Sonata Software shares get hammered, touch 52-week low; what's spooking investors?

Sonata Software Ltd shares fell 19% in intra-day trade on Friday, hitting a 52-week low of ₹445.65, after the company reported muted earnings for the December quarter, triggering a surge in trading volumes.

At 09:28 a.m. IST, Sonata was trading 17% lower at ₹458.60, while the BSE Sensex declined 0.08%. Trading volumes surged over 10 times the daily average, with 2.5 million shares changing hands across the NSE and BSE.

By 2 pm, the shares of the Bengaluru-based information technology company had recovered somewhat, being down 11.51%, and was trading at ₹488.10 a piece.

In Q3, Sonata's revenue stood at $87 million, up 2.8% quarter-on-quarter (QoQ) and 3.9% year-on-year (YoY). In constant currency terms, revenue grew 4.4% QoQ and 5.1% YoY. In rupee terms, revenue rose 31% QoQ to ₹2,843 crore, up 14% from the previous year.

EBITDA declined 7.7% QoQ to ₹164 crore, with margins shrinking ~240 basis points to 5.8%, reflecting higher costs. The company won two large deals and added 11 new clients during the quarter.

Sonata’s international business reported 4.4% QoQ growth in constant currency, but margins fell due to one-time costs, an unplanned ramp-down of a large TMT client, salary hikes, and a client discount settlement. The company expects a 2.5-3.5% revenue decline in Q4, with a recovery anticipated by late Q4 or early Q1.

Despite challenges in the Hi-Tech and TMT sectors, the management expressed confidence in long-term growth, citing its first multi-million-dollar Microsoft Fabric deal and a Gen AI modernisation contract.