COVID-19: Sonata Software expects Q1, Q2 profits in FY21 to take up to 40 pc hit

IT firm Sonata Software on Monday said it expects a negative impact of up to 40 per cent on its profits in the first half of FY21 as one of its large clients has temporarily suspended operations in wake of the COVID-19 outbreak. The company said it expects its "sound business model" and consolidated net cash balance of Rs 400 crore on books to help it in the "long run".

"...due to the COVID-19 situation one of our large clients had to temporarily suspend their operations thus affecting a majority of our services to them. We believe this will in the immediate future have a significant negative impact on our profits by up to 40 per cent," Sonata said in a regulatory filing. It added that currently, this development is expected to affect Sonata's Q1 and Q2 performance for FY21.

"We believe that based on our investments in IP and focus on digital transformation we have a sound business model which, together with a consolidated net cash balance of Rs 400 crores in our books, should help us in the long run," the filing noted. The company said it has been taking various precautionary measures to ensure the safety and health of employees at all its offices in India and overseas.

"This is a one-off event with a client in an industry very badly affected by this crisis and we should come out strongly to take advantage of the opportunity when this situation ends," it added. Factories are shut and cities are under lockdown in multiple parts of the world as countries grapple to contain the spread of coronavirus infection. This has affected business sentiment across the world.

It could have a significant impact on the Indian IT industry that derives a large part of its revenue from exports. There are concerns that there could be layoffs and wage cuts as organisations attempt to counter business disruption and consequent demand slowdown as deals may get deferred.

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