Coforge CEO Sudhir Singh said the company’s FY27 EBITDA (earnings before interest, tax, depreciation, and amortization) margin guidance of 20.5% to 21% could be surpassed, supported by automation, tighter control on operating costs and productivity gains across functions.
The company also remains optimistic about growth in key verticals such as travel and banking, despite concerns around global macro uncertainty and geopolitical tensions.
Coforge expects strong demand linked to airport modernisation, digital transformation and AI-ready data infrastructure to continue driving business momentum, while also targeting improved free cash flow generation and faster scale in the years ahead.
In the January–March quarter (Q4FY26), Coforge reported revenue of ₹4,450 crore, an EBIT margin of 16.6%, and profit after tax of ₹612.3 crore.
These are edited excerpts from the interview.Q: You are guiding for margins of 20.5% to 21% next year, which is basically about a 200 basis points margin expansion. You have outlined a couple of factors driving this, the Encora synergy, you will cut down on cost, but how much of that 200 basis point margin expansion upgrade is on account of AI, internal AI usage and better pricing because of AI?
A: Most of it is on account of the AI interventions, the automation that we are driving through the entire function space that we have. One of the biggest things that we have done outside the results for the year that we have announced over the last 12 months has been the fact that we have made ourselves, in many ways, client zero when it comes to driving automation and AI based interjections across the organization. When we gave a guidance day before on the investor call of jumping by more than 200 basis points, that’s guidance where, given everything that’s been done, we feel that that’s a number that we believe we will hit very solidly, and we will hit for sure.
Q: You are saying most of the margin upgrade is on account of AI related factors, of this 200 basis points?
A: Let me just be very clear about that. AI based interventions across our own internal operations, what we have decided to do is to make sure that the absolute G&A cost stays exactly where it is. We don’t allow the absolute cost to go up, despite the considerable scaling that we expect to see on the revenue front ahead of us.
Q: Is the way forward, set in that way? This is what these AI foundational models can do. This is where IT services companies can come in, is the playbook, the framework, so to speak do we have that playbook now from your perspective, or you think that itself is still evolving?
A: There are going to be changes, when it comes to the LLM set, there are going to be changes and developments, as is natural when it comes to the tool sets. But as far as the services layer, the integration layer is concerned, to your immediate question, the frame is absolutely set for firms and teams that focus on labor as a default, growth is going to be increasingly hard to come by, because that’s not the value pool that is going to expand. The value pool that is going to expand, and is already expanding, is for firms and teams that can focus on AI native process redesign, that can focus on creating delivery models that also have domain enabled agents imbued in them, for firms and for teams, again, that can actually help enterprises with what they need, which is creating AI ready data pipelines.
The frame again to your immediate question, for services firms, in the integration layer, in the solution construction layer, where we are is set. While there will be changes, there will be continued advancements when it comes to foundational models, or when it comes to the tools that surround the broader AI space.
Q: You said you are planning to keep your G&A cost unchanged even as the company continues to grow very fast? What does that mean in terms of your headcount addition plans, and if AI is going to continuously drive this kind of productivity and interventions at the cost level and at the revenue level, do you think your margins can be on a structural uptrend? I am not asking for an FY28 guidance on margins, but just asking the direction, FY27 you have outlined. It goes up minimum 200 basis points. But do you think there is a structural uptrend to margins, given the AI related factors?
A: And the short answer is yes, if we can drink our own Kool Aid, which we should if we were going out there in the market as a tech services firm, talking about AI enabling enterprises, we have to be client zero for ourselves. The guidance that we have given for 20.5% to 21% EBITDA for FY27 is a guidance that will be beat for sure, and has to be beat in FY28?
Q: What about the free cash flow side? You had earlier upgraded your guidance to 70% to 80% free cash flow as a percentage of PAT, and now you have raised it to 100%. What has led to this upgrade?
A: We are looking at what we have already achieved in quarter four, our normalized free cash flow to PAT has come in at 150%. The guidance going forward for next year that we offered is only 100%. What we’ve done over the last 12 months in particular, one is what I talked about, AI interjections at scale within our operations. The second thing that we have done is we have approached the entire cost structure very closely to make sure that the Free Cash Flow (FCF) to Profit After Tax (PAT) ratio goes up. We hit one 50% in quarter four we think 100% is the least that we should aim for and the minimum that we will deliver going forward.
Q: On travel and BFS, on travel, because it’s one of your large verticals, it was a significant contributor to your growth last year. There is concern on account of the Middle East crisis. Have any of your customers, clients, paused projects, or they are rethinking the planned ramp up? And even on BFS, that was the only major vertical which declined in the quarter gone by. If you could tell us the reason and the growth outlook?
A: If you look at travel and FY26 the year that’s closed, we grew more than 70, banking, we grew more than 12%. I suspect, given the long term, the secular tailwinds that travel has because of the one order, one offer led transformation that’s happening, and because of the airport redesign as retail malls on an ongoing basis, travel is likely to be one of the fastest growing verticals for Coforge and FY27 as well.
Banking, again, should do better than the 12% growth that we delivered in FY26.
Q: Over the last many quarters, we have been pushing you, when will you go to that annualized run rate of $1.5 billion, $2 billion, now you are already doing a performer revenue of closure and $2.5 billion, if I include Encora. When do you get to around $3 billion? Nomura, in their note this morning, they are talking about $3 billion in FY28, that should be the target, $3 billion by March 2028?
A: We will get that very soon. Last nine years, we have grown at a CAGR of more than 21% and for lot the last nine years, our PAT has grown at a CAGR of more than 24%. That’s not a track record that any IT services firm over the last decade can come even close to. I totally agree with you Yeh Dil Maange More. We should be heading hopefully by the time we have this conversation, same time next year.
We should be having a conversation that’s very real around when we cross the $3 billion mark.
For full interview, watch accompanying video
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