Coforge

Coforge reported a successful FY26 with 29.2% USD revenue growth, building on a nine-year turnaround story that saw the firm grow from $400 million to nearly seven times that size. Over this period, the company achieved impressive CAGRs: Revenue at 21.7%, EBIT at 24.6%, PAT at 24.1%, EPS at 22%, and Free Cash Flow at 19%. Management highlighted successful contrarian bets, including smart growth during COVID-19 despite travel vertical exposure and the successful integration of Cigniti, which scaled its top two clients from $25-30 million to $75 million collectively.

Q4 FY26 saw a record EBIT margin of 16.6%, a significant 231 basis points sequential increase, driven by SG&A leverage (100 bps), forex fluctuations (80 bps), direct cost reduction (50 bps), and lower marketing and ESOP costs. This structural reset, achieved through backend automation and AI-enablement, positions Coforge to achieve consolidated EBITDA margins of 20.5% to 21% and consolidated EBIT margins of 15.5% in FY27. The company aims to emerge as one of the highest EBITDA/EBIT performers in the mid-cap segment starting this year.

The company recorded a very strong Q4 order intake of $648 million, including five large deals. The 12-month executable order book stands at a record $1.75 billion USD, representing a 16.4% year-on-year increase. This figure does not include material revenue expected from signed framework agreements, such as a $150 million UK public sector deal over five years, which is expected to contribute $4-5 million per quarter starting Q1 FY27.

Coforge is actively embracing the AI imperative, viewing it as a structural demand tailwind that accelerates growth. The company has identified six 'moats' to capture this opportunity, including deep domain expertise, strong client intimacy, reinvented delivery models (hybrid AI mod squads for 40-50% faster time to market), a scalable OneAI platform, and an AI-enabled workforce of over 30,000 members. AI is deeply embedded across the SDLC, driving 25-35% productivity uplift in development and 40-60% in code generation, and in internal operations, reducing effort in financial analysis by 40-60%.

FY26 Free Cash Flow (FCF) grew 68% YoY to $135 million, with Q4 marking the highest quarterly FCF at $73.7 million. The FCF to PAT ratio for Q4, on a normalized basis, was 156%. Management has revised its FCF to PAT guidance to 100% plus from FY27 onwards, up from the previous 70-80%, citing improved rigor in collections, payables management, and contract structuring. Net cash improved to $117 million despite a $36 million reduction in working capital lines and $61 million in dividends paid.

In FY26, key verticals demonstrated strong growth in USD terms: healthcare and high-tech grew 98%, travel 62%, BFS 12%, and other emerging verticals (retail, manufacturing) 27%. The top 10 accounts contributed 30.8% of total revenue and grew 40.4% YoY. Coforge's client base is diversifying, with one client generating over $100 million, three clients between $50-100 million, and 167 clients between $1-5 million, indicating a healthy spread across client tiers and industries.

Coforge implemented accounting changes, reclassifying cash flow hedge gains/losses to other income/expense, aligning with peer practices. A one-time^📎 reversal of deferred tax liability of INR 181 crores due to the Cigniti merger resulted in a negative 7% ETR for Q4 FY26, though the normalized ETR was 22%. The company expects a steady-state ETR of 23-24% for FY27. Amortization related to acquisitions is expected to be roughly $40 million annually, contributing to a 150 bps gap between standalone and consolidated EBIT margins. To further enhance margins, Coforge plans to discontinue a $20 million low-margin India business portfolio, which will impact Q1 FY27 revenue by $15-20 million, though Q1 revenue is still expected to be flattish QoQ.