Sagility India margins reach record despite wage hikes as provider focus expands

Investment View and Valuation

In its October 23, 2026 results update, ICICI Securities maintained its BUY recommendation on Sagility India Limited and raised its September 2027 target price to Rs 55 from Rs 54. The target is based on an unchanged one-year forward price-to-earnings multiple of 17 times.

The broker considers the Q2FY27 outcome mixed. US dollar revenue growth of 12.2 per cent YoY was below its 14.2 per cent expectation, while EBITDA margin reached a record 26.1 per cent and exceeded its 25.2 per cent estimate despite wage hikes.

Q2FY27 Financial Performance

Depreciation was steady at 6.5 per cent of revenue. Attrition fell 290 basis points QoQ to 25.7 per cent, while Sagility added 4,179 employees QoQ ahead of the open-enrolment season.

Business Growth and FY27 Outlook

Payer and provider businesses grew 24.5 per cent and 7.6 per cent YoY, respectively. ICICI Securities noted that provider growth was the lowest ever and had slowed from 38.6 per cent YoY in Q3FY25. Payer growth benefited from positive seasonality in Sagility's core business and BroadPath.

The Q3FY27 open-enrolment outlook is muted and is expected to be broadly flat YoY. However, contract value reached a record US dollars 40.2 million, up 18 per cent YoY, supporting management's retained guidance for low double-digit organic growth in FY27.

Management raised adjusted EBITDA margin guidance to 25 per cent to 26 per cent from 24 per cent to 25 per cent despite minimum-wage hikes. The Q2FY27 impact from these hikes was Rs 148 million, compared with Rs 70 million in Q1FY27.

Go-to-Market Investment and Artificial Intelligence

Sagility is increasing go-to-market investment and scaling its provider team. Management said the pipeline includes managed services, core operations and artificial intelligence deals, with artificial intelligence central to all deals.

Sagility Synchrony is being used to integrate workflows, including agentic revenue-cycle-management solutions for denials processing.

Chirok Health Acquisition

The company acquired Chirok Health on October 21, 2026 for US dollars 32.35 million, comprising US dollars 20 million upfront and US dollars 12.35 million contingent on performance milestones.

Chirok adds clinical documentation integrity, medical coding and revenue-cycle-management capabilities. ICICI Securities believes the acquisition can help strengthen Sagility's slowing provider segment and provide access to high-growth hospital and physician-group customers.

Balance Sheet, Estimates and Key Risks

Sagility turned net-debt negative for the first time, with net debt of negative Rs 1,127 million. Borrowings fell from Rs 6,900 million in Q2FY26 to Rs 4,200 million in Q2FY27.

The company had 105 clients at Q2FY27 versus 109 in Q1FY27. Top-10-client concentration was 84.1 per cent, compared with 83.9 per cent in FY26.

ICICI Securities cut FY27E and FY28E US dollar revenue estimates by 1.7 per cent and 1.2 per cent, respectively, but increased EPS estimates by 12.3 per cent and 3.7 per cent on stronger margin assumptions.

Key risks identified by the broker include:

• Delays in realising acquisition synergies.
• Frequent policy changes that reduce discretionary spending and outsourcing.