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Encora integration execution
View Risks →Coforge Ltd — Q3 FY26
Coforge delivered a strong Q3 FY26 with 4.4% sequential CC revenue growth, driven by six large deal wins and a record executable order book of $1.72B, up 30% YoY.
bullish
high
Financial stats pending filing verification
2-Minute Summary
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Coforge delivered a strong Q3 FY26 with 4.4% sequential CC revenue growth, driven by six large deal wins and a record executable order book of $1.72B, up 30% YoY. Year-to-date dollar revenue growth stands at 32.8%, with top 10 accounts growing 47% YTD. EBIT margin of 13.4% expanded 191bps YoY, though down 60bps QoQ due to wage hikes and hedge losses; underlying EBIT excluding hedge losses was 14.4%. Management guided to 14% EBIT for FY26 and expects FY27 to be exceptional, fueled by strong pipeline in banking, travel, healthcare, and public sector. The Encora acquisition ($2.35B) is on track for regulatory approvals by March-April, with no equity dilution planned. Risk: integration of Encora and potential margin pressure from large deal ramp-ups.
कोफोर्ज ने तीसरी तिमाही में मजबूत प्रदर्शन किया। कंपनी की आय पिछली तिमाही से 4.4% बढ़ी, जिसमें छह बड़े सौदे जीते और ऑर्डर बुक 1.72 अरब डॉलर (पिछले साल से 30% अधिक) रही। साल की अब तक की आय 32.8% बढ़ी, और शीर्ष 10 ग्राहकों से आय 47% बढ़ी। मुनाफा (EBIT) 13.4% रहा, जो पिछले साल से बेहतर है, लेकिन वेतन वृद्धि और मुद्रा घाटे के कारण पिछली तिमाही से थोड़ा कम हुआ। कंपनी ने पूरे साल 14% मुनाफे का अनुमान लगाया है और अगले साल को शानदार बताया है, खासकर बैंकिंग, यात्रा, स्वास्थ्य और सरकारी क्षेत्रों में। एनकोरा का अधिग्रहण (2.35 अरब डॉलर) मार्च-अप्रैल तक पूरा होने की उम्मीद है, जिसके लिए नए शेयर जारी नहीं होंगे। जोखिम: एनकोरा को शामिल करना और बड़े सौदों से मुनाफे पर दबाव।
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Read Transcript →Quarter Snapshot
Sequential CC Revenue Growth
4.4%
+4.4% QoQ
Sequential constant currency revenue growth in Q3 FY26, following 5.9% and 8% in prior quarters.
Executable Order Book (Next 12 Months)
$1.72B
+30% YoY
Record signed order book for next 12 months, indicating strong future revenue visibility.
Large Deals Signed in Q3
6
+2 vs Q2 FY26
Six large deals signed in Q3, with two from banking, one each from travel, insurance, and healthcare.
Attrition Rate (LTM)
10.9%
-0.3pp QoQ
Last twelve-month attrition fell further, among the lowest in the industry.
What Changed vs Last Quarter
NEW
14% EBIT margin for FY26
Management reiterated guidance of 14% EBIT margin for full fiscal year 2026, with Q4 expected to deliver 15% EBIT.
NEW
Exceptional FY27 growth
Management expects FY27 to be an exceptional year, with continued robust growth driven by large deal pipeline and key account momentum.
NEW
No EPS dilution from Encora in FY27
Management confirmed that the guidance of no EPS dilution in FY27 for the combined business remains intact, even after finalizing a term loan instead of QIP.
DROPPED
50 bps EBITDA margin expansion in FY25
Management expects adjusted EBITDA margin to increase by approximately 50 basis points in fiscal year 2025.
DROPPED
Revenue growth correlated with 17.3% executable order book growth
Management pointed to the 17.3% YoY growth in the executable order book as a strong indicator of robust organic revenue growth in FY25.
DROPPED
Target $2 billion revenue by FY27 with 150-250 bps margin improvement
Post Cigniti acquisition, Coforge aims to become a $2 billion firm by fiscal year 2027 with operating margins improving by 150-250 basis points.
DROPPED
Net cash company by end of FY25
CFO Saurabh Goel stated the company endeavors to be a net cash company by the end of fiscal year 2025.
NEW RISK
Encora integration execution
Integration of Encora may face challenges in achieving synergies and margin targets, with integration expenses expected in Q4 and Q1.
NEW RISK
Hedge losses impacting margins
Hedge losses of INR 434 million in Q3 adversely impacted reported EBIT by 26bps; management is revisiting hedging strategy but no final decision yet.
NEW RISK
Unbilled revenue and working capital increase
Unbilled revenues increased due to nature of contracts; while management has guardrails, continued rise could pressure cash flows.
RISK GONE
Integration risk from Cigniti acquisition
The large acquisition may distract management and pose integration challenges, potentially impacting organic growth momentum.
RISK GONE
AI disruption in testing services
Generative AI could disrupt traditional functional testing, posing a risk to Cigniti's revenue if not proactively addressed.
RISK GONE
Client churn in Cigniti's long tail
Cigniti's client portfolio has churn in smaller accounts, which could affect revenue stability post-acquisition.
RISK GONE
Margin pressure from large deals
New large deals, especially in new accounts, come with lower initial margins, which could pressure overall profitability.
Fast read
Guidance and risk preview
Management reiterated guidance of 14% EBIT margin for full fiscal year 2026, with Q4 expected to deliver 15% EBIT.
Integration of Encora may face challenges in achieving synergies and margin targets, with integration expenses expected in Q4 and Q1.
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