Tera Software Limited

Technology — Information Technology Services · NSE

₹223.00+₹4.77 (+2.19%)

DalalBaazaar Score

74 / 100

🟢 Good

Verdict

REASONABLE

Risk

Moderate

Driven by negative free cash flow, micro-cap size, which brings thin liquidity, falling profits.

In simple words: Strong business and financial position, though profits are falling even as sales grow. Cash generation is currently the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:08 pm

Mixed / neutral. No major red flags jump out, but nothing here screams "obviously cheap" either. This is a name that needs a peer comparison and a view on near-term earnings triggers before sizing a position.

Understanding the Business

Company site ↗

The 60-second version of Tera Software Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Tera Software Limited provides IT and integrated related products and services worldwide. It operates through Integrated Solutions, Technical Division, Projects Division, and Others segments.

IndustryInformation Technology Services

SectorTechnology

Employees4,336

Annual revenue₹238 Cr

How does it make money?

Turns over ₹238 Cr a year. Of every ₹100 of sales, about ₹10 reaches shareholders as profit, with ₹16 left at the operating level before interest, tax and depreciation. Each of its 4,336 employees supports ₹5.5 lakh of revenue a year, the signature of a people-led business.

EBITDA margin15.6%

Net margin10.4%

Revenue / employee₹5.5 lakh

Who are its competitors?

The closest listed comparisons in its industry are TATA CONSULTANCY SERV LT, INFOSYS LIMITED, HCL TECHNOLOGIES LTD, WIPRO LTD. These are the companies its valuation and returns are measured against elsewhere in this report.

TATA CONSULTANCY SERV LTP/E 17.3x · ROE 45.6%

INFOSYS LIMITEDP/E 15.8x · ROE 32.0%

HCL TECHNOLOGIES LTDP/E 20.4x · ROE 24.6%

WIPRO LTDP/E 14.5x · ROE 15.9%

What is its competitive advantage?Some evidence

ROCE of 23.0% is above what capital typically costs, which suggests some pricing power, though not yet the sustained, wide gap that marks a durable advantage.

ROCE23.0%

ROE17.0%

Peer median ROE32.0%

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +104% while net margin moved +250% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+104%

Margin effect+250%

DalalBaazaar Score

74/ 100

Good

Weighted across six categories. Every point is explained below.

✓ Beta of 0.39 — historically steadier than the index
✗ Micro Cap: thinner liquidity and sharper drawdowns are normal
✗ Profits have swung sharply from year to year — earnings are hard to forecast
✗ Negative free cash flow means dependence on external funding

Quality vs. Valuation

Company Quality

77/ 100

Good

How good the business is, ignoring the share price entirely.

Valuation

81/ 100

Cheap

What you are being asked to pay, ignoring how good the business is.

A good business currently available at an undemanding price — the combination this framework is built to look for.

Historical Valuation

Current P/E

11.3x

3Y Median

40.7x

40 monthly readings · mean 41.8x · range 10.5x–98.8x

Sector Median

16.5x

median of 4 sector peers

🟢Current valuation is approximately 72% below its 3y median of 40.7x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

🟢Against its sector it trades 32% below the peer median of 16.5x.

vs. its own history

Cheap

40.7x median over 40 months · -72%

vs. sector peers

Cheap

16.5x median of 4 peers · -32%

vs. generic bands

Cheap

Below 15x

P/E (Trailing)

11.3x

P/B

1.91x

EV/EBITDA

8.6x

PEG

0.12

Dividend Yield

0.54%

What's Good / What's Bad

🟢 What's Going Well6

Return on equity is rising
ROE has improved from 3.2% to 17.0%.
Return on capital is rising
ROCE has improved from 12.2% to 23.0%.
High return on capital employed
ROCE of 23.0% is the mark of a business that converts capital into profit efficiently.
Valuation below its historical average
At 11.3x the stock trades 72% below its own median of 40.7x.
Very low debt
Debt/Equity of 0.27x leaves the balance sheet with plenty of headroom.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention3

Margins are compressing
EBITDA margin has slipped from 23.8% to 15.6% over 3 years.
Debt is rising
Total debt is up 63% over 3 years — worth checking what it funded.
Free cash flow is negative
The business is not currently covering its capital spending from operations.

Red Flags

4 items require attention · 3 high · 1 watch

🔴Debt has risen sharplyFinancial
Total debt is up 63% over 3 years, from ₹24 Cr to ₹39 Cr.
🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.
🔴Significant margin compressionFinancial
EBITDA margin has fallen 8.3 points, from 23.8% to 15.6%.
🟡Free cash flow is negativeFinancial
Free cash flow was -₹16 Cr in the latest year.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Capital compounds at a high rate
ROCE of 23.0% means each rupee reinvested earns well above what capital costs. If the company can keep deploying at this rate, growth creates value rather than just consuming cash.
Priced below its own history
The stock trades 72% below its own median multiple. If the business performs as it has and simply re-rates back to normal, that gap is return on its own.
Cheaper than its peers
It trades 32% below the sector median. Either the market sees a problem the numbers do not show, or the discount closes.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

Margins are being competed away
EBITDA margin has fallen from 23.8% to 15.6%. If the trend continues, profit falls even on flat sales — and margin decline rarely reverses quickly.
Earnings are hard to forecast
Profit has swung sharply from year to year, so any single year — good or bad — is a weak guide to the next. Cyclical earnings deserve lower multiples for that reason.
Size brings its own risk
Micro Cap businesses are thinly traded, so exits are harder in a falling market and single events move the price more than they would for a larger company.
Several serious flags at once
3 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 20% a year✓ 26.9% CAGR
Latest reported year was 52.3%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 14%✓ 15.6%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Free cash flow remains positive✗ -₹16 Cr
Profit that never becomes cash eventually stops being profit.
4Debt / EBITDA stays below 2x✓ 1.1x
The ratio lenders write covenants against; it survives a small or negative equity base, unlike Debt/Equity.
5ROCE stays above 20%✓ 23.0%
Falling returns on capital are usually competition arriving, and show up here before they reach the margin.

Investment Checklist

7 / 11 checks passed

✓ Strong return on equity (ROE ≥ 15%)
✓ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✓ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✗ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

6 good · 3 neutral · 2 weak

Market Cap

₹279 Cr

Micro Cap

Smaller company — thin liquidity and deep drawdowns are normal here

P/E (Trailing)

11.3x

Cheap

Cheap against the generic band

P/B Ratio

1.91x

Fair

Moderate premium to the company's book value

EPS (TTM)

₹19.82

Profitable

Profitable on a per-share basis

ROE

17.0%

Strong

Strong capital efficiency

ROCE

23.0%

Strong

Earns comfortably above its likely cost of capital

Debt/Equity

0.27x

Low

Conservative leverage

Revenue Growth (YoY)

52.3%

Healthy

Healthy top-line growth

Profit Growth (YoY)

-0.3%

Falling

Profits are shrinking

Dividend Yield

0.54%

Modest

Small cash return — most of the return has to come from the price

Free Cash Flow

-₹16 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

CMP

₹223

Operating Margin

16.3%

Good

Healthy core-business profitability

Net Margin

9.7%

Average

Average bottom-line conversion

Current Ratio

1.69

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.39

Defensive

Steadier than the market

52W Range Position

Near low

Near its 52-week low

Technical Snapshot

SMA 20 / SMA 50

224.8 / 276.5

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

54.4

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹117 Cr	₹84 Cr	₹107 Cr	₹238 Cr	+26.9%
EBITDA	₹28 Cr	₹11 Cr	₹15 Cr	₹37 Cr	+10.0%
EBITDA Margin	23.8%	12.5%	14.2%	15.6%	—
PAT (Net Profit)	₹3 Cr	₹4 Cr	₹9 Cr	₹25 Cr	+92.7%
EPS	₹2.77	₹3.13	₹7.52	₹19.82	+92.7%
ROE	3.2%	3.5%	7.7%	17.0%	—
ROCE	12.2%	7.0%	12.0%	23.0%	—
Total Debt	₹24 Cr	₹33 Cr	₹20 Cr	₹39 Cr	+17.7%
Free Cash Flow	₹45 Cr	-₹3 Cr	₹7 Cr	-₹16 Cr	—

🟢 Revenue has grown at 26.9% a year over 3 years.

🟢 EBITDA has grown at 10.0% a year over 3 years.

🔴 EBITDA Margin has fallen from 23.8% to 15.6% over 3 years (-8.3 pts).

🟢 PAT (Net Profit) has grown at 92.7% a year over 3 years.

🟢 EPS has grown at 92.7% a year over 3 years.

🟢 ROE has risen from 3.2% to 17.0% over 3 years (+13.8 pts).

🟢 ROCE has risen from 12.2% to 23.0% over 3 years (+10.8 pts).

🔴 Total Debt has grown at 17.7% a year over 3 years.

🔴 Free Cash Flow has turned negative, from ₹45 Cr to -₹16 Cr.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹325 Cr

Total Liabilities

₹179 Cr

Total Debt

₹39 Cr

Cash & Equivalents

₹0 Cr

Operating Cash Flow

-₹14 Cr

Capex

-₹3 Cr

Shareholding (proxy)

Institutional Holding

0.0%

Insider Holding

56.0%

Corporate Actions

Dividend Rate

₹1.2

Ex-Dividend Date

22 Sept 2026

Peer Comparison

Company	P/E	ROE
TATA CONSULTANCY SERV LT	17.3x	45.6%
INFOSYS LIMITED	15.8x	32.0%
HCL TECHNOLOGIES LTD	20.4x	24.6%
WIPRO LTD	14.5x	15.9%

Recent News

4 mixed2 general

Tera Software reports consolidated net profit of Rs 4.65 crore in the June 2026 quarter

Business Standard, 12 AugResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Do Tera Software's (NSE:TERASOFT) Earnings Warrant Your Attention?

Simply Wall Street, 10 SeptResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Tera Software Secures 100% Control of TS Innovations via Final 26% Share Acquisition

Sahi, 13 JunM&A

🟡Mixed / dependsAcquisitions change the balance sheet before they change the earnings. Look at what was paid, how it was funded, and whether debt rose.

Tera Software discloses AGM voting results; all resolutions pass

scanx.trade, 29 SeptResults

🟡Mixed / dependsA results event. The figures on this page update once the new statements reach the data feed, which usually lags the announcement.

Tera Software Share: Bull Case vs Bear Case for 2026

Univest, 25 Sept

Tera Software Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 02 Sept

Watch Items

Trading very close to its 52-week low — worth checking whether this reflects a temporary setback or a structural problem.
Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

🟢Business QualityStrong15.4/20

🟢Financial HealthStrong13/20

🟢GrowthStrong18.5/20

🟢ProfitabilityStrong10.9/15

🟢ValuationAttractive11.8/15

🔴RiskHigh4/10

Attractive on both counts

A good business currently available at an undemanding price — the combination this framework exists to look for. The work left is qualitative: whether the advantage the numbers imply is one you can identify and expect to last. 3 high-severity red flags sit above this conclusion and should be read first.

This thesis breaks if

✓Revenue growth stays above 20% a year26.9% CAGR
✓EBITDA margin holds above 14%15.6%
✗Free cash flow remains positive-₹16 Cr
✓Debt / EBITDA stays below 2x1.1x
✓ROCE stays above 20%23.0%