18 June 2021
Company Update | Sector: Technology
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TP: INR350 (+18%)
Positive on new strategy and leadership
We attended ZENT’s analyst meet on Day 2 of the RPG conference, where the
management reiterated its GTM strategy and highlighted key investment areas for the
company. Here are the key highlights from the meet:
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
67.2 / 0.9
347 / 121
Financials Snapshot (INR b)
FY21 FY22E FY23E
EBIT Margin (%)
EPS Gr. (%)
105.7 114.3 127.6
Div Yield (%)
Shareholding pattern (%)
FII Includes depository receipts
ZENT reiterated its GTM strategy under the new leadership of Mr. Ajay
Bhutoria. It reiterated its focus on five strategic growth opportunities
(SGOs) to better target the enterprise market. ZENT expects its capabilities
under Experience Services (c10% of revenue) to fuel business in Advanced
Engineering Services, Data Engineering, Analytics, and Infra Services.
Application Services will remain a focus area, given it’s the largest volume
generator in the business.
To increase the traction in its GTM strategy and drive better revenue
growth, it has identified four key areas of investments: 1] sales, 2]
partnerships, 3] talent, and  M&A.
It plans to use its historical high profitability (4QFY21 EBITDA margin of
19.9%) and cash balance (of c$160m in 4QFY21) to fuel investment in sales
and for inorganic acquisitions to add capabilities and target clients.
We remain positive on the strategy devised under the new leadership and
expect the same to deliver results in the next two years. We expect ZENT to
deliver 12.5% CAGR over FY21-23E as against a combined 11% decline in
revenue from FY19-21.
The company has been focusing on unbundling its current services into five
key segments: 1] Experience Services – Spearheaded through earlier
acquired entities – Foolproof and Indigo Slate; 2] Advanced Engineering
Services – to tap downstream demand; 3] Data Engineering – leverage
AI/ML; 4] Application Services, and 5] Digital Foundation Services –
experience led infra services.
While these are not the new businesses, a different packaging of the same
will help in targeting the right client for right services, instead of a non-
systematic sales structure.
ZENT believes this change will be fully implemented in the next 4-8 weeks.
The company has been investing in building up its sales strength on two
fronts: 1] increasing/restructuring the sales team, and 2] enriching the sales
process. It is also hiring/restructuring several business heads and bringing in
senior delivery personnel.
The management said there is an acute shortage of relevant talent in the
market. To manage the same, it has enhanced its onboarding engine by
expanding its recruiting team and invested in better training of freshers. It
has also invested in the recruitment process to onboard laterals and on-site
talent (East Europe).
Five key strategies to leverage the strong market environment
Investments in sales and talent to keep margin rangebound
Mukul Garg– Research analyst
Research Analyst- Anmol Garg (
Heenal Gada - Research analyst
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.