Coforge Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Record order book, confident FY26 guide: Q4 orders hit \$2.1 bn, matching all of FY24, and management expects "very robust" FY26 growth with simultaneous material EBIT expansion despite uncertain macros.
• Sabre mega-deal secured and ramping well: The \$1.56 bn, 13-year deal was won against two of the world's largest SIs, and its linear ramp is already contributing revenue with no disruption to large-deal velocity expected.
• Margins expanded 100 bps QoQ with more to come: Adjusted EBITDA margin reached 18.7% on operational leverage and Cigniti synergies; management sees a clear path to 18% reported EBITDA by FY27, with much of the EBIT journey covered in FY26.
• Cigniti integration ahead of plan, merger on track: The acquired business has already lifted margins from 12% to ~18% through synergy capture, and the share-swap merger is expected to close by December–January.
• What to watch next quarter: Whether top-5 and top-10 client cohorts rebound as promised, the pace of Sabre's revenue conversion, and any quantification of liability from the disclosed client security incident.

Order Book & Large Deals

• Q4 orders equal full-year FY24: The \$2.1 bn booked in Q4 alone matches the entire order book of fiscal 2024, capping a year in which deal momentum accelerated every quarter.
• 14 large deals in FY25: Growth was large-deal-led across every industry unit, service line, geography, and client cohort, with the number and median size of large deals expected to keep increasing year on year.
• Sabre win validates domain depth: Won against two of the largest SIs globally from a final shortlist of four, driven by travel-industry expertise and iterative engineering solution workshops. The 13-year, \$1.56 bn deal is described as having an "impeccable" transition and ramp-up so far.
• Large-deal velocity sustainable: Management does not believe the velocity of large-deal closures or median deal size will deteriorate even if Sabre is excluded; the pipeline of high-conviction, near-term closures is unimpaired.
• Revenue conversion on track: Revenue from large deals is converting well, with the immediate quarter and FY26 both expected to be strong; Sabre's ramp continues over a three-quarter period, adding roughly \$10–20 mn per quarter linearly.

Sudhir Singh: "The Sabre deal was won against two of the largest SIs in the world. When I look at the final shortlist of four, two of the folks who were against us were two of the largest SIs that do play within our industry."

Margins & Profitability

• 100 bps adjusted EBITDA expansion QoQ: Exit adjusted EBITDA margin reached 18.7%, and exit EBIT margin expanded 123 bps to 13.2%, achieved despite a quarter with fewer working days.
• ESOP cost declining: ESOP cost fell 33 bps to 1.8% of revenue and is expected to drop further to ~100 bps from H2 FY26.
• Cigniti synergy margin lift: The acquired business improved from ~12% EBITDA on \$220 mn revenue to an exit rate of ~18% in the current quarter, contributing to the 100 bps pro forma margin expansion over the prior year.
• No Q1 wage-hike headwind: Unlike last year, wage hikes were given in Q2, so Q1 FY26 faces no margin depression from increments; EBITDA and gross margins should hold or marginally expand.
• EBIT path to ~14%: Management expects a large part of the journey from 13.2% to roughly 14% EBIT to be covered in FY26 through structural levers: scale, large-deal expansion without gross margin depletion, and the AdvantageGo sale removing 50 bps of burn.
• OCF structurally improving: Full-year OCF to EBITDA was 61% (71% excluding integration expenses), with Q4 at 108%; ongoing run rate guided at 67–70%, with normal seasonality of a weaker H1 and stronger H2.

Sudhir Singh: "Oh no, I do not think there is any risk at all to fiscal year 2027 getting to 200 crore. The intent will be to get there faster. We would be a little disappointed if it took us all of fiscal year 2027 end to scrape by to 2 billion dollars."

Vertical & Client Performance

• Travel vertical structurally well-positioned: Opportunities span GCC setup, modern airline retailing, data modernization, M&A integrations, loyalty, and personalisation; Asia Pacific, Middle East, Latin America, and Africa demand is growing steadily.
• Engineering outstripping IMS: Engineering growth is lifted by the Sabre deal and functional expertise across industries, with a new engineering leader in place for over 12 months; IMS continues to grow strongly in relative terms.

Cigniti Integration & M&A

• QE now a horizontal business unit: The Cigniti quality engineering team is fully integrated into Coforge, run by former Cigniti global delivery head Raghu Krovvidy; two of five large deals were influenced by AI-for-QE and QE-for-AI offerings.
• Cross-sell engine activated: The acquired business was 90% QE with a small RPA/digital practice; Coforge can now deliver the full gamut of engineering and platform services to those customers.
• Merger timeline: The share-swap proposal is with SEBI as of end-March and has exchange clearances; management expects 2–3 months with SEBI, then NCLT, then shareholder approval, with merger consummation by December–January. Business and operational synergies are already flowing.
• Bolt-on acquisitions: Acquired a data and cloud asset in the US (\$0.6 mn quarterly revenue) and a ServiceNow asset in Australia (\$2 mn quarterly revenue), both generating margins in line with company performance.
• AdvantageGo exit: Signed definitive agreement to sell the entire stake for £4.3 crore; the business generated \$23 mn revenue, a \$5 mn EBIT loss, and \$8.5 mn cash burn in FY25, so the sale removes a 50 bps drag.

Saurabh Goel: "We believe that somewhere toward December to January is a timeframe when the merger should get consummated. But having said that, as far as we are concerned from a business standpoint and from operation standpoint, apart from the fact that there are two separate listed legal entities running, the business synergies, and the operational synergies have started flowing in already."

AI & Technology

• Over 200 AI solutions deployed: Available via the Coforge Quasar AI Marketplace, spanning real-world implementations across insurance, transportation, and aviation.
• GenAI in production: A large US insurer achieved 30% operational efficiency; an AI solution processes a million documents a year for a US insurance company; an AI-based prioritization solution delivered a 75% reduction in weather alerts to pilots for a leading air transport communications firm.
• Agentic AI developing: Building an Agentic AI-based product catalogue solution for a major US building products distributor.
• GitHub Copilot at scale: Engineering teams are achieving more than 30% reduction in time and cost on large modernization programmes; over 50% of developers are proficient in Copilot, and 94% of employees are AI-trained under the AI Spark programme.
• Ecosystem partnerships: Developed a model lifecycle-as-a-service offering using NVIDIA NeMo; launched a Generative AI Center of Excellence with ServiceNow focused on Agentic AI for payments, fraud detection, and dispute management; achieved Zscaler tier-1 MSSP status and Pega Global Elite Partner status for 2025.
• AI-for-QE differentiation: Coforge is organizing a four-hour workshop in New York City in November to showcase its AI suite for quality engineering to analysts.

Risks & Unresolved Items

• Client security incident: A hacker tricked service desk agents into resetting employee passwords and accessed a client's customer loyalty database; Coforge did not handle core cybersecurity services for this client. The liability amount cannot yet be determined, though the client is not material and not in the top 50.
• Demand downturn duration unknown: Management declined to estimate how long the demand downturn will last, calling it "difficult for us to comment at this stage," while asserting the large-deal pivot is their approach regardless of macros.
• Top-client concentration dip: The Q4 decline in top-5 and top-10 clients followed a very strong Q3; the rebound is expected but not yet evidenced.
• No organic margin guidance for FY26: Management stated "we have not given a hard number of guidance" when asked for organic margin expectations, pointing instead to the FY27 framework.

Guidance & Commitments

Key Metrics