy deal momentum. It is executing well on refreshed strategy given

1. improving revenue growth profile and deal wins,
2. strengthened sales team with improved focus on hunting new logos and client mining,
3. consistent strong growth in digital revenue.

The EBITDA margin is expected to be in mid-teens in the near term, because growth will continue to remain the top priority. Margin is expected to improve to high teens as supply side pressures eases for the company with the global talent crunch expected to recede over the next 2-3 quarters Hence, we recommend it as BUY with a target range of Rs410-420.

Click here to read full report : Quick Insight: Zensar Technologies Ltd.