Zensar Technologies is in focus, surging in trade, as the company has bagged a new deal in August but there are other triggers as well that unfolded in the current quarter.

There were two important developments. The first one is a very large deal with the City of San Diego that the company had secured by way of a bidding process against an incumbent. It was a large deal worth $122 million spread over four years, which can be extended by another two years. This should roughly add about 4-5 percent to the company's annual revenues, but initially, the margins will be lower.

The company is also making incremental investments in the insurance vertical, which enhances its offering. Last week, the company announced a partnership with Friss, which provides AI solutions for property and casualty insurers (P&C). So the company has acquired AI capability, which will enhance its offering and it can cross-sell it to its existing insurance clients and therefore scale up its insurance portfolios. Earlier the company was focused on Guidewire but now it is looking at other areas as well.

The second factor that is working in favour of the company is that the valuation is much cheaper than its peers. The company is trading at 23-23.5 times forward multiple versus average midcap IT companies which are trading close to about 30 times. So, there is this valuation gap, which seems to be getting corrected now.

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(Edited by : Dipti Sharma)

First Published:Sept 15, 2021 2:58 PM IST