Coforge Seals Record Deals In Q3 At $345 Mn

The firm signed three large deals, including a $50 million-plus client, and two $30 million-plus contracts in terms of the total value. It signed 11 new clients during the period. Its rupee revenue rose 4.9% sequentially and 24% year-on-year to ₹2,055.8 crore, while dollar revenue was at $251.7 million, up 3.7% sequentially and 20.7% from a year ago in constant currency.

Coforge said its executable order book, or the total contract value of deals for the next 12 months, is $841 million. It reported the lowest attrition levels among IT services companies, at 15.8%, falling 0.6%, sequentially. For the fourth straight quarter, Coforge signed $300-million-plus deals in Q3. Interestingly, the company is seeing a surge in high-value contracts amid a year of falling growth for India’s IT services sector, declining around 26% in 2022 from a year ago, as per the 30-share BSE IT index.

Coforge’s Q3 results were published before the opening of trading on Friday. The company’s shares ended the day up 3.38% from the previous close at ₹4,100.55 apiece. The BSE IT index closed 0.48% down on Friday, at ₹29,463.99.

InQ3, Coforge announced a ‘digital and metaverse centre of excellence showcase, a virtual reality services platform. Its India revenue, accounting for 3.5% of revenue, fell 8.5% to ₹72.9 crore, but this was offset by revenue growth in North America and Europe.

Coforge’s financial results are in line with the rest of the domestic IT services industry, which has seen four out of the top six companies post strong numbers. Barring Tata Consultancy Services, Infosys, HCLTech and Wipro all outperformed analyst estimates.

As a result of its financial performance during the seasonally weak quarter, Coforge chief executive, Sudhir Singh, upgraded the company’s FY23 annual revenue growth guidance to 22%. The company also announced a dividend of ₹19 per share.

Analysts said that Coforge’s overall performance is based on the company’s focus on specific high-growth sectors such as travel — in contrast to how large-cap IT companies are facing market challenges due to slowdown in tech spending in traditionally large sectors, such as banking, financial services and insurance (BFSI).

Ruchi Burde Mukhija, vice-president of equities research and financial services firm Elara Capital, said that demand among offshore (non-Indian) clients for digital transformation and automation remains strong.

“Coforge highlighted that they work with 50 of the world’s top 100 companies, so it’s not just that smaller companies are working on small ticket-size digital transformation projects. Even Infosys has seen good deal signings, and this is due to the clients of domestic IT services firms focusing on cost optimisation," she said.

Mukhija added that the market demand, despite inflationary concerns in the West, is “not as bad as what initial headlines had projected."

“The demand buoyancy remains strong, and companies that are doing well in specific verticals that are seeing strong demand are set to do well in the upcoming quarters as well," she added.

Coforge’s December quarter performance bucks the trend of large-cap IT services firms signing smaller value deals of shorter tenures and TCVs, as against the previous trend of large deals making the headlines. However, most firms reported a resilient December quarter — for instance, Infosys disclosed a TCV of $3.3 billion in new deals, while Wipro disclosed an annual growth of over 30% in the revenue it earned from offering ‘product platforms’ to its clients.

Product platforms refer to software-based platforms, such as those made by SAP, Microsoft or IBM — which an IT services firm leases from a software maker, and subsequently provides to clients.

A January 13 report on the Indian IT services sector by equities research firm, BNP Paribas, said that the trend of deal signings by Indian IT firms showcase resilience and robustness across the world in terms of the demand for tech products and services. Kumar Rakesh, vice-president of equities research at BNP Paribas, said in the report that digital services, automation and cloud products were among the most in-demand services among the multiple long-tenured deals signed through the quarter.