FY26 closed at 29.2% USD growth and 14.4% EBIT.

On reported margins per SEBI format declined 50 basis points QoQ while management adjustments suggest improvement. What is the nature of discounting income on long-term contracts and recurring income from mortgage business, and when do reported and management format margins converge?

Discounting income on long term contracts is an accounting interest entry where if you bill $100 to a client on a long-term contract, $90 goes to top line and $10 goes to other income - it is a notional accounting entry reclassified as part of EBITDA. Income from mortgage business is similar and these two will continue. Apart from that, integration expenses on Cigniti have become insignificant, the previous quarter acquisitions are only ~Rs.24 million ($300,000), and we are only left with the one-time bonus which is a quarter event - otherwise nothing else will be there.

On discounting income, it was about $24 million last quarter and has quadrupled this quarter. How should we think about the trajectory of this going forward?

It is more of an accounting entry as and when the unwinding of the discount is happening, the amount keeps going up. If we bill the quarter in the first quarter the amount will be low, as time lapses and you are coming closer to the billing, the amount goes up and then it crashes down. It is an accounting notional interest entry and the corresponding value in the balance sheet is sitting as part of receivables.

Any colour on the demand environment - the July 9th tariff deadline went and now we are looking at August 1st. Is the tariff uncertainty still looming large? Are clients still hesitating?

The run-the-enterprise budget continues to oscillate based on macro uncertainties given the overhang of tariff related discussions, but more importantly, the change-the-enterprise budgets are where given the proliferation of AI we see that the discretionary nature of the spend has ebbed and those spends from our vantage continue unabated. The large deals that we structure and the proactive large deals are also aimed solidly at the change-the-enterprise budget.

Banking as well as insurance both were a tad soft in this quarter. Any specific reason to call out, or just quarterly variation that could be back next quarter itself?

We will be back. There is nothing that is going to hold back the growth. Banking is still growing year on year at 32% for us, insurance at 20% for us. The pipeline is very strong. So we are not concerned around short term, medium term or long term growth across BFSI. It will be robust.

How is AI adoption looking in the banking industry, especially BFS? Are core banking systems being modernized? What are the different things you are looking at over the next two years?

Banking institutions are under pressure to improve ROE amidst macro uncertainty, higher interest rates, and intensified regulatory scrutiny. From our vantage business demand is healthy across commercial banking, lending, wealth management, and risk and compliance. Operational resilience and cloud native architectures have become mission critical for banks. Core modernization efforts at banks are also gaining momentum, driven by the need for simplification, agility, and the strategic retirement of cost free legacy infrastructure.

On margins - can you walk us through the puts and takes for this quarter that despite strong growth and operating leverage, margins remained tight? And going forward in the next two to three quarters with ESOP cost coming down, are we targeting 14% for this fiscal year itself?

Historically, Q1 has been a quarter where margins get depressed and even without wage hike, it used to come down by 100 BPS or so. This quarter we were ramping up one of the largest deals with around 1000 odd people in an account, and despite that we maintained EBIT margins. Q2 we expect margin ramp because the ramp-up has already happened, leverage will start playing out. In Q3, ESOP cost will start coming down which will compensate for wage hikes. So we are confident that 14% EBIT for the year is doable.

What is the timeline for the final integration of Cigniti? Earlier you mentioned December 2025 - do you think the timeline could be met or could there be spillover?

It is more with regulators so it would be minus a month or two, but December, January should be the timeline. And whenever the approval comes in, the effective date of the merger is April 1st 2026.

How do we expect the Sabre deal to ramp up sequentially from here on? Should we expect TTH vertical to continue growing over the next three quarters? On a steady-state basis, where do we see OCF to EBITDA settling? And on BFSI - any hesitation from clients or do you see offerings still resonate well?

Sabre deal will continue to ramp up sequentially in Q2 as well, with Q3 onwards we expect resource loading to stabilize. On BFSI we see healthy demand across commercial banking, lending, wealth management, risk and compliance. Banking - high confidence because operational resilience and cloud-native architectures have become mission critical, this is going to be secular longer term non-discretionary spend. We see absolutely no reason for our growth rates to waver. On OCF to EBITDA, Saurabh: 65-70% OCF to EBITDA is what we would like to maintain because rest will be needed for increased working capital requirement for growth.

What is the capex outlook for FY2026? Do we expect it at similar levels or taper down? 2-3% odd or 5%?

It will taper down. It will come down to our original levels, 2-3% odd.

On EBIT margin - Q1 run rate at 13% and full year being 14% means exit has to be 15%. With wage hike effective Q3, what will pull out a 200 bps margin improvement in the next three quarters? Also a related question on depreciation amortization and a suggestion that the one-time bonus should not be treated as non-recurring.

Two things - one, Q1 to Q2 to Q3 you have always seen impact of operational efficiencies coming in and margins going up historically. Number two, the wage hike impact is going to be very limited in Q3, which will largely get set off by the lower ESOP cost - we are looking at 80-90 BPS reduction on account of ESOP cost going down. On the bonus, this was one off decided during the quarter and will not be incurred next quarter or through the year. Depreciation amortization will normalize from here, no further increment, can continue at current level.

Can you provide more detail around the five large deals announced? And on the 14% margin indicated for the year - is it as per BSE reported or as per the management presentation format?

On margins - 14% EBIT is a like-to-like of the 13.2% reported in the current quarter. On the five large deals - first was from one of the top three Cigniti clients, an AI infused app modernization $30M+ TCV win delivered by GitHub Copilot, Quasar Accelerators and Intelligent DevOps (US-based). Second was a North America-based digital transformation on Pega Cloud. Third was North America-based transformation of workplace platform with AI-enabled Microsoft Services. Fourth came from the Middle East where we secured a mandate to build GCC for exchange operations. Fifth came from Asia, a transformation of technology infrastructure to enable scaling up of CAC services. Two of three top Cigniti clients are now Coforge wins demonstrating cross-sell.

How much of the deal wins over the past two to four quarters are market share gains where you are displacing similar or bigger size peers, versus incremental work coming out of newer technologies?

We give credit to sales teams only for deals that are not renewals. A large deal internally is one where the net new revenue being recognized has to be more than $20 million TCV. Almost all of these large deals - 19 out of our top 20 clients where principal competition is a large-scale SI - have been won against the large-scale SIs.

Top 5 clients have grown stupendously and non-top 10 grown strongly, but there is some weakness in top 6 to 10. Is this temporary and will it recover during the year?

You will see a correction immediately. You will see a correction in Q2 itself, Rishi. There is absolutely no structural weakness there.

On the BFS vertical near to medium term outlook - when does this business start coming back to a reasonable growth number sequentially? And in the medium term, what are your plans to go deeper into BFS as you become a $2 billion plus company?

Both near term and medium term outlook are positive and very positive, off the back of the best estimate for Q2 and the high probability large deals pipeline for banking. Banking for Coforge is growing on a YOY basis by 32%. Going forward, we expect banking as a percentage of our revenue to continue to hold where it is, because we expect banking and more broadly financial services to continue to almost pace ahead at the same pace as the rest of the firm.

On the data centre capex - is it like we own this asset effectively on behalf of the client and over a period the client pays for it? How is this structured? And can the asset be used for any other client?

We own the asset and we control the asset. We placed them in the location we identified. It has been capitalized and we are providing services on this data centre - the client is not concerned about how much is the capex behind it. The asset is in our books and we are in control. It is not dedicated - we can use it for whomever we want.

How are you thinking about overall balance sheet investments and intensity as you go after this opportunity? Would you do more asset-intensive or balance sheet intensive deals to capture more market share?

We do not plan to go any further into the data centre space. The total capex was $85 million, $62 million of which has already been realized by the firm. It is a shared data centre where we are offering services to one and over time more clients. The balance sheet leverage is largely going to be for acquisitions that fit the valuation and capability profile of assets we are looking at, but you will not see anything material by way of data centre plays in the short to medium term.