- Sonata Software Ltd awarded AWS DevOps Competency status, joining elite group of AWS Partner Network members with proven expertise in DevOps solutions.
- Second-largest deal in Sonata’s history to establish dedicated AI-enabled Modernization Engineering Center in India.
- Company simultaneously announces $73 million (₹607 crore) five-year deal with leading US-based TMT company for AI-led digital modernization services.
- International Services revenue grew 4.4% QoQ in constant currency to $87 million in Q3 FY25.
- Company maintains strong credit profile with ‘IND AA-/Stable‘ rating from India Ratings, citing robust business profile and comfortable credit metrics.
BENGALURU: Sonata Software, a global leader in Modernization Engineering, today announced it has achieved Amazon Web Services (AWS) DevOps Competency status while simultaneously securing a landmark $73 million (₹607 crore) five-year transformational engagement with a major US-based Technology, Media, and Telecom (TMT) company. This dual achievement underscores the company’s accelerating growth trajectory in high-value cloud transformation and AI services.
Sonata Software Ltd- BSE: 532221 | Price: ₹433 | 52-week High/Low: ₹764/₹286 | Market Cap: ₹12,130 crore
Table of Contents
AWS DevOps Competency Milestone
The AWS DevOps Competency designation recognizes Sonata Software’s technical proficiency and proven customer success in implementing continuous integration and delivery practices. This achievement distinguishes Sonata as an AWS Partner Network (APN) member with specialized consulting capabilities for complex DevOps projects on AWS.
“We are proud to have achieved AWS DevOps Competency status,” said Anthony Lange, Chief Revenue Officer at Sonata Software. “This designation underscores our commitment to delivering high-quality DevOps solutions. Leveraging AWS and best practices to optimize our clients’ software development processes ensures faster deployments, greater scalability, and improved reliability. This designation further solidifies our role as a provider of cloud services and solutions, driving our clients’ digital transformation journeys.”
The competency reinforces Sonata’s cloud modernization capabilities, which account for approximately 37% of its international services revenue mix, according to the company’s latest investor presentation.
Strategic $73 Million TMT Deal
In a parallel development, Sonata announced a $73 million, five-year transformational engagement with a major US-based TMT sector company. This strategic partnership will focus on enhancing the client’s global scalability, accelerating innovation, and optimizing IT operations through an AI-first outsourcing model.
Under this engagement, Sonata will establish a dedicated AI-enabled Modernization Engineering Center in India covering critical areas including platform engineering, cloud transformation, enterprise systems integration, cybersecurity, data services, and modern application development.
“This is the second-largest deal in Sonata’s history—and a proud milestone for Team Sonata,” said Samir Dhir, Managing Director and CEO of Sonata Software. “It reflects our unique positioning as a right-sized partner for enterprises seeking deep modernization capabilities and AI-first transformation. We are excited to help our client unlock new speed, agility, and digital resilience levels.”
The deal is expected to contribute significantly to Sonata’s TMT vertical, which currently constitutes 29% of the company’s international services revenue mix.
Financial Performance
The company recently reported its Q3 FY25 results, showing solid growth in its international business segment.
| Financial Parameters (₹ in Crore) | Q3 FY25 | Q2 FY25 | QoQ Change (%) | Q3 FY24 | YoY Change (%) |
|---|---|---|---|---|---|
| Total Revenue (Consolidated) | 2,842.8 | 2,169.8 | 31.0 | 2,432.1 | 16.9 |
| International Services Revenue | 731.7 | 707.9 | 3.4 | 705.3 | 3.7 |
| EBITDA before OI & Fx | 163.6 | 177.3 | -7.8 | 159.4 | 2.6 |
| EBITDA Margin (%) | 5.8 | 8.2 | -2.4 | 6.6 | -0.8 |
| Profit After Tax (PAT) | 105.0 | 106.5 | -1.4 | 101.8 | 3.1 |
In dollar terms, the International Services segment revenue reached $87 million in Q3 FY25, representing a 4.4% quarter-on-quarter growth in constant currency and a 5.1% year-on-year increase. The company maintained a healthy book-to-bill ratio of 1.23x, indicating strong future growth potential.
Financial Risk Profile
India Ratings and Research (Ind-Ra) has affirmed Sonata Software’s Long-Term Issuer Rating at ‘IND AA-/Stable’ and assigned ‘IND AA-/Stable/IND A1+’ ratings to the company’s additional fund-based working capital limits.
The ratings reflect the significant increase in the Sonata group’s scale of operations and profitability during FY23-FY24 while maintaining a comfortable credit profile. The company reported consolidated revenue growth of 16% year-on-year to ₹86,130.60 million in FY24, with the international IT services (IITS) business growing by 39%.
Key rating strengths include:
- Robust business profile with a mix of software distribution and international IT services
- Larger deals and customer acquisition aiding revenue growth
- Stable EBITDA margins at current levels
- Comfortable credit metrics with interest coverage at 8.6x in FY24
The rating agency noted potential challenges including:
- Increase in working capital cycle, with net working capital to gross contribution ratio at 0.41 in Q3 FY25
- Moderate geographical and customer concentration with 78% of international revenue coming from the USA
- Currency fluctuations as majority of IITS revenue is in foreign currency
Outlook and Future Prospects
Sonata Software has set an ambitious target to reach $1.5 billion in revenues by FY27, with international business aiming for EBITDA margins in the low 20s. The company’s strategic investments in AI and cloud modernization services are expected to be key growth drivers.
“We are making significant progress with our AI offerings through our Harmoni.AI platform,” notes Rajsekhar Datta Roy, Chief Technology Officer at Sonata Software. “DevOps is foundational to enabling continuous modernization of enterprise technology landscape, especially in terms of building agility into the modern software engineering practice in an AI-first approach.”
The company’s pipeline shows strong potential in emerging technologies:
- $73 million Microsoft Fabric pipeline across 70+ customers
- $58 million AI & Generative AI pipeline across 100+ customers
- Strategic partnerships with Microsoft, AWS, and other major cloud providers
Challenges and Risk Factors
Despite the positive momentum, Sonata faces several challenges in maintaining its growth trajectory:
- Margin pressure in the international services segment, with EBITDA margin declining to 14.6% in Q3 FY25 from 18.2% in Q2 FY25
- Increasing attrition rate, which rose to 14% in Q3 FY25 from 13% in the previous quarter
- Intense competition from tier-1 IT players and well-established tier-2 players, limiting pricing power
- Currency fluctuations affecting international revenue, though the company maintains a hedging policy covering 60-70% of foreign currency exposure
Additionally, the company’s operating cash flow moderated to ₹2,813.50 million during FY24 (FY23: ₹3,047.30 million) due to an increase in the net working capital cycle, which could impact future liquidity if not managed effectively.
About Sonata Software
Sonata Software, with over $1 billion in revenue, is a leading Modernization Engineering company powered by its unique Platformation™ framework. Headquartered in Bengaluru, India, the company has a strong global presence across North America, UK, Europe, APAC, and ANZ with over 7,000 engineers worldwide.
The company’s service portfolio includes cloud modernization, data services, Microsoft Dynamics implementation, customer experience transformation, and automation solutions. Sonata serves Fortune 500 clients across Banking, Financial Services and Insurance (BFSI); Healthcare and Lifesciences (HLS); Technology, Media, and Telecom (TMT); and Retail, Manufacturing and Distribution (RMD) sectors.
Key Takeaways for Investors
- Dual achievements strengthen growth outlook: The AWS DevOps Competency status and $73 million TMT deal validate Sonata’s expertise in high-growth cloud modernization and AI services.
- Revenue growth remains solid: Despite margin pressures, the 4.4% QoQ constant currency growth in international services and healthy book-to-bill ratio of 1.23x indicate robust demand.
- Strategic direction aligned with market trends: Focus on AI, cloud services, and data modernization positions the company well in high-growth segments of the IT services market.
- Credit profile remains stable: The ‘IND AA-/Stable’ rating confirms financial stability despite increased working capital requirements.
- Execution of large deals will be crucial: The company’s ability to successfully implement the TMT deal while maintaining profitability will be a key indicator of sustainable growth.
Footnotes:
- DevOps Competency: A designation by AWS recognizing partners with specialized skills in implementing continuous integration/continuous delivery practices and helping customers automate infrastructure provisioning.
- TMT: Technology, Media, and Telecommunications sector.
- Book-to-bill ratio: A measure comparing orders received to units shipped and billed; ratios above 1.0 indicate stronger demand than current supply.
- EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization; a measure of operational profitability.
- Platformation™: Sonata’s proprietary approach to digital transformation that helps businesses create platform-based, connected, open, intelligent, and scalable solutions.
- IND AA-: Long-term issuer rating by India Ratings; indicates high degree of safety regarding timely servicing of financial obligations and very low credit risk.
Disclaimer: This article contains forward-looking statements based on management expectations, which involve risks and uncertainties. Actual results may differ materially from those projected due to various factors including market conditions, economic circumstances, and business environment changes. The information presented is not intended as investment advice, and readers should conduct their own research before making investment decisions.