Coforge shares: 2 reasons why this IT stock rallied 10% today

Shares of Coforge Ltd surged 10 per cent during the trading session on Wednesday on the back of stock-split and acquisition buzz, announced by the company through multiple exchange filings on Tuesday. Shares of Coforge surged 9.99 per cent to Rs 7,924.50 on Wednesday, commanding a total market capitalization close to Rs 53,000 crore. The stock had settled at Rs 7,204.10 on Monday.

The company board of Coforge has approved a stock split in the ratio of 1:5, wherein the shares of the company with a face value of Rs 10 each will be split into 5 shares of Rs 2 each, said the company in an exchange filing. This will be the first instance of the IT solutions company splitting its shares.

In another exchange filing, Coforge announced that it has acquired two entities through its subsidiaries. The company said that via its subsidiary Coforge Inc, it has signed a stock purchase agreement with Rythmos Inc and its stockholders, involving the acquisition of all the outstanding shares of Rythmos.

Coforge Technologies Australia, a step-down subsidiary of Coforge, has signed a share sale agreement with TMLabs and its shareholders for the purpose of acquiring all outstanding shares of the company, said the company in the exchange filing.

Shares of Coforge have dropped nearly 28 per cent from its 52-week high at Rs 10,017.95, hit in December 2024. However, the stock is up 85 per cent from its 52-week low at Rs 4,291.05 in May 2024. However, the stock is down 20 per cent on a year-to-date (YTD) basis.

Coforge posted a 10 per cent YoY growth in adjusted net profit for the December quarter to Rs 268 crore, The revenue stood at Rs 3,318.2 crore, up 40.3 per cent YoY in constant currency terms. Cigniti Technologies is set to merge with Coforge with effect from April 1, 2025.

Tier-2 IT companies delivered relative outperformance despite Q3 seasonality, said ShareKhan, which has picked Coforge from the IT pack. "We have revised our earnings estimates to factor Q3FY25 performance as revenues were above estimates, while margins were in line, but profit were below the expectations," it said with a 'buy' rating on the stock with a target price of Rs 10,490.

Management expects the coming year to be sustainable. Management expects further improvement in Cigniti margin with synergy exceeding its expectation. Management expects cross-sell synergies to flow in from Q4 or Q1, said Nuvama Institutional Equities, with a 'buy' rating and a target price of Rs 10,0850 on the stock.

Among other brokerage firms, Indsec Research had a 'hold' rating on Coforge with a target price of Rs 9,275 on the stock, while Dolat Capital gave it a sell tag. However, its target of Rs 8,320 has already been met and the stock its trading below the targets.