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Scaling the next growth phase in the AI era

We attended Coforge's Investor Day, where management outlined its roadmap to achieve a USD 5bn revenue target by FY30, including USD 4.3bn of organic revenue, implying a revenue CAGR of ~19% and an organic CAGR of ~15% over FY26–30. The growth strategy is centered on 1) scaling strategic accounts, 2) expanding Healthcare and Public Sector while sustaining BFSI and Travel momentum, 3) deepening AI ecosystem partnerships, and 4) pursuing strategic acquisitions. The company expects AI-led opportunities to more than offset productivity-led cannibalization of legacy services, resulting in a net 25–35% increase in IT outsourcing spend. Management also reiterated confidence in sustaining Q4FY26 EBIT margin of ~16.5%, despite Encorarelated amortization headwinds, supported by the exit from low-margin businesses, AIled delivery efficiencies and G&A optimization. We remain constructive on Coforge's outlook, supported by strong deal momentum (21 large deals in FY26, +50% YoY), order intake (USD 2.3bn) and an executable order book (USD 1.8bn, +16% YoY), while Encora expands its engineering capabilities and U.S. market presence. We also believe acquisitions will remain an important pillar of Coforge's FY30 strategy, with future large-scale M&A potentially funded through a mix of debt and equity, which could result in equity dilution. Factoring in the exit of the India Government business (~USD 50mn revenue impact in FY27E), we revise our CC revenue growth estimates to 43.0%/15.1% for FY27E/FY28E from 45.7%/14.9% earlier. On margins, we raise our EBIT margin estimates to 15.3%/15.4% from 15.1%/15.3%, reflecting management's confidence in sustaining margin performance. We maintain our BUY rating with a target price of INR 2,020, based on 28x FY28E EPS.

FY2030 revenue ambition:

Management outlined a USD 5bn FY30 revenue aspiration, with organic revenue of USD 4.3bn (~15% CAGR) and ~USD 500mn from acquisitions in FY28 expected to scale to USD 700 bn in FY30. Growth is expected to be led by Public sector outside India (~17.5% CAGR), Others (~17.0% CAGR) and Healthcare (~16.8% CAGR), reflecting management's confidence in scaling these focus areas faster than the broader portfolio

Maintain margins while improving FCF:

Management reiterated its confidence in sustaining FY27 EBIT margins at ~16.5% despite the integration of Encora. It also targets FCF/PAT conversion of 100%+ in non-acquisition years and remains focused on improving RoCE and RoE through stronger profitability and growth.

Large deals engine:

The company has made strategic investments to build a proactive large-deal pipeline and improve conversion rates. Coforge won 21 large deals in FY26 versus 15 in FY25, while its win ratio improved to 47% from 38% in FY25. Management expects this momentum to continue, supported by a healthy pipeline in Healthcare and Public Sector, and sees the potential for one Public Sector client to scale to ~USD 100mn in annual revenue in the near term.

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