Summary
Nucleus Software Exports Limited - Q3 FY26 Earnings Call Summary Tuesday, February 11, 2026, 15:00 Hrs.
Event Participants
Executives 10 Abhishek Pallav (VP), Anurag Mantri (COO), Apurva Chamaria (CBO), Ashok Kumar Bhura (CFO), Mukesh Bangia (VP), Parag Bhise (CEO & ED), Pradeep Malik (VP), Swati Ahuja (IR), Swati Patwardhan (CHRO), Tapan Jayaswal (Financial Controller), Vishnu R. Dusad (MD)
Analysts 4 Chinmay Nema, Raghav Maheswari, Rahul Jain, Rushabh Shah
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue | ₹220.03 crores | +3.05% QoQ, +6.97% YoY; Growth driven by steady implementation and product business. |
| Product Revenue | ₹185.58 crores | +2.52% QoQ, +6.15% YoY; Represents 84.3% of total revenue. |
| Projects & Services Revenue | ₹34.45 crores | +6.03% QoQ, +11.60% YoY; Continued traction in service-linked implementations. |
| EBITDA | ₹32.72 crores | +41.77% QoQ, -0.91% YoY; Significant QoQ recovery as delivery costs as a % of revenue normalized. |
| Net Profit (PAT) | ₹20.70 crores | -21.26% QoQ, -40.81% YoY; Impacted by lower other income and tax adjustments compared to previous quarters. |
| EPS | ₹7.86 | Lowered from ₹9.99 in Q2 FY26 and ₹13.28 in Q3 FY25. |
| Order Book | ₹656.68 crores | -2.15% QoQ; Product business comprises ₹588.74 crores (89.6%) of the total backlog. |
| Cash & Cash Equivalents | ₹971.60 crores | +₹9.94 crores QoQ; Majority held in mutual funds (₹634.30 crores) and fixed deposits (₹263.17 crores). |
| Cost of Delivery | 70.4% of Revenue | Improved from 73.9% QoQ; Expected to face pressure from new labor code implementation. |
Geographic & Segment Commentary
- Lending Segment (FinnOne Neo): This remain the primary growth driver with seven new logos added YTD FY26, all in the lending space. Management noted specific traction in Gold Loans, Finance Against Securities (LAS), and Co-lending modules.
- International Markets (Australia/USA): The Australian market is described as high-yield but less dense than India/Middle East, leading to slower scaling despite a sales presence. In the US, the company has minimal current interest but is attempting to establish a foothold through new leadership.
- India Market: Remains dense and active; management is focusing on migrating the legacy FinnOne customer base to the FinnOne Neo (GA.5) platform, with the current split being roughly 50-50.
Company-Specific & Strategic Commentary
- Leadership Changes: Appointed Apurva Chamaria as Chief Business Officer to leverage his two decades of experience (Google, HCL) for global expansion.
- Platform Migration: Strategic focus is on moving legacy FinnOne customers to FinnOne Neo; while migration is a 3-4 year journey due to client caution, upgrades within the Neo stack (e.g., to GA.5) are becoming faster, sometimes achievable over a weekend.
- AI Integration: AI is being embedded directly into product offerings (e.g., assisted care decisioning, interactive statements, sentiment analysis) rather than being sold as a standalone revenue line.
- Partnerships: Groundwork has started for global partnerships with AWS and Oracle, overseen by a new Global Head of Partnerships, alongside deeper integrations with the fintech ecosystem.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Migration Timeline | 3 - 4 Years | Management expects the total shift from legacy FinnOne to FinnOne Neo to take several years due to the complexity of banking switches. |
| Operating Costs | Upward Pressure | Impact of the new labor code will increase manpower costs, though AI adoption is expected to partially offset this in the long term. |
| Sales Pipeline | Growth Trajectory | Management noted a “significant pipeline” and expects conversions to improve in coming quarters following senior sales hiring. |
Risks & Constraints
| Risk | Context |
|---|---|
| Higher Manpower Costs | The implementation of the new labor code is expected to increase delivery costs, potentially impacting EBITDA margins in the near term. |
| Technology Obsolescence | While customers are comfortable on legacy platforms, management cited technology obsolescence as a challenge that necessitates the difficult migration to FinnOne Neo. |
| Slow International Scaling | Markets like Australia and the US have shown slow conversion rates and require long-term investment before contributing meaningfully to the order book. |
Q&A Highlights
Migration Progress
- Question: What is the qualitative status of the migration from legacy FinnOne to FinnOne Neo? (Raghav Maheswari)
- Answer: It is a difficult, time-consuming journey because customers are comfortable with existing products; however, the split is now roughly 50-50 between old and new platforms, with a 3-4 year window to complete the shift (Parag Bhise).
Cost of Delivery & Labor Code
- Question: Is the current 70% cost of delivery sustainable? (Raghav Maheswari)
- Answer: We expect an uptick in costs due to the new labor code being injected into the P&L; while AI might reduce costs long-term, marketing expenses for new territories will act as an offset (Ashok Kumar Bhura).
Capital Allocation
- Question: With ₹971 crores in cash, what is the plan for dividends or buybacks? (Rahul Jain)
- Answer: The company prefers to retain cash currently to fund potential AI-related investments; the board will review the position once the investment landscape clarifies in 2-3 quarters (Ashok Kumar Bhura).
Order Book Stagnation
- Question: Why hasn’t senior leadership hiring reflected in a higher order book yet? (Rahul Jain)
- Answer: Software deals are long-drawn and take months to sign; however, seven new logos have been added this financial year, indicating the right trajectory (Ashok Kumar Bhura).
Key Takeaway
Nucleus Software reported a steady Q3 FY26 with consolidated revenue reaching ₹220.03 crores, supported by a robust cash balance of ₹971.60 crores. While the product business remains the core engine (84% of revenue), the company is navigating a complex 3-4 year transition as it migrates half of its installed base from legacy FinnOne to the modern FinnOne Neo platform. Strategically, the firm is strengthening its global sales leadership and embedding AI-driven decisioning tools into its GA.5 release to capture growth in MSME lending and co-lending sectors. However, profitability faced YoY pressure, and management cautioned that upcoming labor code changes will likely increase delivery costs. Looking ahead, the focus remains on converting a “significant” sales pipeline and stabilizing margins through lean initiatives and fintech partnerships as they expand into the Australian and US markets.
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