The past two years have been “hellish” for the IT sector—and those aren’t my words; it comes straight from the CEO of a mid-cap IT company. The numbers back it up, too. The IT index has delivered just a 14% absolute return in this timeframe, significantly lagging behind the Nifty’s 34%, even after the recent correction.
However, one company emerged as an oasis in this desert, delivering a hefty 50% return over the same period and “forging” a unique edge in the Indian IT industry. From the lame reference and the blog title, you might have guessed which company we’re talking about by now.
So, what has enabled COFORGE to outperform its peers, and can it sustain this momentum? We dive into these questions in this week’s edition!
COFORGE: Transformation from NIIT Technologies
COFORGE, originally known as NIIT Technologies, saw a turning point in 2019 when Baring Private Equity Asia (BPEA) acquired a controlling stake. This shift led to a rebrand in 2020 as COFORGE, marking a transformation in focus and operations.
With BPEA’s backing, COFORGE redirected its growth strategy, investing heavily in digital capabilities like cloud services and AI solutions. Its industry focus sharpened to high-growth sectors such as banking, insurance, travel, and healthcare. This transformation has been impactful, as the company scaled from around US$ 500 million in revenue pre-acquisition to nearly US$ 1.5 billion today.
The ownership change also brought in a performance-driven culture and new operational efficiencies, establishing COFORGE as a key digital transformation partner in the IT services landscape.
What Sets COFORGE Apart?
The outperformance was majorly attributed to its superior revenue growth compared to its Midcap IT peers. So what worked for COFORGE, where the whole IT industry was struggling a bit?
Broad-Based Growth Across Segments
COFORGE’s growth isn’t tied to one line of business; it’s across every sector it serves and every region it operates in. Whether it’s North America or other global markets, all verticals including BFSI, travel, transportation and insurance are contributing to their revenue.
Instead of relying on a single sector to drive results, COFORGE has spread its capabilities widely, making its growth more resilient to market ups and downs.
Execution-Driven Success, Not Just Strategy
Its strong results come from a relentless focus on execution—getting things done right and on time. While most companies in the sector are focused on trendy tech like AI, data, and cloud, COFORGE stands out by delivering these services with precision.
It has a unique internal structure where, instead of chasing a range of small wins, it focuses on a few critical bets—big projects—and ensure these projects succeed without compromise.
A Unique Sales Model
COFORGE uses an innovative approach to sales, blending both new client acquisition and deep relationship-building with existing clients. This approach, called the “Client Services Group,” goes beyond traditional sales.
Rather than simply selling and moving on, COFORGE’s sales teams work closely with delivery teams to ensure it is constantly adding value to clients’ businesses.
This method has led to an impressive repeat business rate of 95%, showing how well COFORGE meets client expectations, which fuels consistent growth.
The Cigniti Acquisition
COFORGE is moving beyond organic growth with the recent acquisition of a 54% stake in Cigniti Technologies, completed in 2QFY25. Furthermore, the company aims to merge Cigniti, with the swap ratio and relative valuation to be determined in due course.
This acquisition is expected to support COFORGE's target of reaching US$ 2 billion in revenue by FY27 while enhancing operating margins by 150-200 basis points. Key benefits include:
Expanding into new verticals like Retail, Hi-Tech, and Healthcare.
Strengthening its footprint across the Southwest, Midwest, and West regions of the U.S.
Enhancing capabilities in specialised assurance services, especially as AI adoption grows.
The integration is already showing positive effects. With Cigniti reporting a 6.1% sequential revenue growth (6.3% for COFORGE), the consolidate adjusted EBITDA margin rose from 12.6% in 1QFY25 to 15.8% in 2QFY25.
COFORGE expects further synergies, aiming for an adjusted EBITDA margin above 18% by 4QFY25, with early cross-selling initiatives signalling accelerated growth at Cigniti.
What’s More?
Apart from inorganic growth, several factors further strengthen COFORGE's position for future success:
Strong Order Book: In 2QFY25, COFORGE achieved a record 43% QoQ growth in orders, with its 12-month executable order book rising 18% YoY, positioning the company for strong growth in FY25.
Demand Turnaround: COFORGE was the first in its sector to announce the positive turnaround in the industry, and its strategic offerings and targeted verticals position it well for growth in the recovering market.
Enhanced Diversification: Over the past seven years, COFORGE has shifted from being heavily reliant on the airline industry to a more diversified business. It is further aided by the recent Cigniti acquisition, enhances its ability to enter new verticals and strengthen its market position.
With these promising tailwinds, COFORGE appears poised to “forge” its niche within a sector central to India's economic growth. As it continues on this growth trajectory, COFORGE may well surpass its ambitious target of becoming a US$ 2 billion firm ahead of the anticipated timeline of FY27.
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