Coforge Limited — Q4 FY26 earnings call

Call held 5 May 2026

Management summary

Coforge concluded FY26 with strong revenue growth of 29.2% in USD terms and a record Q4 EBIT margin of 16.6%, driven by operational efficiencies and AI-led interventions. The company reported robust order intake and an increased executable order book, underpinning confidence for FY27 with higher margin and FCF to PAT guidance. While the banking vertical saw softer growth and a low-margin India business will be discontinued, management expressed optimism for broad-based growth and continued margin expansion.

Highlights

  • FY26 USD revenue grew 29.2%, demonstrating strong performance in a challenging environment.

  • Q4 FY26 EBIT margin reached a record 16.6%, a significant 231 basis points increase quarter-on-quarter, driven by SG&A leverage, forex, and cost reductions.

  • The company reported a record Q4 FCF of $73.7 million, contributing to a 68% YoY increase in FY26 FCF to $135 million.

  • Order intake for Q4 was robust at $648 million, and the 12-month executable order book stands at a record $1.75 billion USD, 16.4% higher YoY.

  • Management provided strong FY27 guidance, expecting consolidated EBITDA margins of 20.5% to 21% and FCF to PAT of 100% plus.

Concerns

  • The banking vertical's growth was softer at 12% in FY26, attributed to one of the top three banking clients not growing, though management states this issue has been addressed.

  • The planned discontinuation of a $20 million low-margin India business portfolio will result in a $15-20 million pass-through revenue impact in Q1 FY27.

  • The company expects mark-to-market hedge losses to continue for one to two more quarters before tapering off.

Key financials

3 periods

Q4 FY26

  • Sequential CC Revenue Growth
    2%
  • EBIT Margin
    16.6%
    YoY +3.8%
  • FCF to PAT (Normalized)
    156%
  • Headcount
    35,777

FY26

  • USD Revenue Growth
    29.2%
  • EBITDA Margin
    18.6%
    YoY +4.3%
  • Free Cash Flow
    135 Mn
    YoY +68%

LTM

  • Q4 FY26 Attrition
    10.8%

What they filed

Q1 FY27: revenue up 50.5%, net profit down 43.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,326 1,433 1,870 2,046 1,981 +49%2,486 +73%2,658 +42%3,080 +51%
EBITDA108 87 198 183 184 +70%272 +213%261 +32%351 +92%
Net profit230 106 144 360 332 +44%118 +11%553 +284%205 −43%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Healthcare and High-tech
    98% FY26 USD Growth
  • Travel
    62% FY26 USD Growth
  • BFS
    12% FY26 USD Growth
  • Government outside India
    17.5% FY26 USD Growth
  • Other Emerging Verticals (Retail, Manufacturing)
    27% FY26 USD Growth

Order book

high confidence

Total value

$1.75 Bn

as of 2026-03-31 quantified

16.4% YoY

Inflow this quarter

$648 Mn

Execution

executable over the next 12 months

Pipeline

deal pipeline tcv

Framework agreements not accounted for in the signed order book, expected to be material.

Q4 was a very strong quarter for order intake and large deal closure, with a record executable order book and additional material revenue expected from framework agreements.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Debt disclosed Cost 4.5%
    • New borrowing Taken a dollar loan of $550 million in India, serving as a natural hedge. $550 Mn
    We have taken a dollar loan of $550 million, and it gives us a natural hedge. That loan has been taken in India. It is to ensure that the cash flows and the balance sheet are aligned to the liability we have in the balance sheet. We are moving towards balance sheet hedges, and that is where you see a decline in the cash flow hedges. On that loan point, the $550 million loan is good, and the headline interest rate is 4.5%.
  • Returns FYTD $61 Mn
  • Liquidity Cash $117 Mn Net cash improved from $93 million in Q1 despite $36 million reduction in working capital line and $61 million dividends paid.
    Net cash improved to USD $117 million from $93 million in quarter one despite a $36 million reduction in our working capital line and paying dividends of $61 million.

Guidance & targets

Profitability

  • Steady state Effective Tax Rate Profitability · FY27 · High confidence 23-24%
    Steady state effective tax rate guidance for FY27 is between 23% and 24%.

    — Saurabh Goel

  • EBITDA margins (consolidated, including Encora) Profitability · FY27 · High confidence 20.5% to 21%
    EBITDA margins of 20.5% to 21% in FY27 on a consolidated basis, which is including Encora

    — Saurabh Goel

  • EBIT margins (standalone, excluding Encora) Profitability · FY27 · High confidence 16.5% to 17%
    EBIT margins of 16.5% to 17% on a standalone basis, that is, excluding Encora

    — Saurabh Goel

  • EBIT margins (consolidated, including Encora) Profitability · FY27 · High confidence 15.5%
    and 15.5% on a consolidated basis, which includes Encora.

    — Saurabh Goel

  • EBIT margins Profitability · FY28 over FY27 · Medium confidence Improve incrementally
    We should be able to improve FY28 over FY27, obviously not by this quantum. But at least incrementally, Kawaljeet, the threshold that we have shared for FY27 will be the minimum. That should be expected from us starting FY28 onwards.

    — Sudhir Singh

  • Minority interest Profitability · From Q1 FY27 · High confidence INR 9 crores

    From INR 53-54 crores today

    Going forward, you will see minority interest come down from INR 53 crores to INR 54 crores in one quarter to almost INR 9 crores. The reduction in minority interest is yet to happen. It will happen from Q1 onwards because the share allotment is happening.

    — Saurabh Goel

Free Cash Flow

  • FCF to PAT ratio Free Cash Flow · FY27 onwards · High confidence 100% plus

    Previously 70 to 80% → 100% plus

    Looking ahead, we anticipate free cash flow to PAT to be maintained at 100% from FY27 onwards in contrast to our earlier guidance of 70 to 80%.

    — Saurabh Goel

Revenue

  • Q1 FY27 Sequential Revenue Growth Revenue · Q1 FY27 · High confidence Flattish
    Net-net, are we expecting a flattish quarter next quarter? Yes, on a QoQ basis, on a reported basis.

    — Saurabh Goel

Cost

  • ESOP cost as proportion of revenue Cost · Next year · High confidence 0.8-0.9%
    It will stay where it is. Around 0.8% to 0.9% is where it will stay. It is not going to go up or significantly go down.

    — Saurabh Goel

  • Amortization Cost · Annual · High confidence $40 million
    Amortization $40M/year? Roughly $40 million a year.

    — Saurabh Goel

Market context

  • Revenue growth Revenue · FY27 · Medium confidence Robust
    We believe revenue growth will be robust.

    — Sudhir Singh

What to watch in Q1 FY27

Q1 FY27 Revenue Growth (QoQ)

Next quarter (Q1 FY27 results)
Current Expected flattish QoQ
Target Flattish or positive growth

Why it matters

To verify management's ability to offset the $15-20 million impact from the discontinued India business with new deal wins.

Net-net, are we expecting a flattish quarter next quarter? Yes, on a QoQ basis, on a reported basis.

Risks & concerns

  • Banking vertical growth slowdown

    medium

    One of the top three banking clients did not grow in FY26, leading to softer BFS growth of 12%, but management states the issue has been addressed.

    Analyst acknowledged

  • Revenue impact from discontinuation of low-margin India business

    low

    Planned closure of a $20 million low-margin India business portfolio will result in a $15-20 million pass-through revenue impact in Q1 FY27.

    Management acknowledged

  • Continued mark-to-market hedge losses

    low

    Mark-to-market hedge losses are expected to continue for one to two more quarters before tapering off from Q3 FY27.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Order book conversion and impact of macros/AI deflation on growth Partial
This year, again, the intent is to deliver robust growth, but the intent is equally not to classify that or to offer hard numbers around it, which you well know. The environment is challenging, and yet the confidence is high that we should be able to deliver industry-leading growth.

Analyst sought specific FY27 growth numbers based on order book, but management reiterated qualitative 'robust growth' and confidence without providing a specific conversion multiple or growth percentage.

Asked by Abhishek Pathak

Drivers of margin upgrade (AI vs pricing) Direct
As far as EBIT is concerned, we believe the EBIT reset in Q4 has been a structural reset. It has come off the back of automation and Al-led interventions. It has also come largely off the back of a deeply held conviction that in an Al-infused era, our G&A costs have to be held constant in absolute terms, and it is Al-based interventions that are allowing us to do it.

Clarifies that the significant margin expansion is primarily due to structural changes from AI and automation, rather than just pricing, indicating sustainable improvements.

Asked by Abhishek Pathak

Drivers for FCF to PAT ratio improvement to 100%+ Direct
But the rigor that we have brought into the organization, in terms of the way collections are being followed, the way payables are being managed, and the way contracts are being structured, gives us confidence that 100% is the bare minimum FCF to PAT we will deliver in FY27, along with the significant step-up in profitability that we mentioned in our prepared remarks.

Explains the operational and process-driven reasons behind the significant upgrade in FCF to PAT guidance, suggesting a sustainable improvement in cash generation.

Asked by Sulabh Govila

AI opportunity: industry expansion and beneficiaries Direct
The Al opportunity that we see is multifold, and I am going to request the head of our Al practice, Mr. Vic Gupta, to add to this. As we have said, we are seeing a very significant near-term modernization surge using Al technologies. That is real. That is now. There is another wave building up very strongly, which is the agent deployment wave. Firms that ride those waves are firms that will continue to do well.

Addresses the strategic impact of AI, confirming management's view of it as an expansionary force for the industry and highlighting Coforge's positioning to benefit from modernization and agent deployment waves.

Asked by Vibhor Singhal

Travel vertical outlook and impact of external factors Direct
At this point in time, Vibhor, from our perspective, the travel vertical continues to do really well, even in the short term. We saw a press report yesterday that talked about the impact of Spirit Airlines on Coforge. We want to reiterate that the impact is negligible to none. The budgeted revenue from that airline was about 10 bps for FY27.

Provides specific reassurance regarding the travel vertical's resilience and dismisses concerns about a specific client's impact, indicating continued strong performance in this key segment.

Asked by Vibhor Singhal

Quantification of discontinued India business and Q1 FY27 revenue impact Direct
It should have an impact of roughly $15 million to $20 million in pass-through revenue in Q1 itself. ... Yes, on a QoQ basis, on a reported basis.

Provides a specific financial impact of the planned business discontinuation and clarifies the expected Q1 FY27 revenue trajectory, which is important for short-term modeling.

Asked by Vibhor Singhal

Banking vertical's softer growth and client-specific issues Direct
What slowed down our growth to only 12% for the current year, Kawaljeet, was the fact that one of our top three banking clients did not grow this year. That client account has now been transferred over to John's personal stewardship, and we feel far more positive about it. It has nothing in our mind to do with the GCC movement. It is more to do with a client-specific issue that we had and we believe we have addressed.

Addresses concerns about a key vertical's underperformance by pinpointing a specific, now-addressed client issue, rather than broader market or competitive pressures, suggesting a potential rebound.

Asked by Kawaljeet Saluja

Balance sheet number for hedge position Evasive
I will come back to you on that.

Management deferred answering a specific balance sheet question regarding the hedge position, indicating either complexity or a lack of immediate readiness to disclose.

Asked by Dipesh Mehta

3 min read 7 chapters

Detailed narrative

Strong FY26 Performance and Turnaround Story

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.

Record Q4 Margins and Robust FY27 Outlook

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.

Strong Order Intake and Growing Executable Order Book

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.

Strategic Focus on AI and New Value Pools

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%.

Enhanced Free Cash Flow and Capital Allocation Discipline

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.

Vertical Performance and Client Diversification

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.

Accounting Changes and Margin Management

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.

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