Earnings Review
High costs push Coforge's consol PAT down 41% QoQ
This story was originally published at 11:52 IST on 23 July 2024
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--Coforge Apr-Jun consol revenue 24.01 bln rupee vs 23.59 bln qtr ago
--Coforge Apr-Jun consol PAT 1.33 bln rupee vs 2.24 bln rupee qtr ago
--Analysts saw Coforge Apr-Jun consol net profit 2.24 bln rupees
--Coforge: Demand outlook in fincl svcs segment improved in Apr-Jun
--Coforge: Apr-Jun order intake $314 mln, added 10 new clients Apr-Jun
--Coforge: Order book touched $1.07 bln, up 19.3% YoY Apr-Jun
--Coforge: Expect to improve EBITDA margins Oct-Mar
--Coforge: To seek SEBI's approval for open offer to acquire Cigniti
--CONTEXT: Coforge announced buy-out of Cigniti in May, holds 28% shrs
--Coforge: Aim to complete merger with Cigniti in next 9-12 months
--Coforge to pay 19 rupees/share interim dividend
By Narayana Krishna
HYDERABAD - Information technology and digital solutions provider Coforge Ltd today reported a consolidated net profit of 1.33 bln rupees for Apr-Jun, down 40.5% on quarter due to costs related to the acquisition of information technology major Cigniti Technologies Ltd and increased visa expenses. The company's revenue for the quarter was up by 1.8% quarter-on-quarter to 24.01 bln rupees.
The company’s net profit and revenue were below the Street's estimates. Analysts had estimated Coforge's net profit to be 2.2 bln rupees on a revenue of 24.3 bln rupees. On year-on-year basis, the company's net profit fell 19.4%, but revenue rose 8%.
At 1044 IST, shares of Coforge were trading 1.3 higher at 6,153.25 rupees on the National Stock Exchange.
In its post-earnings conference, the management said costs related to the acquisition of Cigniti Technologies and the qualified institutional placement issue have impacted the margins and profits for the quarter. Expenses related to tax liability from a few years ago, onsite ramp up of manpower, and payment of bonuses also had an impact on earnings for the quarter, the management said. The overall impact of the higher costs on margins was around 350 basis points, the company said.
Coforge, which offers software solutions for travel, and banking, financial services and insurance sectors, among others, said overall demand outlook in BFSI space improved during Apr-Jun and this is expected to continue in coming quarters. The company said there is a rebound in insurance segment business, too.
For Apr-Jun, the company added 10 new clients, which saw the order book swell by $314 mln to $1.07 bln. The overall order book growth as on Jun 30 was 19.3% on year, the company said.
The company is expecting improvement in its earnings before interest, tax, depreciation and amortisation, or EBITDA, margins by 50 basis points in Jul-Sep and a further improvement in the second half (Oct-Mar) of the current financial year. Coforge reported EBITDA margin of 17% for Apr-Jun against 18% a quarter ago.
The company's total expenses for the quarter rose by 6% on quarter to 22.2 bln rupees. Other expenses, which include visa expenses, increased by 13% sequentially to 6.8 bln rupees. The tax outgo rose 16% sequentially in Apr-Jun to 654 mln rupees, mainly on account of settlement of liabilities from a few years ago.
CIGNITI BUY OUT
Coforge's management is gearing up to go for an open offer for Cigniti Technologies soon. The company aims to complete the acquisition process in 9-12 months. In May, Coforge announced its plans to acquire up to 54% equity in Hyderabad-based Cigniti Technologies.
The company now holds 28% in Cigniti Technologies and expects to file an application with regulators, including the Securities and Exchange Board of India, for an open offer and other clearances, the management said. The management said Coforge has already taken control of the board of Cigniti Technologies.
Meanwhile, the company's board has approved to pay an interim dividend of 19 rupees per share. End
US$1 = 83.63 rupees
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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