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Coforge chairman resigns ahead of term end

* Mr. O. P. Bhatt has resigned as Non-Executive Independent Director and Chairman with immediate effect. The resignation follows observations from an internal audit of the Board Evaluation Exercise, which highlighted gaps in the evaluation process and disclosure of certain material information, including aspects related to the Chairman's performance.

* The board had sought an explanation from Mr. Bhatt and was reviewing his response. Mr. Bhatt stated that he acted in good faith but resigned before the board reached a final decision. The board has appointed Mr. Vivek Sharma as Interim Chairperson until 31st Jan’27.

Our take

* The issue appears to have stemmed from the Board Evaluation Exercise, in which an internal review identified concerns relating to the handling of the evaluation process and the disclosure of certain material information. The board had sought an explanation from Mr. Bhatt and was reviewing his response before he resigned.

* It is also worth noting that Mr. Bhatt's term was scheduled to end on 30th Apr’27. At the recent AGM, his reappointment resolution received 65.5% shareholder approval, below the 75% threshold required for the reappointment of an Independent Director. In our understanding, the resignation appears to have been voluntary and initiated by Mr. Bhatt himself given that his term was nearing its end.

* Mr. Sharma has been appointed as Interim Chairman until 31st Jan’27. He was earlier appointed as a Non-Executive Independent Director on Coforge’s Board in Apr’26. He is the Founder & CEO of InStride and has held senior leadership roles at Disney, Yahoo and McKinsey, with over three decades of experience across technology, digital transformation and AI. He is an IIT Delhi graduate and holds an MBA from INSEAD, France.

* We see limited implications for the underlying business as of now and await more clarity on the permanent appointment of the new chair. We therefore do not change our business outlook at this stage.

Valuations and view

* We have kept our estimates unchanged following this development. We continue to expect Coforge to be the growth leader within our coverage universe and reiterate it as our top pick. Strong deal wins, continued execution, improving cash conversion, and further margin upside from the Encora integration support our medium-term growth outlook.

* We continue to value Coforge at 29x FY28E EPS with a target price of INR2,200, implying 19% upside. Reiterate our BUY rating.

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