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Outlook remains resilient for FY24

We attended COFORGE’s Investor Day where in the management highlighted the current business environment and FY24 outlook for Coforge. The focus remains on maintaining robust execution for driving consistent performance even as the nearterm demand environment remains challenging. The 12 month executable order book offers visibility about revenue growth for FY24. Clients remain cautious and are taking more time especially with regard to signing of new deals. However, there has been no deal cancellation for Coforge so far and its deal pipeline remains steady. The company aims to drive around 50bps improvement in gross margin for FY24 through optimisation of employee cost.

Key Investor Day Highlights:

• Maintained FY24 revenue growth guidance of 13-16% in cc terms , primarily led by the current 12 month executable order book

• The near term demand environment remains challenging as client remain cautious about the macroeconomic environment. This is reflected in more time taken by clients with regard to signing of new deals

• Coforge has not seen any deal cancellation and its deal pipeline remains robust

• Its Insurance vertical is expected to report improved performance in FY24 vs FY23 and expected to grow inline with overall revenue growth

• In terms of verticals, demand environment remains strong for Travel segment; while, there are definite signs of softness in BFSI vertical

• It has guided for 50 bps improvement in gross margin for FY24 led by optimization of employee cost. However, it expects SG&A expense to increase by around 40- 50 bps in FY24. The key margin levers remain increasing fresher billability, improving price realization and positive operating leverage

• There has been some increase in vendor consolidation, but it will not result in material impact on Coforge

• It aims to drive business growth through 1) scaling up key accounts; 2) scaling up new verticals; 3) Partnerships led growth; 4) acquisitions. It is looking to start new verticals that include a) Public sector-outside India b) CPG c) Healthcare. It has recently increased investments in niche areas to acquire new capabilities.

• Currently, IT project cycles have become shorter accompanied with increased velocity.

• Multi-cloud environment is a reality of today and client are looking to optimize their cloud experience as per their budget.

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