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Coforge hosted a conference call on Oct 20, 2022. In the
conference call the company was represented by Mr Sudhir Singh-CEO, Mr Ajay
Kalra-CFO, Mr Vikas Jadhav-Investor relation leader and Mr Ankur Agarwal-Head
Investor relations & M&A.
Key Highlights of the
call
Q2 FY2023 was a strong quarter for the company. The company
registered 6.2% QoQ revenue growth in constant currency terms.
Banking and Financial Services (BFS) continued to register
strong growth. Mortgage was 2% of revenue so there was no material impact from
mortgage.
SLK contribution to revenue continued at levels similar to
previous quarters and it saw low volumes in mortgage processing.
Margin: Adjusted
EBITDA increased by 190 bps QoQ. Of which 10 bps was contributed by forex
gains, while the balance 180 bps was contributed by off-shoring, utilization,
fresher’s, revenue mix, and operating leverage.
Key levers for margin improvement include off- shoring,
utilization and fresher’s becoming billable. Pricing is also one of the levers
for the company.
Current utilization stood at 77.3% as against 76.2% in Q1
FY2023.The company prioritizes growth and wants to maintain utilization levels
at the current band.
Order Book: The
company had a strong order intake of US $ 3.4 million, with 11 new logos and 2
large deals of US $ 30 million plus.
The company saw healthy increase in the 12-month executable
order book, which now stands at US$ 802 million, 93% of which is from repeat
businesses.
The company is likely to close one new deal with the help of
SLK.
Attrition: The attrition rate declined by160 bps QoQ to
16.4%.
ADR listing: As
the current market conditions are not favorable, the company has delayed its
ADR listing. However, it remains committed to the ADR listing
Outlook:
The management of the company has reiterated its annual
growth guidance of 20% in constant currency for FY2023. The company maintains
margin guidance in the range of 18.5-19% for FY2023.
Conversation with clients at ground level indicate strong
demand trend.
The financial services and travel industry contributes to
nearly 75% of the company’s global revenues and they continue to be resilient
on the demand front despite the ambient macroeconomic uncertainty.
In BFS, the company expects good spends to continue in
digital transformation initiatives. Clients
in Insurance vertical are looking to spend more on end-to-end digital transformations along with newer products. Travel
vertical is expected to perform well in FY23. In-spite of certain clients are
cautious on discretionary spending, the outlook remains positive.
EMEA will continue to remain strong as it is concentrated to
BFS and travel with few and deep client relationship.
The company has identified the road to reach US $ 2 billion
run rate and plans to achieve the same within next five years.
Dividend: The
Board has declared second interim dividend of Rs 13 per equity shares of Rs 10
each.
Management
commentary:
Commenting on the performance Mr Sudhir Singh-CEO said “A
record high twelve month locked-in order book of $800 million plus, a highly
committed workforce with one of the lowest employee attrition numbers across
the industry, a large deal machinery that continues to close pursuits at scale,
robust quarterly order intake of $300 million plus, and the absence of a
disproportionate reliance on any single client gives us confidence that revenue
growth will continue to be sustained and robust in FY’23 and beyond”
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