Coforge’s Strategic Acquisition of Cigniti to Fuel $2B Revenue Ambition
About the stock
Coforge Ltd. operates as an IT solutions provider with a focus on digital transformation and technology services. Its business model revolves around offering consulting, implementation, and support services in areas such as cloud computing, cybersecurity, analytics, and enterprise applications. The company provides solutions in product engineering, digital solutions, data analytics, artificial intelligence/machine learning (AI/ML), cloud, business process re-engineering, digital process automation, and Low Code/No Code platforms.
Coforge Q1 revenue up 8.1% YoY
In Q1FY25, Coforge Ltd. reported consolidated financial results that showed modest growth and improved profitability. The company’s revenues increased by 1.8% QoQ, reaching INR 24,008 million. Coforge’s EBITDA margin saw a substantial improvement, rising to 17.02%, which represents a 14.02% increase YoY. The company reported a PAT of INR 1,332 million for Q1. However, when adjusted, the consolidated PAT reached INR 2,285 million, marking a substantial 28.2% growth compared to the same period in the previous year.
Robust Order Book
Coforge Ltd. demonstrated strong business momentum in Q1FY25, securing a robust total order intake of $314 million, marking the tenth consecutive quarter of over $300 million in new orders. The company signed two large deals and added 10 new logos to its client portfolio. Coforge’s order book for the upcoming 12 months grew to $1,070 million, representing a substantial 19.3% increase compared to the same period last year. The company maintained one of the lowest IT attrition rates in the industry at 11.4% (LTM). The company’s global workforce expanded to 26,612 employees as of June 30, 2024, reflecting a net addition of 1,886 people and a 7.6% sequential increase.
Acquisition of Cigniti Technologies
In May 2024, Coforge entered into a definitive Share Purchase Agreement to acquire a 54% stake in Cigniti Technologies Ltd. for approximately Rs. 2000 crore. This strategic acquisition is expected to support Coforge’s growth ambitions, potentially helping it reach $2 billion in revenue by FY27 and establish three new major verticals: Retail, Technology, and Healthcare. The Cigniti acquisition is set to significantly boost Coforge’s presence in North America, with the company projecting a nearly 33% increase in revenue.
Coforge formed an alliance with Fiorano in May 24, launching a new offering that provides ISO 20022 Compliance as a Service. In March 2024, it also announced its multi-year strategic partnership with Carnival UK, for precision quality engineering & testing.
Strategic Partnerships
Coforge has recently formed two notable strategic partnerships. In May 2024, it joined forces with Fiorano to offer ISO 20022 Compliance as a Service. Earlier, in March 2024, the company entered into a multi-year agreement with Carnival UK, focusing on delivering precision quality engineering and testing services.
Consolidated Income Statement – Q1FY25 (INR Mn)
| Particulars | Q1 FY25 | Q4 FY24 | QoQ% | Q1FY24 | YoY% |
| Gross Revenues | 24008 | 23585 | 1.8% | 22210 | 8.1% |
| Gross Profit | 7911 | 8034 | -1.5% | 6808 | 16.2% |
| Selling / General and Administration | 3625 | 3561 | 1.8% | 3264 | 11.1% |
| Adj. EBITDA | 4286 | 4473 | -4.2% | 3545 | 20.9% |
| Cost of ESOPS | 199 | 22 | -10.5% | 216 | -8.0% |
| EBITDA | 4087 | 4251 | -3.8% | 3316 | 23.3% |
| Depreciation and Amortization | 815 | 846 | -3.7% | 757 | 7.7% |
| Other Income (net) | -272 | -452 | -39.8% | -152 | 78.9% |
| PBT (Excl. Transaction related expenses) | 3000 | 2953 | 1.6% | 2407 | 24.7% |
| Transaction Related expenses | 953 | 96 | 889.0% | 0 | |
| $1 Bn Milestone celebration cost | 0 | 165 | -100.0% | ||
| Profit Before Tax | 2047 | 2856 | -28.3% | 2242 | -8.7% |
| Provision for Tax | 654 | 564 | 16.0% | 485 | 34.8% |
| Minority Interest | 61 | 55 | 10.5% | 104 | -41.3% |
| Profit After Tax | 1332 | 2237 | -40.5% | 1653 | -19.4% |
| Adj. Profit After Tax* | 2285 | 2334 | -2.1% | 1782 | 28.2% |
| Basic EPS | 20.9 | 36.2 | -42.2% | 27 | -22.6% |
| Adj Basic EPS | 35.9 | 38.1 | -5.9% | 29.2 | 23.1% |
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