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Informist, Sunday, May 3, 2026

By Shakshi Jain

NEW DELHI – Coforge Ltd. is expected to report a moderate sequential growth in its revenue for the March quarter, along with a slight increase in its adjusted net profit, led by a ramp-up of large deals and lower foreign exchange losses. Operating margins of the company are likely to expand sequentially, aided by operational efficiencies, higher utilisation, and depreciation of the rupee against the dollar, according to analysts. Further, the impact of wage hikes has already been absorbed in the December quarter, usually a seasonally weak quarter on account of furloughs, analysts added. .

If analysts' consensus estimates hold, the company's bottom line will revert to sequential growth after declining in the December quarter, while the revenue growth will be faster than in the trailing quarter. Further, this would likely mark the eighth consecutive quarter of sequential revenue growth for the company. 

Coforge's consolidated net profit for the March quarter is expected to rise over 10% on quarter to INR 4.38 billion, according to the average of estimates from 15 brokerages. This excludes the one-time expenses of INR 1.48 billion incurred in the trailing quarter. Including the impact of the one-time costs, the company's bottom line for the reporting quarter is likely to jump over 75%.

On a year-on-year basis, the mid-cap company's adjusted bottom line is seen soaring almost 69%. This would, however, be slower than the year-on-year growth reported for the December quarter. The highest net profit estimate for the reporting quarter is INR 4.94 billion by Nirmal Bang Equities Pvt. Ltd. and the lowest is INR 3.90 billion by Indsec Securities and Finance Ltd.

The company's consolidated revenue for the March quarter is expected to rise over 6% sequentially and almost 31% on year to INR 44.56 billion, according to the average of the estimates. The highest revenue estimate is INR 45.94 billion by Dolat Capital Market and the lowest is INR 43.73 billion by Nomura Financial Advisory and Securities (India) Pvt. Ltd.

For the December quarter, the company had reported a consolidated net profit of INR 2.5 billion on revenue of INR 41.88 billion. In the absence of one-time costs reported in Oct-Dec, the net profit would have been around INR 3.98 billion, the change in tax notwithstanding. For the year-ago quarter, the company's consolidated bottom line was INR 2.60 billion, excluding exceptional items, and its revenue was INR 34.1 billion.

Indsec Securities said most verticals should have done well in the March quarter, except for the travel category, which could have been impacted by concerns tied to the West Asia war. Motilal Oswal Financial Services Ltd. warned that these war-related concerns may have led to potential delays in some engagements of the company in the travel vertical.

In dollar terms, Coforge's March-quarter revenue is estimated at $485.72 million, as per the average of estimates from 12 brokerages. This would be slightly higher than $478.2 million reported for the December quarter.

Overall, analysts expect the company to report sequential revenue growth in the range of 1.5-3.5% for the reporting quarter, in constant currency terms, according to estimates from 14 brokerages. For the December quarter, the company had recorded a growth of 4.4% on the metric. "Softness (in revenue growth) is likely due to slower conversion of TCV (total contract value) to revenue in larger deals," ICICI Securities said.

The company bagged 16 large deals in the first three quarters of 2025-26 (Apr-Mar).

Most brokerages expect Coforge to report deal wins of over $500 million for the March quarter, broadly in line with the trend seen in Apr-Dec. "The company announced two deals of more than $100 million in the quarter (Jan-Mar)," Kotak Securities said. The company had targeted closing 20 large deals in FY26.

MARGIN EXPANSION

Coforge's consolidated earnings before interest, tax, depreciation, and amortisation for the March quarter is expected to rise to INR 8.48 billion from INR 7.30 billion in the trailing quarter, as per the average of estimates from four brokerages.

The company's earnings before interest and tax margin for the reporting quarter is expected to expand sequentially by 140 basis points to 14.8%, according to the average of estimates from 10 brokerages. This falls short of the company's expectation of hitting 15% EBIT margin for the March quarter in order to meet the target of 14% margin for the full year.

Analysts attributed the likely margin expansion to operational efficiencies, a change in revenue-mix, higher utilisation, the depreciation of the Indian unit against the dollar, and moderation in pass-through of artificial intelligence-related efficiency gains to clients.

"Coforge is seeing AI-led productivity gain-sharing in new deal signings, which is being offset by new volumes of work. It also has lower exposure to managed services deals where deflation is highest," ICICI Securities said.

For 2025-26 (Apr-Mar), the company is expected to report a consolidated net profit in the range of INR 13.73 billion to INR 16.15 billion, as per estimates from three brokerages. The company's consolidated revenue for the 12 months ended March is seen in the range of INR 162.61 billion to INR 163 billion.

Coforge will announce its March quarter earnings on Tuesday. Investors await the management's commentary on demand across verticals, large deal wins, order book and its conversion to revenue, materialisation of the deal pipeline, and the free cash flow and capital allocation strategy. Industry watchers are also curious about details tied to expansion into high-growth artificial intelligence-led services, the technology budget of clients for calendar year 2026, deflationary impact of AI on pricing, and the overall outlook for FY27.

Market participants will also watch out for updates on the progress tied to the acquisition and integration of Encora Digital LLC. Last month, the company had said it secured all regulatory approvals and statutory clearances in multiple jurisdictions for the acquisition of the US-based AI software engineering firm.

"We look forward to the two firms merging by the end of April 2026 and subsequently operating as a $2.5-plus billion firm on a run rate basis, with a $2 billion enterprise core of AI-led engineering, data, and cloud services," Coforge Chief Executive Officer Sudhir Singh had said.

Shares of the company ended Thursday at INR 1,195.90 on the National Stock Exchange, down 0.7% from the previous close. The stock is down over 29% since Coforge reported its results for the December quarter. It is also down 40% from its 52-week high of INR 1,994, recorded on Jul. 8.

Of the 16 research recommendations on Coforge available with Informist, 11 have a 'buy' call on the stock, while four have a 'hold' and one has a 'sell' recommendation. The average target price of the 'buy' recommendations is INR 2,086 and that of the 'hold' calls is INR 1,823. This implies an upside of over 74% and more than 52% from Thursday's closing price, respectively.

Following are the Jan-Mar earnings estimates for Coforge from 15 brokerages in descending order of the estimate of net profit in INR billion:

End

US$1 = INR 94.91

Edited by Tanima Banerjee

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