Sagility’s US payer outsourcing and acquisitions underpin growth and margin expansion

Investment View

Emkay Research initiated coverage of Sagility Ltd with a BUY recommendation on September 20, 2026. The broker views Sagility as a specialised, technology-enabled healthcare operations provider with a sticky revenue base. About 90 per cent of revenue comes from US payers, the company serves seven of the top 10 US health plans, and its five largest clients have average relationships of about 18 years.

Emkay believes rising medical and administrative costs, increasing regulatory complexity and demand for operating efficiency should support structural outsourcing by US payers.

Growth Strategy and Opportunity

Sagility’s growth thesis rests on mining existing clients, entering adjacent workflows, cross-selling services, expanding in mid-sized and small payers, adding new logos and pursuing acquisitions. Management targets roughly 8-12 new logos annually.

There is substantial cross-sell headroom in the mid-market portfolio: 63 per cent of clients use only one of Sagility’s five practice areas, while only 4.6 per cent use four or five. The company is also pursuing larger transformation-led managed-services contracts and outcome-based pricing structures, including per-member-per-month and gain-share models.

Financial Performance and Outlook

Sagility reported USD revenue CAGR of about 16 per cent and rupee revenue CAGR of about 20 per cent during FY23-FY26. FY26 growth benefited from full-year BroadPath consolidation, a better-than-expected annual enrolment and open-enrolment season, and expansion within mature accounts. Seasonal enrolment revenue doubled to about 6 per cent of total FY26 revenue, or about USD 50 million, from about 3 per cent in FY25.

Management expects low double-digit organic growth and an adjusted EBITDA margin of 24-25 per cent in FY27. Its medium-term low-to-mid-teens organic growth objective incorporates annual revenue deflation of about 1.5-2.0 per cent from pricing, productivity, offshoring, conventional automation and AI.

Emkay estimates USD revenue CAGR of about 12 per cent and rupee revenue CAGR of about 15 per cent over FY26-FY29E. It forecasts FY27E revenue of Rs 87,034 million, EBITDA of Rs 21,167 million and adjusted PAT of Rs 11,403 million. Emkay expects EBIT margin to improve by about 40 basis points to 18.1 per cent by FY29E and EPS CAGR of about 20 per cent over FY26-FY29E. Lower legacy amortisation and repayment of promoter debt by FY27-end are expected to aid earnings and reduce finance costs.

Acquisitions, Capabilities and AI

Acquisitions have broadened Sagility’s capabilities and client access. Devlin Consulting added payment-integrity capabilities, BirchAI strengthened generative AI capabilities, BroadPath added around 30 mid-market payer client groups, and CareSeed added HEDIS, quality analytics, Medicare Advantage capabilities and around 26 client groups.

Sagility has deployed AI in 32 client use cases across 10 clients and is shifting towards outcome-based pricing. However, Emkay identifies AI-led automation as a key uncertainty.

Valuation

Emkay values Sagility at 18 times September 2028E adjusted EPS to arrive at a 12-month target price of Rs 55. The broker notes that the stock traded at about 17 times September 2027E adjusted EPS, at discounts of about 6 per cent and 20 per cent to Firstsource Solutions and eClerx respectively.

Key Risks

• A slowdown in healthcare spending.
• Client insourcing and pricing pressure.
• Regulatory changes affecting Medicare and Medicaid.
• Client concentration.
• AI-driven deflation of labour-intensive workflows.
• Potential sponsor stake-sale overhang.