Shares of Coforge Ltd are in focus on Tuesday morning, as the board of the company will consider stock split today. If announced, it would be the first stock split by the company ever. Coforge had announced a bonus issue in the ratio of 1:2 in August 2007. The IT firm has been a consistent dividend payer of later.
In a filing earlier, Coforge said: "The meeting of board of directors of the company is scheduled to be held on Tuesday, March 04, 2025, inter-alia to consider the proposal of alteration in the share capital of the company by sub-division/ split of the existing Equity shares of the face value Rs. 10/- each, fully paid-up, in such a manner as may be determined by the board of directors subject to approval of the shareholders of the company and any approvals, as may be required under applicable law."
Kotak Institutional Equities recently hosted the Coforge management for its Chasing Growth 2025 conference. Among key takeaways, it noted that Coforge's EBIT margin has a 150 basis points (bps) upside by FY2027. The IT firm is expecting a 100 bps tailwind reduction in ESOP costs. Leverage of scale and lower depreciation charge as a percentage of revenue may provide the additional 50 bps margin upside, as per the management.
As far as Q4 is concerned, Coforge is expecting growth moderation on sequential basis, with some upside possible. Large deal will contribute to revenue from 1QFY26, it suggested.
Nuvama said Coforge's strong Q3 performance and solid total contract value have set up the base for 20 per cent-plus growth in FY26. This coupled will margin expansion should yield 25 per cent-plus earnings CAGR over FY24-27. The brokerage retained a buy on the stock with a target of Rs 10,850.
Coforge is focusing on growth rather than margin improvement. Coforge only uses forward contracts for hedging. AI adoption will not impact Coforge immediately. AI adoption can simplify legacy modernisation, presenting opportunities for Coforge, as per the management.
In Q3, a quarter normally regarded as a seasonally weak quarter for the industry, Coforge registered a sequential CC growth of 8.4 per cent and a YoY CC growth of 40.3 per cent. Despite furloughs during the quarter, BFS grew 20.4 per cent YoY. The insurance vertical grew 20.3 per cent YoY.
"The travel vertical grew 43.4 per cent YoY, and the government vertical outside India grew 48 per cent YoY. There is no over-reliance on any one growth vector. All vectors—including geo-based units, industry-based units, service lines, and client-size cohorts—are growing robustly," JM Financial noted.