📌 At a Glance (Excerpt)
Zensar was once your classic midcap IT underdog — delivering quietly, scaling efficiently, and moonlighting as RPG’s tech arm. But the last five years have been all about detox — reducing debt, cleaning margins, and consolidating verticals. At ₹846 and 30x earnings, is it still a sleeper or already fully priced?
1️⃣ Flashback: The Underdog Nobody Noticed (Until Now)
Zensar always had “main character potential” — headquartered in Pune, backed by RPG Enterprises, present across the US, UK, Africa, and India… but rarely made headlines like TCS, INFY, or even Persistent.
Here’s what they were dealing with back in FY20:
- 🧾 Sales: ₹4,182 Cr
- 💸 Net profit: ₹272 Cr
- 🧠 Verticals: BFSI, HiTech, Retail, Consumer
- 🤕 Infra business was dragging margins
- 🏋️♂️ Borrowings were growing
What did they do?
Ctrl + Alt + Refresh — sold the infra business, focused on application services, hired a new CEO, and stopped trying to be Wipro-lite.
2️⃣ Financial Recap: Slow Revenue, Fast Clean-up
| Metric | FY20 | FY25 | 5-Yr CAGR |
|---|---|---|---|
| Sales (₹ Cr) | 4,182 | 5,281 | 4.78% 😬 |
| Net Profit (₹ Cr) | 272 | 650 | 19.1% ✅ |
| EPS (₹) | 11.7 | 28.6 | 20%+ |
| EBITDA (₹ Cr) | 507 | 817 | 10% |
| OPM (%) | 12% | 15% | Expansion! |
| ROCE (%) | 18% | 22% | Uptrend 💪 |
| Net Debt | ₹332 Cr | ₹0 🚫 | |
| Working Capital Days | 71 | 120 | 👀 Uh-oh |
🎯 Summary: Sales barely moved. Profits grew fast. Why?
Because costs dropped and low-margin segments were kicked out.
3️⃣ Quarterly View: Boringly Consistent — and That’s Good
| Quarter | Sales (₹ Cr) | OPM (%) | Net Profit (₹ Cr) | EPS |
|---|---|---|---|---|
| Q1 FY23 | 1,213 | 14% | 119 | 5.27 |
| Q4 FY23 | 1,230 | 17% | 173 | 7.65 |
| Q4 FY24 | 1,359 | 16% | 176 | 7.77 |
Even in the peak IT slowdown of FY24, Zensar didn’t bleed.
🧂 Not spicy. But not scary either.
4️⃣ Segments & Strategy: From Infra Dinosaur to Application Samurai
💻 Application Services (Core Focus Now)
- 90%+ of current revenue
- Plays in BFSI, Consumer, HiTech
- Margin-friendly, asset-light
- Cloud, digital engineering, and automation at center
✅ Verdict: High-margin, scalable, exactly what midcap investors love
❌ Infrastructure Services (Phased Out)
- Legacy dragger with no scalability
- Sold off in FY21-22
✅ Verdict: Good riddance. Helped boost OPM from 11% → 15%
🌍 Geography & Clients
- 65% revenue from US
- 20% from Europe
- No crazy client concentration (Top 5 < 35%)
- BFSI & Consumer dominate
✅ Verdict: Safe & balanced — just not hyper-growth.
5️⃣ Balance Sheet: From Borrower to Buff
| 🏦 Metric | FY20 | FY25 |
|---|---|---|
| Debt | ₹332 Cr | ₹0 |
| Cash Reserves | ~₹600 Cr | ₹700+ Cr |
| Capex | ₹159 Cr | ₹102 Cr |
| Dividend Payout | 24% | 45% |
| ROE | 12% | 17% |
They went from “please approve my loan” to “take my dividend.”
💰 Dividend ₹11/share (final FY25) = 1.3% yield
🧠 CFO discipline unlocked long-term shareholder value.
6️⃣ Peer Check: Still a Discount to Big Boys
| Company | Price (₹) | P/E | ROCE | EPS (TTM) | Comments |
|---|---|---|---|---|---|
| TCS | ₹3,424 | 25.5 | 65% | ₹134 | 🧠 Behemoth |
| Infosys | ₹1,618 | 25.4 | 37.5% | ₹63 | 🛠️ Slower now |
| Persistent | ₹5,898 | 66 | 31.4% | ₹90 | 🚀 Expensive |
| LTIM | ₹5,368 | 34.6 | 27.6% | ₹155 | 🔧 Merger play |
| Zensar | ₹846 | 29.6 | 22% | ₹28.6 | 🧼 Clean smallcap |
Zensar is NOT cheap anymore — but it’s still trading ~20–25% below Tier-1 IT P/Es, despite faster profit growth in the last 3 years.
7️⃣ Fair Value: Time to ZEN or Exit?
🧮 Base Case
- EPS FY26 = ₹32–34
- Fair P/E = 24–26 (midcap IT avg)
- 🎯 FV = ₹768 – ₹884
🧠 Bull Case
- EPS hits ₹36
- Premium P/E of 30x
- 🎯 FV = ₹1,080
EduInvesting FV Range: ₹770 – ₹1,080
Current Price: ₹846 ✅
— It’s fair. You’re not early, you’re not late. You’re just… in.
🚨 Risks & Real Talk
- 🐢 Slow topline: Just 5% CAGR in 5 years
- 💼 Vertical concentration: BFSI, Consumer = 75%
- ⏳ Working capital days increased to 120 — watch receivables!
- 🌍 FX exposure: USD-centric biz
But also…
- 🧼 Cleanest midcap IT BS out there
- 💸 Increasing dividend payouts
- 🧠 Sticky clients, improving margins
🧘 Final Verdict: Zensar is the “Chamomile Tea” of IT Stocks
You won’t get multibagger thrills here — but you’ll sleep well.
It doesn’t want to become TCS or start selling AI dreams on CNBC. It just wants to quietly make ₹650 Cr profit, pay out ₹250 Cr to you, and log off.
And sometimes… that’s exactly the kind of stock you need.
✍️ Written by Prashant | 📅 June 20, 2025
Tags: Zensar Technologies, RPG Group, midcap IT stocks, digital services, dividend payers, IT recap, EduInvesting, Nifty 500
