More Stories

Informist, Tuesday, Jan. 14, 2025

 

By Rajesh Gajra

 

NEW DELHI – The like-to-like sequential revenue growth of Coforge Ltd. in the quarter ended December is likely to be strong but below the like-to-like or organic growth recorded in the September quarter. The September quarter was substantially robust for the company in terms of revenue growth, both in constant currency terms and in rupee terms, amid strong order execution and a steadily growing order book. The sequential revenue growth of the company in the December quarter may not match the exceptional performance of the September quarter, but it will be higher than that in the prior seven quarters up to the June quarter of 2024-25 (Apr-Mar).

 

For the December quarter, the consolidated net profit of Coforge is seen at INR 2.68 billion and the consolidated revenue is estimated at INR 32.38 billion, according to an average of estimates by 11 brokerages. Sequentially, the net profit is estimated to rise 33%, while the revenue is estimated to be 5.7% higher. The projections for the company's consolidated net profit range from INR 2.50 billion to INR 3.02 billion, while those for revenue range from INR 32.03 billion to INR 32.68 billion. In constant currency terms, Coforge's revenue is likely to be $386.85 million, up 4.7% on quarter, according to an average of estimates by six brokerages.

 

In the December quarter, Coforge's sequential revenue growth may be lower than that clocked in the previous quarter. The estimated sequential revenue growth of 4.7% in constant currency terms and 5.7% in Indian rupee terms is on a like-to-like basis since both the December and September quarters include Cigniti's financials.

 

In the September quarter, Coforge's like-to-like revenue growth was represented only in the organic growth number, which was 6.3% in constant currency terms and 6.8% in rupee terms, excluding Cigniti's revenue. This indicates a slowing down in revenue growth, but in the backdrop of lower sequential revenue growth numbers for seven consecutive quarters up to the June quarter, according to data available with Informist, it is still an improvement.

 

Coforge's executable order book over the next 12 months was $1.31 billion at the end of the September quarter, including that of Cigniti Technologies Ltd., whose acquisition was completed in the September quarter. Excluding Cigniti, the company's executable order book over the next 12 months was $1.11 billion, as of Sept. 30, up from $1.07 billion as of Jun. 30.

 

Analysts see the company's revenue growth in the latest quarter to be higher despite soft demand, as the company has recently shown clear capability of strong order execution in key markets, particularly in continental Europe. Revenue growth is also seen across most of the key verticals the company operates in, including the banking and financial services vertical. In the post-earnings analysts' call in October, the company's management had asserted that "overall, our confidence in the commitment that we offered at the beginning of the year to deliver robust and sustained growth is ironclad."

 

Coforge's profitability, in terms of the earnings before interest and tax, or EBIT margin, for Oct-Dec is expected to only inch up, reined in due to rising staff costs on account of employee stock options granted to the company's leadership team, including those issued to Cigniti's leadership team. The company had said in October that the employee stock options cost "is expected to go up in a range of 180 to 200 bps (basis points) per quarter for next two quarters (Oct-Dec and Jan-Mar)." The net profit growth for Oct-Dec is expected to trail the EBIT and revenue growth.
 

Brokerage Kotak Securities' institutional equities team estimates Coforge's sequential revenue growth to be broad-based and estimates it to rise 4.7% in constant currency terms. The brokerage forecasted a 5.1% growth for Coforge's standalone business and 3.2% for Cigniti. "Coforge has robust executable orderbook, providing reasonable comfort on improvement in revenue growth despite limited pickup in demand," the brokerage said in its preview report.

 

Brokerage Indsec Securities and Finance expects the company to have faced currency headwinds in the December quarter but which it believes will be "offset (by) organic growth of around 5% qoq (quarter on quarter) and Cigniti growth of around 3% qoq." The brokerage estimates Coforge's revenue growth, in rupee terms, to be 5.2% on quarter.

 

Coforge's consolidated EBIT margin for the December quarter is likely to be 12.7?ter including Cigniti's financials, higher than the organic EBIT margin of 12.2% in the previous quarter. The margin expansion will likely be partly offset by a jump in employee stock options granted to the leadership of Cigniti. In the September quarter, the consolidated employee stock options plan cost, including that of Cigniti's, had risen 11.4% on quarter to INR 222 million. Excluding Cigniti, the cost was up 5.5% sequentially.

 

The company has guided for an additional net increase of 120-140 bps on quarter in employee stock options plan cost for the December and March quarters. This translates to a 12.6-12.8% jump in the consolidated employee stock options plan cost in the December quarter, which will limit the company's EBIT expansion. Coforge's "EBIT margin expansion could have been higher but for higher ESOP costs," Kotak Institutional Securities said in its preview report on the company's December quarter earnings.

 

The company will detail its December quarter earnings on Jan. 22. Post the earnings announcement, the market will keenly watch out for the company management's commentary on demand outlook and deals pipeline for 2025 and 2025-26 (Apr-Mar).

 

According to Kotak Securities, post the earnings announcement by the company, the investors' focus will likely be on the "outcome of budgeting exercise, ...integration process, synergy revenues and progress on growth and margin increase in Cigniti, and margin pressure in new deals and timeline for recovery in higher margin segments".

 

In the quarter ended September, Coforge's consolidated net profit rose 52% on quarter to INR 2.02 billion, while revenue from operations jumped 28% sequentially to INR 30.62 billion. Shares of Coforge ended Tuesday 1.3% down at INR 8,592.40 on the National Stock Exchange.

 

Following are the Oct-Dec consolidated earnings estimates for Coforge based on reports from 11 brokerages:

 

Brokerage name	Net Sales	Net Profit	Revenue	EBIT margin
	(In INR million)		(In $ millio)	(In %)
Centrum Broking Ltd.	32,381	2,532	----	12.2
Elara Securities (India) Pvt. Ltd.	32,031	2,642	381.0	13.1
Emkay Global Financial Services Ltd.	32,484	2,583	----	----
IDBI Capital Market Services Ltd.	32,499	2,616	385.1	12.7
Indsec Securities and Finance Ltd.	32,200	2,500	400.0	12.8
JM Financial Institutional Securities Pvt. Ltd.	32,504	3,016	----	----
Kotak Institutional Equities	32,282	2,607	----	----
Motilal Oswal Financial Services Ltd.	32,521	2,985	386.0	13.7
Nirmal Bang Equities Pvt. Ltd.	32,677	2,769	385.0	12.3
Nuvama Wealth Management Ltd.	32,371	2,609	384.0	11.9
Sharekhan Ltd.	32,240	2,650	----	----
Average	32,380	2,682	386.9	12.7

 

End

US$1 = INR 86.63

 

 

Edited by Tanima Banerjee

 

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2025. All rights reserved.