Coforge Ltd Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Abhishek Pathak - Motilal Oswal - Analyst : Hi. Thank you for the opportunity and congrats, team, on a great quarter. So I got a couple of questions. Firstly, as you mentioned, right, over the past eight years, the growth has been quite significant, but would you agree that this is probably going to be an extended period of downturn for the industry? And if so, does the deal with engine have to kind of permanently pivot towards large deals and cost takeouts, or there is still room for discretionary and in other areas? That's one. The second question is on the Sabre ramp up. Could you please tell us how the margins will be impacted in the short term and how should we model that? And just on the margins as well, right? I mean, how should we expect the reported EBIT margins to expand from here on in terms of margin work? Thank you.

Question: Vibhor Singhal - Nuvama Equities - Analyst : Yeah, hi. Thanks for taking my question and congrats, Sudhir and team, for a solid performance yet again. So, Sudhir, two questions from my side. One is in terms of growth you had called out that the pipeline also looks quite healthy at this point of time despite the very strong bookings that we've had in this quarter. So again, I mean, it's just because we're operating in an environment in which there's quite a benign commentary by a lot of our peers. How do you see this, basically, pipeline shaping out over the next few quarters? Any specific pockets that you want to call out in which we have seen very good strength? That you believe could be the driver of the deal with next autumn next year. The next year growth is, of course, taking care of what the deal is this year, but what could be the driver or what segments could you see be the driver of next year's deal with? Then I was a a question for Saurabh. Maybe if you can answer this, and then I'll have a follow up with Saurabh.

Question: Vibhor Singhal - Nuvama Equities - Analyst : Got it. And specifically, if I could just prick your brains on the travel vertical, that is one vertical in which we have seen a lot of airlines coming with the profit warnings. United went ahead with the bimodal guidance in terms of the environment. How's the environment in that vertical looking like? I know we had the largest deal in that vertical in this quarter, but going forward, are you seeing some sort of, let's say, uncertainty or delay in decision making from the airlines specifically, the airline's part of the travel vertical?

Question: Vibhor Singhal - Nuvama Equities - Analyst : Got it. That's really helpful, that detailed explanation. Just one last question for Saurabh. So I think our OCF reported a very sharp jump in this quarter. Last two, three quarters, it had been $50 million. This time, it's around $74. So if you could just take us through that, will this be the -- can we expect it to be the ongoing run rate over the next few quarters also, or are you expecting some headwinds to this number?

Question: Vibhor Singhal - Nuvama Equities - Analyst : And that would have the normal seasonality that the first half will be weak and the second half will be stronger?

Question: Ankur Rudra - JP Morgan - Analyst : Hey, thank you. Maybe you just wanted to talk about the outlook to start with.

Question: Ankur Rudra - JP Morgan - Analyst : Hi, can you hear me now?

Question: Ankur Rudra - JP Morgan - Analyst : Okay, thanks. So yeah, thanks for taking my call. I wanted to get a sense of the outlook outside of the Sabre deal. We understand that will be a significant component of the growth outlook, but outside of that, if you can share how does the overall momentum look like given the environment has probably weakened a bit, and if you can give us any kind of update about the medium-term target of hitting $2 billion in in revenues.

Question: Ankur Rudra - JP Morgan - Analyst : Understood. And there is no risk to that number for FY27 that you previously stated, right? Given the weakness in the short term and you're seeing very soon.

Question: Ankur Rudra - JP Morgan - Analyst : Understood. In terms of the near term, if you can commentate anything about revenue conversion from all these large deals, anything to note given some of the weaknesses you might be seeing on travel side which you've acknowledged?

Question: Manik Taneja - Axis Capital - Analyst : Thank you for the opportunity and congratulations for the steady performance. My question is for Saurabh. Saurabh, if you could help us understand how does the number of working days in April, May, June, differ and should be a tailwind to sequential growth in the current quarter, if you can provide some insight into that. And the second question is with regards to the margin outlook. If you could talk about the different margin levels, especially in context of the lower ESOP charge as well as sales and marketing expenses outside of ease of expenses and the gross margin progression that we should be seeing in the FY26.

Question: Manik Taneja - Axis Capital - Analyst : Sure, that's helpful. And if I can check in with one more question, if you could clarify on the segmental margins for Asia, they appear to be the highest in several quarters. If you could help us understand what drove the big upswing in terms of segmental margins in this geography.

Question: Dipesh Mehta - MK Global - Analyst : Yeah, thanks for the opportunity. Couple of questions. I just want to understand -- I want to understand our optimal utilization, right? I'm looking at..

Question: Dipesh Mehta - MK Global - Analyst : Is it better now?

Question: Dipesh Mehta - MK Global - Analyst : Yeah, so my question is about utilization. What is the optimal utilization range you are looking for? And in the context of people or head count, it is roughly a percentage this quarter where we are expecting some of the large deal ramp up to play out in the next few quarters. So in that context, if we can provide some sense, that is question one. Second question is if I look at your service mix, there is a sharp growth in engineering while IMS is so, we just want to get some sense because in geography, also America is very soap compared to the rest of the world. So there are some quarter specific nuances playing out if you can provide some color around. Thanks.

Question: Dipesh Mehta - MK Global - Analyst : Understand. And last question about the Sabre ramp up, how one should look at the ramp up whether the linear equation is a good way to look at it the way it should contribute over a period of time.

Question: Dipesh Mehta - MK Global - Analyst : And contribution would be roughly linear, right? Across 13 years, if one do that division.

Question: Abhishek Kumar - JM Financials - Analyst : Yeah. Hi, good evening. Thanks for taking my question. First question is on Sabre deal and it's a question that is asked to us very frequently by investors. Given the financial situation of Sabre, do we foresee any risk of ramp down or any challenge to receivables o receivable days? And if at all, any risk mitigation that we kind of use to protect ourselves?

Question: Abhishek Kumar - JM Financials - Analyst : Okay, that's helpful. My second question is in the others vertical, which saw a sharp decline this quarter, a lot of what is included in the others vertical like retail, healthcare, et cetera, seems to be where Cigniti has contributed. So I just wanted to understand is that attributable to some softness in Cigniti or that's just quarter noise?

Question: Sandeep Shah - Equirus - Analyst : Yeah, thanks for the opportunity. The first question is if I look at FY 2025 and step out the inorganic growth based on my estimate, we have roughly done a kind of organic growth. And if I look at also the announcement on Sabre deal plus other acquisitions, it looks like that the coming year with these announcement will also contribute 15% growth automatically through Sabre and inorganic acquisitions. So is it fair to assume the growth momentum what we have seen in FY25, which is upwards of 30%, can be maintained in FY26 as well?

Question: Sandeep Shah - Equirus - Analyst : Okay. So Sudhir, you expect the macro advents may have some paperness or some impact on organic growth in the FY26 versus FY25?

Question: Sandeep Shah - Equirus - Analyst : Okay, thanks. And just -- I have joint late apology for the same. Can you once again, in the give a detail about the organic -- the margin guidance for FY26?

Question: Sandeep Shah - Equirus - Analyst : Okay. And Saurabh has said that this year would be between 13.2 to 14.2 at the EBIT level.

Question: Chirag Kachhadiya - Ashika Institutional Equities - Analyst : Hello, congrats on a great set of numbers. So I have brought two questions. The (inaudible) is offering in one particular they offering testing related services to how that particular division is now integrated in this consulted entity and providing some synergy benefit to the existing business of the reports. And in the advent of this AI-related description, how this is offering on a real-time basis, will not get impacted by this AI and all. And second, what risks you see in FY26 and '27?

Question: Vibhor Singhal - Nuvama Equities - Analyst : Yeah, hi. Thanks for taking my question again. Sudhir, just a question on the Sabre deal again. I mean, more of a subjective kind of assessment if I could ask you for. So I mean, it's very seldom that we see a company of our size, mid-tier company, grab such a large deal. These large deals had always been the kind of forte of the large cap companies that we'd always seen. You mentioned, of course, that this was a long-standing client. We've had a long-standing relationship and our domain expertise, the travel article is also known but is it -- is there a kind of a paradigm shift in which more and more companies like our size are being called for large cap companies are. In your pipeline, are there any more large deals that you are chasing? And are the customers now becoming more open towards, let's say, including more companies of our size into these large deals as compared to, let's say, three or four years ago?

Question: Vibhor Singhal - Nuvama Equities - Analyst : Got it. Thank you so much. That's for the detailed explanation. Just one last bookkeeping question from Saurabh. Saurabh, if you could provide some update on the Cigniti's shared swap proposal, what is the status, where is the approval pending, and what is the timeline that we are looking for the full integration of Cigniti into our business?

Question: Abhishek Pathak - Motilal Oswal - Analyst : Yeah, hi. So just very quickly on the client complained that we -- it's been an ongoing issue for the past, I guess, 18 months, but just a brief update on that and how do we expect to sort of close this. thanks.

Question: Prateek Maheshwari - HSBC Securities - Analyst : Sorry guys, I was on mute. Thank you for the opportunity. Guys, I just wanted to ask on your net other income. It continues to be negative and just wanted to check if this could be a strong lever for PBT margin growth next year.