Coforge’s $1.56 bn Sabre deal win sparks fresh optimism in a shaky IT sector

Further, Coforge has acquired Rythmos Inc. for $48.7 million and TMLabs Pty Ltd for Australian $20 million (about $12.5 million). Coforge also announced a stock split in the ratio of 1:5.

The Sabre agreement is Coforge’s largest-ever multi-year deal win, offering the Noida-based company greater revenue visibility for 2025-26. Winning a large deal at a time when most US clients are tightening their technology budgets is notable, and could lead to more such deal wins.

Analysts tracking Coforge have raised their revenue expectations for the company for FY26 and FY27. However, large deals are usually margin-dilutive in the ramp-up phase and may weigh on Coforge’s overall earnings. Coforge’s travel vertical formed about 18% of its revenue in the December quarter (Q3FY25). 

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Coforge’s management had said during the company’s December quarter earnings call with analysts that the global travel sector was resilient and growing despite inflationary pressures.

Following the Sabre deal announcement on Tuesday, Rahul Jain, director–research at Dolat Capital Market, wrote in a report on 5 March that although Sabre was an old client, “the scope of this deal win is completely new, which suggests strong new-age technical prowess and effective execution”.

While that bodes well, some risks linger. 

“Coforge would need to ensure efficient receivables collection, with stricter payment timelines to insulate from potential cash flow risks,” said analysts from Kotak Institutional Equities. 

Besides, Sabre’s weak financial position could also pose a threat. 

“Sabre has $746 million gross cash and cash equivalents, and gross debt of $5.1 billion, as of December 2024. In CY2025, Sabre expects to generate over $700 million adjusted Ebitda, free cash flow of $200 million+ and cash interest payments of about $375 million,” Kotak’s analysts added. 

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Coforge’s impressive December quarter

After Wednesday’s jump at the bourses, Coforge’s shares are up almost 25% over the past year, although the stock is down 22% from its 52-week high of ₹10,026.80 apiece seen on 30 December.

The company is expected to continue to outperform on revenue growth.

“Coforge has outgrown its peers during upcycles and downcycles in demand. During FY20-23, a period during which demand was strong, whilst our coverage universe grew revenues at about 9% CAGR, Coforge grew at 17% CAGR— highest in our coverage universe,” Jefferies India said in a report dated 27 February. “Even during the weak demand phase over FY24-25E, Coforge has sustained growth at 14% CAGR (organic), versus 2% for our coverage.” (CAGR is compound annual growth rate.)

In the December quarter, Coforge put up an impressive show, leading the growth among Indian mid-cap IT services companies. Although the December quarter is seasonally weak, Coforge surpassed expectations by reporting constant currency sequential revenue growth of 8.4%.

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Coforge’s order intake in the October-December period was its second straight quarter with more than half a billion US dollars. At the end of December, Coforge’s executable order book over the next 12 months was $1.4 billion, up 40% year-on-year. 

This signals good growth for Coforge in FY26, even as the Indian IT sector’s demand recovery remains uneven.

Against this backdrop, it is not surprising that Coforge’s shares trade at a premium of 37 times its estimated earnings for FY26, as per Bloomberg consensus data. The company’s robust growth outlook and consistent execution may well help it sustain its premium valuations.