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

License procurement seasonality december — answer hedged.

1 weak · 8 clean — pushback across 1 of 9 Q&A turns

Focused evidence 1 of 9

Kawaljeet Saluja · Kotak Securitiesweak

Hey, thanks Sudhir. Congrats, crazy growth here. A quick couple of questions. One is that you mentioned that ServiceNow and Salesforce is a trending practice, where the area of practice is very strong. Now in both these practices, essentially there is a fair bit of licensed procurement and sale that happens in the December quarter, seasonal trend. So does that hold true for Coforge as well and if yes, can you quantify, let us say the contribution that you had from the sale of third party licenses in the December quarter?

Thanks for the question Kawaljeet and thanks for the comment. ServiceNow and Salesforce you are right. ServiceNow, Salesforce, Microsoft, and Pega are the four core enterprise partnerships. The intent is to get each one of them, some of them are already beyond the $100 million mark,. the intent is to get all four of them in short order beyond the $100 million mark. We do not call out specific license revenues from our enterprise partners, but the intent always is to create managed solutions in which licenses are embedded. It ends up being a two-way street. It ends up strengthening the relationship and you know this better than I do. And therefore, to that extent, we get into these. Whenever we do these managed solutions-based sales, where a software or a license is embedded, the one thing that we do watch out for is the margin. And in the license-embedded managed solution sales that we have done this quarter, our margins have been North of 30%.

▸ Other Q&A (8)

Sulabh Govila · Morgan Stanley

Thanks for taking my question and congrats on a very strong quarter. My first question is with respect to the overall demand environment that we see in the world today, especially with respect to the fact that this is the time when the clients are deciding on their budgets and there is a sort of growth divergence that we have seen with respect to the industry in the last two quarters especially. So just wanted to understand from an industry perspective, what are we hearing from the demand side, especially given that this is a budget time going on?

As we read the demand environment, and as we do bottom-up aggregation of the indents that we are looking at, we have said over the last two quarters and we maintain that there is a definite yet gradual improvement in demand across all sectors that is playing out. From a more immediate perspective, as we look at the three core verticals of the organization - on Travel, the sector continues to show impressive resilience and growth despite the ongoing inflationary pressures. The forecast for next year is a robust 7% growth in revenue passenger kilometers. In BFS, which is the other primary vertical for us, we continue to see demand across multiple micro areas, particularly operational resilience and regulatory compliance. And the same story plays out across insurance and government as well.

Abhishek Pathak · Motilal Oswal

Hi, team. Congrats on a great quarter. So just had a couple of questions. So firstly, Sudhir, as Coforge, let us say goes from 2 billion to let us say 3 billion in revenues, how does one expect to sustain the advantages that Coforge currently has in terms of let us say, winning deals, challenging incumbents. Does a bigger size put more pressure or change some of the fundamental modes that you have created? That is one. The second question is deal wins have been quite strong again this quarter. The last 12 month average is close to 490 I believe. And considering there is a certain amount of acceleration in discretionary, can we expect this sum rate to accelerate in the next year? And lastly, just wanted your thoughts on the insurance vertical. There has been a significant amount of disruption with regards to the California fires and just your perspective on how it affects us, if at all, and how does that change, let us say, the outlook on the vertical that we had maybe last quarter and now.

I am going to take your three questions in order. The first question was around the disadvantages of increasing scale. The first thing that I will offer you is just data as proof of how increasing size is impacting our growth numbers. After we crested the billion dollar revenue mark, in less than two years, we have started hitting 1.6 billion run rate. You will notice that our growth rates have actually been increasing over the earlier years. The growth rate increase that has happened of late and that we expect to sustain for a very long time is being driven through three primary factors. The first is a maturing of partnerships as we scale up our ability to become a preferred partner for ServiceNow and for Microsoft, which are core enterprise partners that we are focused on for the next five years. Your second question was around deal wins and whether we expect them to be strong going forward. The answer is a clear emphatic yes. Your third question was around the outlook for the insurance vertical. The California fires are a point in time event. If we look at the next 12 to 15 months and the structural secular change that is happening is that in the insurance space, the SMB market is going through transformation.

Vibhor Singhal · Nuvama Equities

Thanks for taking my questions and congrats on a solid performance yet again. Sudhir a couple of questions for you and then I have one for Saurabh. I mean the growth of course is super strong but just two aspects of this. What are the conversations around the GenAI adoption at this point of time? It was widely believed that the GenAI adoption in the initial stages could actually be deflationary in nature. There could be some cannibalization of revenue. What is your view on this? Are we already into that phase or do you think that we might hit that phase maybe some quarters down the line and how do you see that playing out?

Let me take the first question, which was around GenAI, the impact on growth. GenAI, what we have seen is over the last 18 to 20 months, the demand from a revenue addressing perspective is increasingly pivoting towards engagements that are more focused only on data to begin with. There is a significant amount of work and ask that is coming in terms of setting up scalable data pipelines, in terms of doing an assessment of the data landscape, including assessing data maturity, helping get a grip on the number of data sources and data cleansing. And there is increasing demand and engagements that are being considered in the data vectorization in the infrastructure space, which is largely so that enterprises can move towards supporting AI model training and deployment. AI conversations in some ways, when it comes to actual revenue getting generated, are seeing data based engagements, data vectorization, infrastructure creation to support AI model training, etc become surrogates for getting that upside and that flip upwards. At this point in time, that is the change we have seen. Therefore, we certainly do not, and I suspect you would have picked this up from our commentary as well, do not see GenAI and this very powerful AI based technology as something that is going to be deflationary from our vantage.

Aniket Pande · DSP Mutual Fund

Thank you for the opportunity. Congratulations to Sudhir and team for excellent performance and execution in a low growth environment into this quarter. I have just two quick questions for you. My first question is on the large deal wins. The deal wins which you have won into this quarter are specifically into which vertical and what is the nature of those deals? I mean are they more into cost oriented, efficiency driven or they are more into discretionary related work?

Let me give you a quick cut in terms of it and I will give you a very quick rundown in terms of all four and where they come from. The first one comes from an asset and wealth management client. This is a deal that warrants setting up a specialized GCC for that AWM. This is a new GCC that they are setting up. The second deal comes from the ASEAN region. This is working with a close partner of NVIDIA to scale up data centre operations, AI led data centre operations. The third one is one of the leading airlines of the world, which was led by our testing practice, the Cigniti team. And that focuses largely on AI driven testing and testing in an AI context. The fourth one is a renewal. It is with an insurance client of ours in North America.

Sandeep Shah · Equirus Securities

Thanks for the opportunity and congrats on a great execution. Sudhir just wanted to understand the profile of the deals on GCC in terms of margin profile will it be slightly linear or non-linear and will this impact our free cash flow and what is the pipeline around GCC deals we are tracking?

Sure, I will kick this off and then I will request Saurabh also to pipe in on the margin piece. Let me give you a quick sense in terms of the nature of the deals. The deals that we had, the GCCs that we are helping set up are coming in three different flavours. They are coming in under a BOT construct, they are coming in, in terms of just setting up a greenfield GCC and they are coming in also in the form of a virtual GCC concept. At this point in time, the GCC offering that Coforge has straddles all three. We call them offerings for brownfield and for greenfield GCCs. That is what we are working across.

Shradha Agrawal · MSEC

Congratulations on a great quarter Sir. Couple of questions first is if I look at the top clients performance that number has been very strong and top five, top 10 clients growing at almost upwards of 12-13% on a sequential basis. So anything to highlight there in terms of top client performance?

Thank you Shradha. Our top 10 clients Shradha, all of them come from what is the non-Cigniti portfolio of Coforge. The efforts that we have highlighted over a period of many quarters around key account programme management, around making sure that the farming engine is world-class when it comes to stitching together solutions and capabilities and is effective at competitive displacement. It is essentially a function of all of those things coming together.

Ashish Dash · Mirae Asset Capital

Hi thank you for the opportunity. Just want to understand your BPS segment. So I can see the additions of employees continues. Share your outlook on the BPS.

Our approach to BPS, and I will request John also to layer on to my question, our approach to BPS, given the size of our business, is AI-led. The work that we are doing, the way in which we establish a beachhead is by leading with what we call AI led ops. That has allowed us incidentally to make a significant beachhead with one of the world's largest retailers in terms of setting up a captive for them in India for AI led ops itself. So AI led ops, automation, and given our size advantage, the ability to drive extreme automation and if required, cannibalize our operations revenues is what has marked us out. Our BPS business is doing well. It is, as I noted earlier, growing 17% year-on-year and we are seeing reasonably strong tailwinds for that business currently.

Dipesh Mehta · Emkay Global

Yeah thanks for the opportunity. Couple of questions. First about the quarter three itself whether it played out, let us say in line with your expectation or better kind of thing compared to let us say beginning of quarter and if it is better what worked well in the quarter. Second question is about the pipeline you indicated very robust deal pipeline so if you can help us let us say when we were two years back, how the nature of the pipeline is shaping for us compared to two years back versus now when we acquired a few capabilities through M&A as well as organic development. So if you can give some sense on how it is helping us to maintain momentum. And last question is for tax rate how one should look or combine tax rate for the entity thanks.

I will take the first two questions, Saurabh will take the third one and John feel free to jump in whenever you want to. The quarter has shaped up, it has been a very strong quarter, it was not a surprise to us. If you go back and look at our headcount edition in quarter one, quarter two, it will give you a clear sense of the fact that we were heading towards this. In both those quarters in the commentary and in the question and answer session, we are clearly called out that we were building up an available resource base, that we were keeping utilization where we were because we saw clear and steep growth ahead of us. This quarter is a realization and a confirmation of that assertion. Question number two is pipeline and how it is shaping up. It is shaping up extremely well and what we find the most exciting, going back to the point that I made earlier around functional expertise and around the spends around legacy modernization which are AI infused is that the median size of the large deals, at least some of the large deals that we are approaching is disproportionately higher than what we have ever attempted in the past to close.

▸ Prepared remarks (4 blocks)

Thank you. A very good morning and a very good evening to you across the world, ladies and gentlemen. Thank you for joining us today as we share our quarter three performance and the business outlook. Today, given the performance of team Coforge in Q3, it is my privilege to start the commentary with almost the same sentence that I had used at the beginning of the last quarter's call. Here goes that simple yet powerful sentence once again for the second quarter running. This quarter has been an exceptionally strong quarter for the firm. In Q3, a quarter normally regarded as a seasonally weak quarter for the industry, the firm has registered a sequential CC growth of 8.4% and a Y-O-Y CC growth of 40.3%. The Cigniti business has grown 3.5% CC sequentially and the non-Cigniti business has grown 9.4% CC sequentially. I wish to point out that the Cigniti business had already been fully consolidated in Q2 after we had assumed operational control of that business in the beginning of July itself. What makes this quarter's growth performance even more remarkable is the concurrent expansion in EBITDA. The adjusted EBITDA increased by 122 bps sequentially, even as our revenue rose 8.4% sequentially again. In addition to both strong in quarter revenue growth and margin expansion, the firm has also closed four large deals during the quarter, including one in the Cigniti client portfolio. With that, our 12-month signed order book now stands at $1.37 billion dollars which is up 40.1% from the same period last year. With this quarter's performance ladies and gentlemen, you will note that in less than two years and I repeat less than two years, the revenue run rate of Coforge has grown almost 60% from $1 billion to approximately $1.6 billion. Our inexorable and very rapid march to the next $2 billion milestone is not just unhindered, but it is actually picking up even more pace. The quarter also marked the complete operational integration of the Cigniti business, which has not just seen robust growth, but has also seen its EBITDA margins jump more than 600 bps to 17.3% from around 11% just three quarters back. Starting off with the revenue analysis, I am pleased to report that during Q3, the firm registered revenue of $397.1 million. This represents a year-on-year revenue growth of 40.3% in CC terms, 40.8% in US dollar terms and 42.8% in Indian rupee terms, respectively. We believe that more than the robustness of our growth, what is really truly remarkable is the balanced nature of the growth across all cuts. That is, across all geo units, all industry verticals and every service line of ours. Our confidence in sustained growth in the future rides off the fact that there is no over reliance on any one growth vector, all vectors and I mean all vectors, including geo-based units, industry-based units, service lines, client-size cohorts are all firing. Despite furloughs in the current quarter, BFS grew 20.4% Y-O-Y. The insurance vertical grew 20.3% Y-O-Y. The travel vertical grew 43.4% Y-O-Y, the government vertical outside India grew 48% Y-O-Y and other emerging verticals grew 88.2% Y-O-Y that was the industry cut. From a geo perspective, the Americas grew 9.2% quarter-on-quarter, EMEA grew 8.9% quarter-on-quarter while as you know the firm grew 8.4% quarter-on-quarter overall. From a service line cut perspective, the engineering service line grew 6.3% Q-O-Q and 69.2% Y-O-Y. The intelligent automation service line grew 5.1% Q-O-Q and 11.2% Y-O-Y. The data and integration service line grew 4.1% Q-O-Q and 22.9% Y-O-Y.

The BPS service line grew 1% Q-O-Q and 17% Y-O-Y and finally, the cloud and infrastructure service line grew 19.4% Q-O-Q and 42.1% Y-O-Y. The top five accounts grew 13.5% quarter on quarter and 22.5% year on year. Top 10 accounts grew 14.4% quarter-on-quarter and 23.1% year-on-year. Moving on quickly to the order intake, this is the second consecutive quarter in which the firm has clocked an order intake of more than half a billion US dollars. The number for this quarter, quarter three is $501 million. The executable order book of the firm has moved from $1.3 billion in the previous quarter to $1.37 billion in the current quarter. That represents a 40.1% increase in the next 12-month signed order book over the last year's same quarter. As I have noted earlier, we signed four large deals in the quarter three of them were in North America and one was in ASEAN. Finally, people, the total headcount for the quarter stands at 33,094 reflecting a net addition of 611 employees during the quarter. Attrition continues to be stable and the last 12-month attrition during the quarter stood at 11.9%. Starting as a progress we continue to make towards becoming a true AI first organization. We continue to expand our portfolio of service offerings using AI and GenAI and now have a portfolio of more than 30 capabilities. For example, the implementation of our GenAI powered submission centre solution for a global insurance client has cut e-mail processing time from hours to minutes. Meanwhile, at a leading retail client, we have used a number of our GenAI accelerators to significantly improve application development productivity and quality. We also created an offering to reverse engineer legacy mainframe applications using GenAI. This solution offers 25 to 30% time and cost savings for large modernization programmes. We are continuing to enhance our Quasar AI platform to help clients deploy agentive AI applications. For example, one of our asset and wealth management customers is using the Quasar agentic framework to automate and improve the quality of their recruitment processes. We are actively working with strategic partners, Microsoft and ServiceNow to embed AI and GenAI in solutions. Internally, we continue to invest in upskilling our workforce on AI based technologies. Under our AI Spark initiative, 95% of our workforce has been certified in AI tools and foundational AI concepts. Moving on to the outlook, a 8.4% sequential CC growth in a seasonally weak quarter, four large deals signed in that very same quarter, all geos, verticals, horizontals, client-size cohorts piling together. A concurrent and material sequential expansion of 122 bps in margins. A large deals pipeline that is looking very robust going forward. And finally an ever-strengthening next 12-month signed order book, which now is more than 40% higher Y-O-Y, gives us great confidence that the coming years shall once again see robust and sustained growth delivered by Coforge. The Coforge growth story is now into its eighth year. This is possibly one of the most sustained and I double underline the word sustained high growth business trajectories that any team in our industry has carved out. The key to that sustained and accelerating growth trajectory over the last eight years has been an execution DNA that is uniquely our own and an operating culture where the emphasis is on meeting plans and not just sharing plans.

Let me take you through some of the financial highlights of the quarter. As mentioned by Sudhir, consolidated adjusted EBITDA margin for the quarter stood at 17.8%. Cigniti reported 17.3% adjusted EBITDA margin and excluding Cigniti adjusted EBITDA margin stood at 17.9%. This is despite headwinds in the current quarter on account of furloughs to the extent of approximately 50 bps. During the quarter, ESOP cost at 2.1% of revenue up 130 basis point over previous quarter and in line with our guidance. This was on account of new ESOP grants that were made towards the end of Q2 FY2025. We expect this cost to marginally go down over next two quarters and then come down to a level of 100 bps of revenue from Q3 of next year onwards reflecting a tailwind on EBITDA margins in Q3 FY2026. Despite amortization of intangibles on account of Cigniti acquisition, the EBIT margin stood at 11.8% for the quarter and at 12.3% on year-to-date basis. This reflects growth of 25.8% in EBIT margins on a year-to-date basis. The integration and merger expenses in the current quarter were down to $1.9 million as against $3.5 million in the previous quarter. The depreciation and consolidated financial statement reflects impact of amortization of intangibles such as customer relationships and non-compete created on account of purchase price allocation.

As mentioned earlier, the amortization impact on a per year basis will be $10.7 million. The cash and bank balances stood at $110 million and there was a working capital loan of $80 million reflecting a net cash position of $30 million. Operating cash flow for Q3 FY2025 stood at $47 million against $33.5 million in the same period last year. Q3 YTD basis OCF stood at $86.5 million as compared to $33 million last year. The Board of Directors based on the recommendation of the audit committee and the Independent Directors at its meeting held on December 27, 2024 considered and approved the scheme of amalgamation of Cigniti with and into the company and their respective shareholders and creditors. Pursuant to the proposed scheme, one equity share of Coforge of Rs.10 each fully paid up for every five equity shares of Cigniti of Rs.10 each fully paid up. The scheme is subject to receipt of necessary regulatory approvals. The effective date of merger is going to be April 1st 2025. The merger process from now on will take around 12 months.

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Whether the license procurement seasonality december hedge tightens to a number.