Rising offshore revenue to be growth huge lever for years: Coforge CEO

The IT solutions provider has posted a consolidated net profit of Rs 220.6 crore for Q2FY23, up 36.6% YoY. Its revenue growth was driven by offshoring expansion

Offshore revenue has touched 50 per cent at Coforge Ltd and is set to become a lever of growth for years to come, indicating structural changes in the company's operating profile, said its chief executive officer (CEO) Sudhir Singh.

The IT solutions provider has reported a consolidated net profit of Rs 220.6 crore for Q2 FY23, an increase of 36.6 per cent year on year (YoY). The growth in the quarter was driven by offshoring expansion. The contribution of offshore IT revenue has grown to 49.8 per cent from 36 per cent two years back.

The offshore operation of an IT company refers to the software services executed at locations far away from client premises. Indian IT firms of all sizes including large players like Infosys, and Wipro, and mid-tier ones like Mindtree and L&T Infotech saw a rise in the proportion of the work done offshore during the post-pandemic time.

“The fact that the operating profile of the firm has changed to 50 per cent revenue coming from offshore gives us greater leeway to compensate our employees as well as to invest in the Metaverse and other technologies, without margins getting diluted,” Singh said.

Formerly known as NIIT Technologies, Coforge employs around 23,000 people as of the second quarter. Singh said the company plans to increase the net headcount by around 20 per cent or 4,500 people, in line with net revenue growth numbers. The attrition rate was expected to remain unchanged at 16.4 per cent for the next one or two quarters, he added.

There was a significant rise in employee costs of the company, but it was a conscious choice, Singh said. “The rise in employee costs has been offset and margin has been maintained because offshoring revenue increase was significant too.”

The twelve-month locked-in order book of the firm has crossed $800 million. The company added 11 new clients during the quarter, while total order intake stood at $304 million during the quarter.

“The second thing to feel good about is that the repeat business has come back to 93 per cent, which is a big achievement for a mid-tier firm. Another thing that gives a lot of comfort is that unlike a lot of our mid-market peers, we are not exposed to any one client, which is massive,” the top executive said.