According to CEO Sudhir Singh, Coforge doesn't see a shift in demand very soon

According to CEO Sudhir Singh, Coforge doesn't see a shift in demand very soon

According to CEO Sudhir Singh, Coforge doesn't see a shift in demand very soon

The business intends to keep recruiting in order to foster expansion.

According to Singh, the business is working hard on the ground, and clients' yearly technology budgets in 2024 will be the same as those in 2023 everywhere.

According to Sudhir Singh, CEO of Coforge, there hasn't been any discernible growth in the yearly budget of technology clients, and demand in the industry is predicted to be low in the foreseeable future.

Singh said that Coforge would nonetheless expand in spite of the sluggish demand and the hazy macroeconomic climate.

Therefore, Singh told Moneycontrol, "we will be scheduling for growth as we did earlier this year, while the demand environment will remain tough, similar to how it has been in the current year (2023)."

According to Singh, the business is working hard on the ground, and clients' yearly technology budgets in 2024 will be the same as those in 2023 everywhere.

Coforge's net profit increased by more than 31% during the October–December quarter of FY24, from Rs 181 crore to Rs 238 crore. Revenue increased sequentially by over 2% to Rs 2,323 crore.

margin and furlough

The third quarter saw an increase in the IT services company's EBITDA margin of 39 basis points (bps) to 18%. The third quarter's holidays negatively affected operating margins by around 50 basis points.

"Across the industry, as well as with us, there were extremely prolonged furloughs," Singh said.

Furlough is the term used to describe situations in which customers in the US and Europe choose not to pay Indian IT businesses' outsourced workers on certain days when their business is closed, often around Christmas and New Year's.

"So, whatever we lost on the space between words front, we should make up for it in the fourth quarter (Q4) as well as see a very significant improvement in margins in the fourth quarter (Q3)," Singh said.

When asked why Coforge's margins are lower than those of the majority of its rivals, Singh said that if the topline exceeds $2 billion (Rs 16,600 crore), the operating margin would rise by 150–300 basis points.

Because there were more furloughs in the December quarter, employee expenses also decreased. This is due to the fact that a sizable chunk of the revenue from a significant transformation project that closed during the quarter was reported without the related payroll expenses.

To Rs 1,345 crore, the expenditure of employee benefits decreased 5.2% during a consecutive period.

employee data

Contrary to what several of its rivals said in Q3, Coforge intends to keep hiring staff in light of its ongoing expansion.

"This company's primary, secondary, and third goals are to increase growth in the next year. Thus, in order to sustain that expansion, we will keep hiring, Singh said.

All of the previous quarter's appointment offers have been fulfilled by the organization.

"We anticipate a minimum of ten percent growth in the number of employees," Singh said, indicating that a combination of new hires and lateral hires will be included.

The company's workforce decreased 38 times in a row in Q3, leaving 24,607 workers. The number of workers at the organization rose by 2,102 in the last year. The December quarter had a 90 bps year-over-year decline in attrition, at 12%.

Artificial Intelligence

Singh said that although generative artificial intelligence (AI) does not provide large profits, Coforge is able to produce more potent solutions thanks to the new technology.

It's producing net additional income, or simply GenAI. More significantly, however, it is assisting us in rethinking the solutions we provide for each of our current service lines, according to Singh.

Forty percent of Coforge's further investments in FY25 will go toward the AI industry. A "completely different tone" has emerged in automation, analytics, product engineering, and business process outsourcing, according to him.

regional separation

Coforge's demand pipeline was almost equally distributed across regions during a period in which the majority of IT businesses were having difficulty in the North American market.

"We think North America, no less than from our perspective, still has a lot of things to offer to help us drive growth," Singh said.

The "Americas" region's share of the company's overall sales decreased to around 47% in Q3 from approximately 49% in Q2. Contributions from Europe, West Asia, and Africa decreased to 40% from 38.8%. The "Rest of the World" portion grew steadily, going from 11.8 percent to over 13 percent.