Buy Coforge Ltd for the Target Rs 2,000 by Emkay Global Financial Services Ltd
Coforge hosted a call to address the recent board exits, providing clarity on the developments surrounding the departures and the company’s plans for board reconstitution. The company’s boardroom was jolted by two independent director exits in quick succession, with Chairman O P Bhatt stepping down on 8-Sep, followed by the resignation of independent director and NRC Chair D K Singh. However, the management and independent board members on the call reassured that the episode is confined to concerns identified in the internal audit review and is not expected to impact the company's financials or operations. The management reiterated that the matter has no bearing on financial reporting, operations, performance, or outlook, with EBITDAM/EBITM expected to sustain at 20.5-21%/>15.5% in FY27, FCF/PAT at >100%, and its 4Y ambition of $5bn revenue intact. It also reiterated that 2QFY27 is on track to deliver Coforge’s strongest-ever quarter for large-deal signings, with momentum building toward the full-year deal count achieved 2–3 years ago. Incorporating FY26 AR data and revised currency assumptions, we roll forward our valuation to Sep-28E EPS and raise our TM to 26x (from 24x), resulting in an ~11% increase in TP to Rs2,000 (from Rs1,800). Retain BUY.
Trigger behind the resignations
A KPMG internal audit examining the accuracy of board reporting found that Board Evaluation Reports were shared only with the Chairman and NRC Chair, and not with the wider board, including independent directors. The audit also flagged that the Chairman had received the lowest performance score, a finding that was not disclosed to the NRC or the board. The remaining directors subsequently sought explanations from the erstwhile Chairman and NRC Chair, who tendered their resignations on 8-Sep-26 and 10- Sep-26, respectively
Board reconstitution and independence
Vivek Sharma has been appointed interim Chairperson until 31-Jan-27 and will oversee the global search for two additional independent directors, with Egon Zehnder mandated to support the process. To preserve objectivity, Sharma has recused himself from consideration for the permanent Chair role. The permanent Chair will be elected from among the independent directors, either the existing two (Beth Boucher and Anil Chanana) or the two new independent directors appointed through the ongoing process. In addition, the reconstituted NRC, chaired by Beth Boucher, has 4 members, including three independent directors: Boucher, Anil Chanana, and Sharma.
Governance remains strong
The board viewed the recent exits as an isolated matter linked to the internal review process rather than a broader governance issue, with no bearing on Coforge’s operations or growth outlook. Continued board cohesion is reflected in the unanimous approvals of key strategic decisions since 2024, including the Encora acquisition, AdvantageGo divestment, and Sabre contract. With the remaining board working cohesively, no further churn is expected.
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