Coforge edges past rivals in a hotly contested mid-tier IT services market

Coforge has quietly climbed up the ranks in the pecking order of mid-tier Indian IT services companies and is entangled in a stiff competition with Mphasis, Hexaware and Persistent to emerge as the next big company after LTIMindtree.

 

According to data Coforge is currently ranked at number eight, behind LTIMIndtree and Mphasis. While Coforge reported revenue of $1.44 billion for the financial year ended March 31, Mphasis reported revenue of $1.68 billion during the same time. LTIMindtree, however, is way above the rest with about $4.5 billion.

 

The bigger battle is, however, between Coforge and Persistent. The two companies crossed the $1 billion revenue mark two years back and has been growing at a break neck speed since then. Persistent reported revenue of $1.40 billion for the year ended March 31.

 

At a time when the large IT companies have reported annual growth in low-single digits, these two companies have stood out with high double digit growth and differentiated offerings that have helped them win deals in a challenging macroeconomic situation.

 

What has worked for Coforge, analysts say, is its hyperspecialisation in select sectors such as banking and financial services (BFS), insurance, travel tourism and hospitality (TTH) and public enterprises.

 

“Unlike peers who spread thinly across multiple verticals, Coforge has gone deep in a handful of industries, namely travel, banking, insurance, and public sector. This sector focus gives it a seat at the table for larger transformation deals where clients want partners who truly understand their business. In travel and transportation, especially, Coforge has built domain depth that few competitors can match, making it a go-to partner for complex modernization initiatives,” said Phil Fersht, CEO of HfS Research.

 

Coforge’s growth has also been propelled by three levers: a strong domain-led go-to-market strategy, early bets on platforms and IP-led solutions, and a willingness to be aggressive in deal pursuit while other firms are more conservative.

 

The company has also invested in proprietary solutions and accelerators that help it stand out in many competitive deal situations. Fersht says these aren’t generic toolkits, but domain-specific platforms in travel, BFSI, and insurance that help clients modernize faster and with less risk. “In a market where clients are fatigued by endless pilots, Coforge’s ability to show tangible, pre-built assets has proven to be a genuine differentiator on many client pursuits,” he adds.

 

Investors have also rewarded the stocks of Coforge and Persistent handsomely over the last few years. Shares of Coforge, which traded on the Bombay Stock Exchange (BSE) at just about Rs 400 five years ago, stood at Rs 1,641 as of August 14, a gain of 310 percent. In comparison, Persistent’s shares have risen more than 11 fold to trade at about Rs 5,287 during the same period, from Rs 473.

 

Despite the macroeconomic hedwinds, Coforge expects to maintain a high growth momentum even this year. “We are 100 percent confident. The large deal momentum will continue unimpaired, if not accelerate,” CEO and executive director Sudhir Singh told Business Standard in May.

 

Growth, buoyed by large deals, is expected to be led by BFS, insurance and healthcare, rather than travel which saw a record $1.56 billion deal with US travel and technology company Sabre.

 

Australia business is another factor that has helped the company growth with expectations of it being a $100 million+ business by the end of this year, according to Peter Bendor-Samuel, founder and executive chairman of Everest Group.

 

“Coforge’s cloud business is another growth engine growing more than 30 per cent year over year with more than 6,000 cloud experts. Coforge has been able to keep attrition low (10.9 per cent), which has further helped with the execution focus and client experience leading to client trust,” he added.

 

In addition, the company’s partnerships with global capability centres (GCC) is also yielding rich dividends. Unlike other companies which do not break up their revenue from GCCs, Coforge said last week that the vertical contributes about 10 percent, or about $147 million, to the topline annually.

 

It recently won a $21 million, five-year Build-Operate-Transfer (BOT) deal with a financial group in the UAE to set up a dedicated GCC for IT and business process service. The operations involve back-office functions, ranging from remittance operations to compliance management and finance & accounting.

 

Hansa Iyengar, practice leader of BFS and IT services at HfS Research says Coforge is charting a path that many in the IT services sector talk about but few deliver: successfully scaling enterprise AI transformation. “Not through marketing flash or moonshot claims, but through operational rigor, deep client intimacy, and an obsession with execution.”