3i Infotech FY26: Margin Recovery, A US-Heavier Mix, and a CoE-Led FY27 Push

3i Infotech closed FY26 with a clear split personality in the numbers. Consolidated revenue declined to ₹693.3 crore from ₹725.8 crore in FY25, but profitability strengthened meaningfully. FY26 EBITDA rose to ₹72.0 crore, up from ₹47.0 crore, taking EBITDA margin to 10.4% from 6.5%. PAT increased to ₹35.1 crore from ₹25.4 crore.

For Q4 FY26, revenue was ₹175.7 crore, up 2.1% QoQ. EBITDA stood at ₹12.0 crore with a 6.9% margin, and PAT was ₹7.3 crore. The company also flagged that Q4 FY25 had a one-time deferred tax asset impact, which makes the year-on-year comparison for PAT less clean.

A key driver behind the revenue decline was the closure of the KSA branch, which management said contributed about ₹30 crore in FY25. This is important context because it frames FY26 as a year of portfolio reset. Management repeatedly positioned the last two years as a phase of stabilisation, exiting low-margin work, and improving operating discipline.

What drove FY26 performance

Segmentally, AAA remained the anchor. FY26 revenue from AAA (Application, Automation, Analytics) was ₹493.2 crore. Infrastructure Services delivered ₹135.9 crore, and BPS contributed ₹63.9 crore. BPS continued to be described as under stress.

Geographically, the US emerged as the largest market in FY26, contributing 49% of revenue. India contributed 40%, but management highlighted a 15.6% year-on-year decline in India revenue. The Q4 revenue mix shows the tilt even more sharply, with the US at 55.9%.

The investor presentation also showed rising customer concentration in Q4. The top 20 customers accounted for 52% of Q4 revenue, up from 46% a year ago. While this can reflect deepening relationships, it also raises the stakes of renewals and contract churn.

Financial snapshot

Mix shifts: AAA dominance and a US tilt

The company’s line-of-business mix stayed heavily weighted toward AAA. In Q4 FY26, AAA contributed 74.9% of revenue, Infrastructure Services 17.6%, and BPS 8.1%. The stability of this mix matters because management’s FY27 narrative hinges on scaling through an upgraded delivery model and deeper capabilities in AI, automation, analytics, cloud, and cybersecurity.

Industry mix in Q4 FY26 showed the IT sector at 51.5% and BFSI at 34.5%, with Government at 3.0% and Manufacturing and FMCG at 7.3%.

One operational detail management emphasized was organisational stability. Voluntary attrition was stated at 7.3% in Q4 FY26, down from 11.8% in Q4 FY25. Management also stated DSO improved from 65 days in FY25 to 55 days in FY26.

FY27 strategy: CoE-led execution and BPS repositioning

Management’s FY27 stance is clear on direction but light on specific numbers. The CEO said FY27 should be a growth year but did not provide explicit revenue or margin guidance. The operating plan is framed around six pillars: People, Process, Productivity, Platform, Partnering, and Profitability.

Two initiatives stood out as central to the FY27 story.

First is the CoE-led delivery model. Management said the CoE framework across all three business lines was formally launched internally in December 2025. The stated intent is to create scalable, revenue-generating and margin-accretive delivery models, with the CoE setup expected to be fully operational by the end of Q2 FY27.

Second is the BPS pivot. Management acknowledged that the India BFSI-focused BPS model has been under pressure due to tightening outsourcing guidelines and automation. The response is to reposition BPS as a digital-first, AI-led transformation business and expand into the US and Middle East while diversifying into additional sectors and processes.

The company also pointed to broader corporate actions and restructuring as part of the clean-up. The board approved incorporation of a step-down wholly owned subsidiary in Thailand, and approved closure of the Netherlands subsidiary, which was described as dormant and loss-making.

Risks and disclosures investors will keep watching

There are clear positives in profitability and operating discipline, but the disclosures also underline risks.

The consolidated audit opinion was modified. The audit report cited issues linked to subsidiaries, including an adverse opinion for the Dubai entity and qualified opinion for the Mauritius entity, reflecting legacy accounting matters and recoverability questions.

Operating cash flow in FY26 was negative. The consolidated cash flow statement showed net cash outflow from operating activities of ₹43.58 crore for the year.

Legal and contingent matters remained a recurring topic in the concall. Investors raised contingent liabilities and ongoing matters including RailTel and e-Mudhra. Management said these matters are sub judice and may continue for a long period, while also stating it does not currently expect a major crystallisation impact in FY27 based on current visibility.

Takeaways

3i Infotech’s FY26 performance can be read as a transition year. Revenue declined, largely attributed to KSA closure, but margins improved sharply and profitability remained positive. The US market is increasingly central to the mix, and AAA continues to dominate revenue.

The FY27 investment case, as framed by management, rests on whether the CoE-led model translates into larger deal wins and more consistent topline momentum, while BPS stabilises after its strategic pivot. Investors are also likely to track cash flow conversion, subsidiary-related audit qualifications, and the pace of resolution on legacy disputes.