Coforge record order book and Encora synergies reinforce FY27 growth visibility

Investment View and Valuation

ICICI Securities maintained its BUY rating on Coforge Ltd in its July 28, 2026 result update, citing strong organic growth, a record executable order book, a robust large-deal pipeline and better-than-guided margins despite the Encora integration. The broker set a target price of Rs 1,950, valuing Coforge at about 27x FY28E EPS.

ICICI Securities expects US dollar revenue to grow at a 27.2 per cent CAGR over FY26-28E, including an 11.3 per cent organic CAGR.

Q1FY27 Financial Performance

Constant-currency revenue rose 22.3 per cent quarter on quarter, supported by US$100.7 million from two months of Encora consolidation. Organic constant-currency growth was 1.1 per cent quarter on quarter, but rose to 5.2 per cent after excluding planned exits from the low-margin India Government and data-centre businesses. This performance was materially ahead of Coforge's broadly flat Q1 guidance.

Order Book and Large-Deal Pipeline

The principal growth-supporting metric was Coforge's 12-month executable order book of US$2.23 billion, up 27.2 per cent quarter on quarter and 44.2 per cent year on year. Q1FY27 order intake was US$691 million, up 6.6 per cent quarter on quarter. This included four large deals and excluded Encora order intake and incremental work under earlier framework agreements.

Management said Q2FY27's large-deal pipeline was the strongest in Coforge's history. It includes a recently announced AI-led transformation deal worth more than US$230 million over five years. Management expects robust revenue growth from Q2FY27, while recently signed large deals should contribute more meaningfully from Q3FY27.

Geographic and Vertical Performance

By geography, Americas and EMEA grew 35.4 per cent and 18.6 per cent quarter on quarter, respectively, in US dollar terms, while Rest of World declined 7.5 per cent.

The Rest of World organic constant-currency decline reflected the planned discontinuation of an approximately US$15 million low-margin India Government portfolio and an approximately US$4 million data-centre asset divestment, rather than underlying demand weakness.

Healthcare and Hi-tech was a major organic growth driver, increasing 11.6 per cent quarter on quarter in constant currency. Management sees cross-selling potential in Encora's client base and expects certain acquired accounts to scale over the next 12-18 months. Travel, Transport and Hospitality grew 1.7 per cent organically in constant currency and remains a key growth engine.

Margins and Encora Integration

Encora's G&A cost has already been reduced by about 40 per cent. Management retained FY27 guidance for a consolidated EBITDA margin of 20.5-21.0 per cent, a standalone EBIT margin of 16.5-17.0 per cent and a consolidated EBIT margin of about 15.5 per cent or higher.

Management expects additional Encora synergies, operating leverage, portfolio rationalisation and no planned wage hike until Q4 to support margins. ICICI Securities forecasts EBIT margins of 15.7 per cent in both FY27E and FY28E. Management also expects the Encora acquisition to be EPS accretive in FY27.

AI, Data and Cloud Capabilities

AI-led engineering, data and cloud services contributed 86 per cent of consolidated Q1FY27 revenue. Coforge has more than 11,000 data and AI practitioners, eight AI platforms, 22 AI assets and over 100 reusable AI agents and accelerators.

Management said around 30 per cent of active engagements use AI in delivery workflows. Encora integration is ahead of plan, with all 45 legal entities migrated to a common S/4HANA platform. Management sees additional cross-selling potential in Encora's client base and expects selected acquired accounts to scale over the next 12-18 months.

Key Risks

• Lower-than-expected revenue growth or a slower ramp-up of large deals.
• Lower-than-expected synergies from the Encora acquisition.