Coforge Ltd (NSE: COFORGE) Q1 2026 Earnings Call dated Jul. 24, 2025
Corporate Participants:
Unidentified Speaker
Sudhir Singh
Sudhir Singh
Saurabh Goel — Chief Financial Officer
John Speight — Chief Customer Success Officer
Analysts:
Unidentified Participant
Prateek Maheshwari — Analyst
Vibor singhal — Analyst
Abhishek Pathak — Analyst
Sandeep Shah — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to Coforge Limited Q1FY26 earnings conference call. Please note all participant lines will be in listen only mode and this conference is being recorded. We have today with us from the management team Mrs. Sudhir Singh, CEO Mr. John Speight, Chief Customer Success Officer and Mr. Saurabh Goel, CFO. We will begin the call with opening remarks from the management team and post that we will open the floor for questions. Before we begin, please note that some of the statements made in today’s discussion relating to the future should be construed as forward looking statements and may involve risks and uncertainties.
Please refer to the disclaimer to this effect in the company’s Q1 FY26 earnings press release. With that, I now hand the call over to Mr. Sudhir Singh. Over to you Mr. Singh.
Sudhir Singh
Thank you Imba and a very very good morning ladies and gentlemen. Thank you for joining us today as we share our quarter one fiscal year 26 performance and the outlook for fiscal year 26 and beyond. Quarter one FY26 has been an exceptional quarter for the firm. More importantly, we believe that it has set the foundation for what is likely to be yet another exceptional fiscal for the firm. In quarter one, the firm recorded 9.6% sequential dollar growth and we believe we have established a path to deliver 14% reported EBITDA in fiscal year 26 itself. Our sustained, robust and accelerating growth story is now entering its ninth year.
Before I delve into the nuances of the quarter’s performance, I would like to reflect on the three key reasons that have driven our accelerating and sustained growth over the years. And more importantly, these reasons will continue to power our growth in the quarters and in the years ahead. Reason number one is an execution intensity that is uniquely our own execution. The often neglected but the most essential part of what gets things done is an art which warrants not just setting and sharing lofty plans, but getting into the details of every aspect of bringing those plans to life across every aspect of our operations.
Be it sales operations, solutioning operations, capability build operations, delivery operations or even acquisition integration exercises. We have created execution centric measurement metrics that are atypical and yet are highly effective. For example, when it comes to sales execution, we do not only use the standard measures of tcv, ACV signed or year on year growth delivered to measure execution effectiveness of our sales teams. Those measures are important, but we have learned over time that for us, coforge, the single most important measure for turning in year after year sustained performance is every week’s count of proactive large deal proposals submitted.
This approach to measuring and powering sales execution is atypical, as I said, and yet as our results prove, it is highly effective. Another reflection of our approach to execution is how we approach our big bets. A big bet could be a GEO expansion play, it could be a capability build play, or it could be a new partnership scale up play. Where we differ in our execution is in severely restricting the number of big bets that we pursue as a firm at any one point in time. And we also differ in our execution in that we have never ever given up on even one of the big bets that we’ve undertaken.
If a big bet is not turning out as planned, the team working on it is reassigned, but the big bet is not given upon it is always delivered on. Those two examples illustrate reason number one, an execution intensity and a single mindedness that is uniquely co forged. Reason number two is our hyper specialization in a few select industries over the last eight and a half years it has been our belief that hyper specialized industry knowledge remains essential to creating differentiation and value. Technology is an enabler and industry depth is the blueprint we use to apply it effectively.
The industry first approach is why our clients trust us with some of their most mission critical initiatives. With the enhanced adoption of AI, organizations are shifting resources from run the business to grow the business and AI budgets are expanding at double digit rates making AI the primary engine driving innovation and competitive advantage. Coforge is at the vanguard of this change with real world deployments executing at scale and making impact across sectors. Where we have hyper specialization, we have been able to deliver these real world deployments mainly because of the deep industry domain knowledge that we bring to the table.
Our Quasar AI marketplace has more than 100 case examples of industry specific solutions that we have delivered. Coforge in sum is turning AI into business critical infrastructure and we believe that industry expertise will remain a critical success factor and a critical growth factor in the new AI era. Reason number three why our growth has been strong and continues to accelerate is our deep engineering capabilities and assets. Engineering excellence is central to our operations. You’ve heard me say this for the last nine years almost we’ve built and supported complex platforms for sats which power half of the world’s air cargo.
We now applying this engineering strength to AI integration across the development life cycle. Our unified delivery platform 4J accelerates software development and legacy modernization using AI. You will recall that earlier this year we partnered with a leading travel tech firm to modernize their product suite delivering results in months instead of years using our own AI tools. This is part of a broader strategy to embed AI across programs. Real world AI deployment requires more than just gen AI tech. It demands robust infrastructure, data foundations and AI ops processes. As systems integrators with a deep engineering DNA, we understand this well and we have created purpose built assets from responsible AI frameworks and data readiness tooling to performance optimization and auditability that enable our clients to deploy real world AI solutions at scale quickly.
To recap, we believe that these three factors are execution intensity, our hyper specialization in select industries and our deep engineering capabilities are what have over the last eight years allowed us to build a strong differentiation and that in turn will allow us to deliver on a sustained basis going forward in the quarter quarters and years to come. Robust and sustained growth. With that, I switch over quickly to the nuances the details of the Quarter 1 performance starting with revenue. I am pleased to report that the firm registered sequential revenue growth of 9.6% in US dollar terms.
In Indian Rupee and CC terms, the Sequential growth was 8.2% and 8% respectively. The growth during the quarter, not surprisingly, was led by the TTH Travel vertical which grew 32.3% sequentially in $ terms. The other emerging verticals which include healthcare, retail and high tech grew 12.7%. This is sequential. Government outside India vertical sequentially grew 6.8%. The insurance vertical in turn grew 1.1% and BFS vertical saw a marginal decline of 1.1%. QoQ in $ terms. I do want to point out at this stage that BFS on a YOY basis is growing 32% and the BFSI segment is a segment where we see large deals in the works and near imminent.
Our top five clients and our top ten clients grew 25.1% and 15.7% sequentially respectively. They contributed 20.8% and 29.4% respectively to our overall quarter one revenue. It is important to note that our top five clients and top ten clients grew by 50.8% and 36.8% respectively over the same quarter last year and those relationships continue to be strong. Moving on to order intake Q1 was yet another strong quarter both from an order intake and large deals closure perspective. During the quarter we signed five large deals. The velocity and the median size of large deals signed by Coforge has been increasing over the years and I shall reflect more on this in my concluding remarks.
The total order intake during the quarter was more than half a billion dollars. The Exact number was $507 million. The executable order book, which reflects the total value of locked orders over the next 12 months, stands at a record $1.55 billion. This number, some of you might recall, was a billion dollars a year back and is currently 46.9% higher than at the same time last year. On the people front, our total headcount at the end of the quarter stood at 34,187. We saw a net people addition of 1164 during the quarter. Utilization during the quarter stood at 82.1%, a number we are comfortable with.
Last 12 month attrition for the quarter fell further and is now at 11.3%. We remain, as always, one of the lowest attrition firms across the industry. With that, I will now hand over the call to John Speight for providing insights into our operations and capability creation. Over to you John.
John Speight — Chief Customer Success Officer
Thank you Sadev. I shall now touch upon the highlights of the quarter related to our key capabilities and delivery operations, starting with updates on our AI assets. This quarter we launched the Coforge Agents, the platform with over 100 foundational agents that can address industry pain points across travel, financial services and healthcare clients. As Sadiya mentioned earlier, we have also launched Forge X, our unified delivery platform that applies AI to accelerate and streamline software development. It provides assets such as Code Insight AI, a solution that can deliver 10x productivity gains in legacy modernization programs. With these additions, we now have over 20 core AI assets that accelerate execution of services such as reverse engineering of legacy code, intelligent test automation and resilient cloud and infrastructure operations.
We also launched a number of AgentIQ AI solutions onto the ServiceNow marketplace, including SmartGen Change for improved change management. This agenti AI workflow is among the top five partner created AI agents now available on ServiceNow. By applying these innovations across client portfolios, we are shortening time to market, boosting operational efficiency and improving ROI on technology investments. I will now share a few examples. In banking and financial services, we have developed a gen AI powered solution for the wealth and private banking division of a large multinational bank, providing real time analysis and automated transcription of the calls.
This solution was built in partnership with a leading hyperscaler and has enabled the bank to improve operational efficiency, providing benefits such as summarized conversation view, automated automated call scores, customer sentiment analysis and recommendations on next best action. For a leading European bank, we leveraged AI to streamline their customer onboarding, loan processing and business banking outreach capabilities. This has reduced approval cycle times, reduced the operational costs and reduced the number of non performing loans. Meanwhile, for our insurance clients we developed a Genai powered ISO Circular Form Summarizer that enabled automated extraction and summarization of circulars and forms data.
The solution integrates seamlessly with platforms such as Duck Creek and guideware, delivering over 35% improvement in operational efficiency in the travel segments. Codeforge has just delivered significant value for an airline post a merger managing a major passenger service system migration. It was a large scale digital transformation that has reduced operating costs as well as improving customer experience. Finally, for a leading Australian retailer, we’ve been pioneering the use of Gen AI to drive innovation within our quality engineering services. It has created a quality intelligent foundation that is used to drive intelligent test check case generation. These efforts have been recognized as one of the top three initiatives at the recent ISG Paragon Innovation Awards.
Moving on to Partnerships following a successful ServiceNow dispute management rollout in the US we now offer Dispute Accelerate as a prepackaged solution for efficient dispute management based on the ServiceNow financial services platform. CodeForge was recognized as a leader in Nelson Hall’s NEAT report for ServiceNow across overall creator workflow and customer and industry workflow segments and as an innovator in the employee and technology workflow services. We partnered with Zscaler to launch Secure Access360 on Microsoft Azure delivering zero trust access and advanced security capabilities. With Snowflake, we introduced a Data Insights Retrieval AI Assistant built on Snowflake Cortex enabling non technical users to access and analyze data with ease.
Our growing role as a Snowflake partner further strengthens our enterprise data and AI capabilities. With that I will now hand over to Saurabh Goyal.
Saurabh Goel — Chief Financial Officer
Thank you John. Before our financial performance I would like to highlight enhancements made to our disclosures. In the current quarter we have started providing a comprehensive breakdown of the profit and loss statement, balance sheet, cash flow and EBITDA and EPS reconciliation as part of the Management fact sheet. Going forward from margin perspective, our commentary will focus on EBIT margins and EPS rather than adjusted EBITDA as previously indicated by Sudhir A. Quarterman. Revenue reached $442.4 million reflecting a sequential growth of 8% quarter on and 51.5% year on year in CC basis. Organic revenue increased by 5.9% quarter on quarter on CC basis.
The hedge loss during the quarter is $1.9 million which is reflected in the top line as against the gain of 100k in Q1 last year. Q1 was a quarter which witnessed one of ramp up of the largest deal ever signed by the company and because of our execution intensity we were able to maintain ebit margins at 13.2%. EBIT for the quarter was $58.3 million reflecting a 9.2% increase. Quarter on quarter the EBIT margin remained flat primarily due to higher amortization of intangibles from the recent acquisitions as well as increased depreciation related to the AI powered data center deal, increased subcontractor expenses because of the acquisition and ramp up in the largest deal that we had signed in last quarter and increased VISA costs which typically comes up in quarter one for renewals.
EPS for the quarter is 9.5 rupees per share. It is important to note that this EPS is post split of shares that happened during the quarter. This includes a one time gain of $1.841 point. Sorry, this includes one time gain of $8.4 million from the sale of Advantage Co Business. This oneoff gain of $8.4 million was set off by two transactions one exceptional expenses on account of a legal cost related to the cyber security breach that had happened two years ago. While we maintain errors and omissions insurance coverage and continue to engage with our insurers regarding this matter, a provision has been made in the Professional Law Statement on prudent basis.
This provision will be reversed upon settlement of the claim with the insurer in due course. Additionally, There was a one time broad based bonus provision for employees amounting to rupees 5.5 million dollars adjusting for one off gains and losses. Normalized EPS stands at 9 rupees per share as against a reported EPS of 9.5 rupees per share. Capital expenditure for the quarter stood at 65 million dollars with 58 million allocated to an AI data center project. Over last two quarters, approximately 85 million dollars have been invested in developing a AI powered data center. Of this total investment, $62 million has been received as advance from the client and has been recorded as deferred revenue on the balance sheet.
The balance 23 million has been funded through a term loan at an interest rate of 3.5%. The assets have a useful life of 5 years resulting in an increase in depreciation. OCA for the quarter stood at 43.8 million which is 115% of reported PAT. FCA for the quarter was negative because of the CAPEX incurred in the data center deal bill. DSO stood at 64 days, unbilled at 24 and contract assets at 13 days reflecting a total working capital cycle of 101 days. Update on a merger Exchange approvals have been received for the proposed coforge and signity merger and now we’re in the process of filing the first motion filing to nclt.
With that I’ll hand over the call back to Sudhir.
Sudhir Singh
Thank you Saurabh, thank you for those comments summing up an outlook and I’ll do this very quickly. The 9.6% sequential dollar growth in quarter one a next 12 months signed order book which is 46% higher yoy a sales execution engine that signed 14 large deals last year and aims to close at least 20 large deals in the current fiscal A potential pathway to 14% EBIT in fiscal year 26, one of the lowest employee attrition rates across the industry. That set of metrics are all pointers to what we believe will be yet another exceptional year for the firm.
We remain committed to turning in the ninth consecutive year of robust growth despite the uncertain macros swirling around our industry. To conclude, we remain very strongly committed to setting performance and capability benchmarks for the industry. As our industry pivots, there will over time be a new set of leaders and winners. It is our intent to be at the head of that select pack. With that, ladies gentlemen, I conclude my prepared remarks and all of us look forward to hearing your comments and to addressing your questions. Thank you.
Questions and Answers:
operator
Thank you sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may click on the raise hand icon from the Participant tab on your screen. We will wait for a moment while the question queue assembles. We take the first question from Pratik Maheshwari of HSBC Securities. Please go ahead.
Prateek Maheshwari
Hi guys, am I audible?
Sudhir Singh
Yes, thank you.
Prateek Maheshwari
So I had a couple of questions. First of all congratulations on strong execution on the revenues and strong deal wins. I had some question on the margins so could you so again on your reported margins as per SEBI format it declined 50 basis point quarter on quarter while you guys have shown adjustments which draw to conclusion that there is some improvement that happened quarter on quarter. So I just wanted to understand the work that you have explained on the slide or page 23 about what’s the nature of the discount income that you guys report on long term contracts and the and this recurring income or mortgage business wanted to understand that.
And what is your guidance on when we’ll see the convergence between the reported margins and SEBI format margins.
Sudhir Singh
So Pratik, let me take that up. So number one, discounting income on long term contracts is an accounting interest entry. So what happens is if you have a long term contract and if you bill $100 to a client, 90 goes to top line and 10 goes to other income. So it’s more of a notional accounting entry and that’s why it’s been reclassified as part of EBITDA point number one. Number two, income from Morgan business is something very similar. So these two will continue. Apart from that I’ve already called out that integration expenses on account of signity acquisition merger.
The merger is going on have become insignificant. Acquisition expenses that we had done the acquisitions that were done in the previous quarter again only close to 24 million rupees and which is $300,000 and then we are only left with one time bonus which we have already called out is a quarter event. And because of which, because of which we have seen that getting reflected in the pnl. So otherwise there are only two line items which is discounting income and income from mobile business which is part of the contracts that we have signed and it will continue.
Apart from that nothing else will be there.
Saurabh Goel
Sort of just, just some more color. So on the discounting income it was about 24 million last quarter. It, it has quadrupled this quarter. So just wanted to understand like if somebody has to think how, how should be the basically the trajectory of this going forward.
Abhishek Pathak
So this see as. As and when the unwinding of the discount is happening. I mean it’s more of an accounting entry as and then the unwinding of the discount amount is happening. The amount keeps going up. So if we build the quarter in the first quarter the amount will be low as and when you keep the, the time getting lapsed and you’re coming closer to the billing the amount goes up and then it crashes down. So it’s coming more from that perspective. It’s an accounting notional interest entry. Otherwise the, the corresponding value in the balance sheet is sitting as part of receivables.
Sudhir Singh
Okay, can I, can, can I ask you one question on the. So I we just wanted to understand the CapEx as well. So over the last five years CapEx comes from 2% of revenues to 5% of revenues. CapEx was I think based on what, what, what is shown on the fix assets. Capex was again high. You have called out some data center investments. So just wanted to understand overall what’s happening with the CapEx. It has increased by 300 basis point, 350 basis point over the last few years.
Sudhir Singh
So CapEx as I mentioned is part of the, the, the increase in capex in Q4 and Q1 was specific to two particular deals for a particular deal that we had signed and out of which as I mentioned in my prepared remarks out of $85 million, $62 million have been received. It’s a data center deal wherein we set up a data center and that’s why you also see the increase in the depreciation. And and so for the. Prior years last year F was 5%. So maybe. No I think can we go to the next question Saurabh and then we’ll come back to the the gentleman asking the questions over time can we roll on to the next yes sir.
operator
Thank you. We’ll move to our next question that’s from Vibor single of Nuvama equities please go ahead.
Vibor singhal
Yeah hi thanks for taking my question and congratulations to the entire proposal team for a very long solid quarter Sudeep my question got two questions. One is I know our performance hasn’t been dependent on the macro environment which remains quite volatile but any color that you can provide as to how is the environment that you are looking at from the same industry point of view it’s been quite volatile. We’ve seen the 9th of July deadline ago and now we’re looking at August 1st. Is the tariff uncertainty still looming large? Are the clients still hesitating? I know we have very good pipeline in terms of orders and order book but on the overall environment some help.
Saurabh Goel
If it’s the run the enterprise budget that one is looking at that budget continues to oscillate and move around basis the macro uncertainties given the overhang of the tariff related discussions and decisions that are likely but more importantly the change the enterprise budgets are the budgets where given the proliferation of AI we see that the discretionary nature of the spend has ebbed and those spends from our vantage continue unabated. The large deals that we structure and the ones that we talked about the proactive large deals are also aimed solidly and the change the enterprise budget and the enterprise is under is under pressure given the macro uncertainties.
Vibor singhal
Got it, got it, got it. In terms of our own performance though I think it was it didn’t leave any quarters which was not met at the banking industry Banking as well as insurance both were a tad soft in this quarter Any specific reason to call out or just the quarterly variation and it could be back next quarter itself.
Sudhir Singh
He’ll be back. He’ll be back. There’s nothing, there’s nothing that’s going to hold back the growth Banking is still growing year, year on year at 32% for US insurance at 20. For us the pipeline is very strong so we’re not concerned around concerned around short term, medium term or long term growth across bfsi. It will be robust.
Saurabh Goel
Got it, got it. And if I can just dwell on the banking industry yet again. You talk a lot about how our Genai products are basically helping clients and how we are trying to create an edge for ourselves in that. Any, any insights that you would be able to provide as to how the AI adoption is looking like in the banking industry, especially the BFS part, not the insurance part and maybe insurance parties. Well, if you have time for that and how and what are the kind of solutions that we are looking at? Are the basically core banking systems also being looking at being modernized and what are the different things that we are looking at in this sector, let’s say over the next two years.
Saurabh Goel
So banking institutions are under pressure to improve ROE amidst the macro uncertainty that you talked about, the higher interest rates and the intensified regulatory scrutiny. This is to your immediate question, driving technology investments focused on cost efficiency, product innovation, REC compliance and customer retention. From our vantage, business demand is healthy across commercial banking, lending, wealth management and risk and compliance. And that’s driven in turn by margin pressure, the need for product innovation and changes in REC frameworks, operational resilience, cloud native architectures have become mission critical for banks at this time and that’s also an area of investment.
And as you said, we are empowering banks to move beyond AI experimentation towards enterprise scale adoption with a strong emphasis on intelligent automation and advanced risk analytics. Finally, core modernization efforts at banks, to your immediate question, are also gaining momentum and that’s been driven by the need for simplification, for agility, for the strategic retirement of costly legacy infrastructure.
Vibor singhal
And you believe we have a very good presence in all of these opportunities that you talked about. It should hold us in good stead over the next years in the entire banking space.
Sudhir Singh
It should hold us in very good stead, not just good stead going forward.
Sudhir Singh
Great, thanks for those answers. Just one question for Saurabh, sort of I think our margins in this quarter just if I were just to basically take a step back this quarter we had a very strong growth which was helping us. So if you could basically, basically walk us through the puts and takes for this quarter that despite, let’s say some of the operating leverage coming through the growth, how the margins remain flat in this quarter and going forward in the next two to three quarters, I know there is one ESOP cost which is going to come down.
What are the other levers that we are looking to expand margins to what Sudhir said. We are targeting 14% for this fiscal year itself.
Vibor singhal
So we got two things. Number one, historically quarter one has been a quarter wherein margins get depressed and even without wage hike, it used to come down by 100bps or so this quarter wherein we were ramping up one of the largest deals. And we all understand that when you’re ramping up a deal of that scale and size around some thousand odd people in an account, there are expenses that will come and hit you because the billing doesn’t start at the same time. Despite that, we were able to maintain EBIT margins and I’m talking about EBIT because that’s what the guidance is going forward will still remain flat.
And as we move forward, you’ve always seen that historically we’ve expanded margins post quarter one performance. So quarter two, because of the ramp that we are expected to see in quarter two as well, a similar kind of a ramp is going to now help us on margins because whatever had to happen from a ramp up standpoint has already happened. There is no headwind, no other headwind in the in in quarter two. So we will see that thing ramping up from a margin perspective. Leverage will start playing out in quarter three, the ESOP cost will start coming down.
There will be a headwind of wage hikes in quarter three but a lot of that be compensated by by ESOP cost reduction that that is expected to hit the period. So that is why we are confident that we have had a good start to from a EBIT margin standpoint for the year and not drop the margins in quarter one. And historically as you’ve ramped up in future in quarter two, quarter three we’ll continue to see that.
Sudhir Singh
Got it, got it. If I could just squeeze in last thing, what is the timeline that we are looking for? The final integration of signity. I know you mentioned that we’re now going to NCLT. Earlier you had mentioned December 25th is probably the target. Do you think that the timeline could be met or do you think there could be some spillover from that?
Sudhir Singh
I think it’s more with regulators so it could be minus a month or two. But December, January should be the timeline and in case whenever the approval comes in, as I had mentioned earlier, the effective date of the merger is 1st.
Vibor singhal
Of April 1st of April 25. Got it, got it. Thanks. Thanks for posting. Thank you so much for taking my questions and wish you all the best.
operator
Thank you. We take our next question from Abhishek Pathak of Motilal Oswal. Please go ahead.
Abhishek Pathak
Yeah. Hi team. Morning. Am I audible? Yes. Yeah. Hi. Hi Sudhir. Hi Saurabh. I think congrats on our execution on revenues. A couple of questions. Firstly, how do we expect the Sabre deal to ramp up sequentially from here on? I mean sequentially, should we be expecting the TTH vertical to continue to grow over the next three quarters? That’s the first question. And the second question is on a steady state basis where do we see our OCF to EBITDA ratios settling? I understand that the deal ramp up in Sabre may have some investments that might maybe skew that ratio but over the steady state where should we be modeling that, that number? And if you could talk a bit about the bfsi, you know, deal and outlook that you were referring to earlier.
There’s been some mixed remarks around bfsi. You know, the bank results have been good but the numbers are still a little bit of a mixed bag. So do you see, you know, any, any hesitation from clients over there or do you, do you see our offerings still sort of, you know, resonate well and we should expect the vertical to grow. Thank you.
Sudhir Singh
Thanks Abhishek. I’ll take number one and three in. Saurabh is going to address the steady state OCF Sabre deal will continue to ramp up sequentially in quarter two as well and quarter three onwards. We would expect the, the, the resource loading, the total headcount to stabilize. So quarter two, the quarter that we are now beginning in should again see a sequential growth. On the saber side on the BFSI piece, as I said, we are seeing healthy demand across commercial, across lending, across wealth management, across risk and compliance. And structurally the demand is being driven by margin pressures and the need for product innovation and also for, because of the reasons of trying to stay in line with the changes in direct frameworks technical point of view, banking again there is high confidence because we believe operational resilience, we believe cloud native architectures have become mission critical for banks and that’s going to be a secular law, longer term, non discretionary, non fluctuating demand spend that we are going to be looking at.
And I think banking in general, our confidence continues to be high. Our performance over the last four to five years has been very robust. We see absolutely no reason given the fact that the banking sector continues to be driven by the need for simplification, by the need for agility, by the need for retirement of legacy infrastructure, for our growth rates to waiver or to.
Sudhir Singh
Taper on OCF to EBITDA we maintain that till the time we continue to grow 65 to 70% OCF to beta is what we would like to maintain because REST will be needed for increased working capital requirement that is needed for the growth business.
Saurabh Goel
Understood? Understood, sort of. And if I could just follow up. What’S the capex outlook for FY26? Do we expect it to be at similar levels or taper down from from here on? No, it will taper down, it will come down to our original levels. Understood. So 2%, 2, 3% odd or 5%.
Abhishek Pathak
Okay, thank you, thank you so much. All the best.
Sudhir Singh
Thanks. Abhishek and Imba, if you could, going forward, just make sure that we have two questions per person who speaks and then we can keep putting them back in the queue please.
operator
Sure sir. Ladies and gentlemen, we request you to please limit your questions to two per participant. You may then return to the queue and rejoin the queue if you have more questions. We’ll move to our next question. That’s from Sandeep Shah of Equity Securities. Please go ahead.
Sandeep Shah
Yeah, thanks. Thanks for the opportunity. Just on the bit margin, the first quarter run rate being closure to 13 and full year being 14 so the exit has to be 15 where we expect some tailwinds. But there would be a wage hike effective 3Q. So in that scenario what will pull out such kind of a 200bps margin improvement in the next three quarters.
Sudhir Singh
So Sandeep, two things. One quarter one to quarter two to quarter three we’ve always seen impact of operational efficiencies coming in and margins going up. Historically that is point number one. Number two, the wage hike impact is going to be very very limited in Q3 which will largely get set off by the lower piece of cost. We are looking at a 90 pips reduction, probably 80 to 90 pips reduction on the amount of ESOP cost going down. So I think from that perspective, historically what we have delivered and from a quarter on quarter margin ramp we believe that 14% is due.
Sandeep Shah
Okay. And just a related question, so what could be the depreciation amortization amount going forward? And just observation and a suggestion, this one time bonus of 458 in my view should not be treated as non recurring because that is one of the catalysts in terms of your. One of the reasons for higher growth which is execution intensity. Why I’m saying is that as a percentage to last year’s revenue has been closure to 40 bits.
Prateek Maheshwari
So two things. So this was not something which was part of the part of the bonus plan. Existing bonus plan and this was one of that was decided during the quarter and that’s why we put it like that. It is not going to get incurred next quarter or through the year or next year and that is what’s been reflected like that. Anyways, whether we included or excluded reported EPS for the quarter is 9.5 and normalized as I said is 9 and we’ll continue to ramp from there.
Saurabh Goel
Yeah and a question on depreciation about. It will normalize from here. There is no other increment happening on. The so it can continue at current level. Mrs. Shami, we request you to return to the queue please. Thank you. We will now move to our next question. That’s from Dipesh Mehta of MK Global. Please go ahead.
Prateek Maheshwari
Yeah, thanks for the opportunity. Two questions. First about if you can give some sense about the file large deal which we have signed. If you can give some more detail around those deals. Second question is about the clarification kind of thing you said.
Saurabh Goel
Mr. Dipesh Mehta, I think the management is not able to hear you clearly. Could you hold the microphone a little closer to you?
Vibor singhal
Yeah. Is it better now? Yes.
Unidentified Participant
Yeah. Yeah. First question is about the five last deal which we announced. If you can provide some more detail around those deals. Second question is about the 14 percentage margin which you indicated for the year. Is it as per the BSE reported or the as per our presentation kind of format which you give if you can provide that clarification. Thanks. Just answer number two sort of which format and then yeah so so see. The, the the margins that we are reporting right now as part of the management fact sheet 14 EBIT is is a like to like of a 13.2 that has been reported in the current quarter.
John Speight
All right and moving on to question number one five large deals. The first large deal Dipesh was from what was one of the top three clients of Signity. This is an AI infused app modernization 30 plus million dollar TCV win delivered by GitHub Copilot was our accelerators and through intelligent DevOps. This was a US based client. Is a US based client. Second one again is a North America based client involves digital transformation to scale up various customer and enterprise processes on PEGA cloud and our domain expertise and the PEGA engineering capabilities were responsible for this.
Number three was yet again a North America based client Transformation of the workforce platform and integration with AI enabled Microsoft services differentiations here why we won were Microsoft workplace capabilities and the architecture which was centered around AI enabled Microsoft services. Number four came from the Middle east where we have secured a mandate to build GCC to help the customer transform their exchange operations. This was driven by our BPS and GCC horizontals working together. And finally the fifth one came from Asia, which is a transformation of technology infrastructure to enable scaling up of CAC services. I do want to point out you would have noticed last quarter that we closed a large deal with one of the clients that came with the signity acquisition more than a year back.
That was a top three client. This is another one. This is a different client, but it’s another top three client. And the third top three client, interestingly, is where we are pursuing one of our largest opportunities. So as a quick seg back to that acquisition announced last year May, and the effectiveness of cross sell that we’ve indicated many times has been in the works, you are now seeing it in action. Thank you. Thanks for the questions, Dipesh.
operator
Thank you. Our next question is from Rishi Junjunwala of . Please go ahead.
Unidentified Participant
Yes, you know, thanks for the opportunity Sudhir. Just wanted to understand the amount of, you know, deals that we have won over the past two to four quarters and you know, that has gone up significantly. Can you give some color in terms of, you know, how much of those would be as a result of market share gain where we are displacing some of our similar or bigger size peers versus those where it is incremental work which is potentially coming out of some of the newer technologies that we are pushing.
Sudhir Singh
The way we run the sales execution cycle, what we refer to at the beginning of our call, Rishi, is we give credit to our sales teams only for deals that are not renewal. We believe that renewals should be table stakes. A large deal from an internal evaluation perspective is a large deal where the net new revenue being recognized as part of that deal, even if it has, even if it is a hybrid of existing business, has to be more than 20 million dollar TCB. So the focus from an execution perspective is not to compensate sales teams for any piece of renewal that is embedded as part of a large deal and to not call out a deal as a large deal internally, at least from a sales operations persp unless the new component is at a minimum a TCV or $20 million.
Almost all of these. And this is, this is because 19 out of our top 20 clients, our principal competition is a large scale SI have been won against the large scale SIS.
Unidentified Participant
Got it. Thank you. The other thing is, you know, while we have, you know, of course our top 5 clients have grown stupendously are non top 10 have also grown pretty strong. There is some bit of, you know, weakness in the top six to 10. Just wanted to understand the nature of that weakness. It is something which is purely temporary. Do we expect it to recover back during the course of the year?
John Speight
Well, you’ll see a correction immediately. You’ll see a correction in quarter two itself. Rishi. There’s absolutely no structural weakness there.
Prateek Maheshwari
Understood. All right, thank you. All the best.
operator
Thank you, Rish.
operator
Thank you. Our next question is from Abhishek Bhandari of Nomura. Please go ahead.
Saurabh Goel
Good morning to the management team.
Abhishek Pathak
Sudhir.
Vibor singhal
I just wanted to understand the near to medium term business outlook on your BFS vertical. You know, when do you think, you know, this business starts, you know, coming back to a reasonable growth number from a sequential side and also in the medium term, what are your plans to go deeper into this vertical on the BFS as you want to, you know, become a 2 billion and beyond company. So the near term outlook and the medium term outlook both are positive and very positive. And I say this off the back of the best estimate that we have for quarter two and off the back of the large, large deals pipeline, high probability large deals pipeline that we’re looking at for banking.
As I said at the outset, banking for coforge is growing on a yoy basis by 32%. On a go forward basis we would expect banking as a percentage of our revenue to continue to hold where it is because we expect banking and more broadly financial services to continue to almost pace ahead at the same pace as the rest of the rest of the firm.
operator
Thank you. We’ll take our next question. That’s from Ashwin Mehta of Ambit Capital. Please go ahead. Mr. Ashwin Mehta, could you please unmute your microphone and ask your question now?
Sandeep Shah
Are you able to hear me?
Abhishek Pathak
Yes, sir.
Saurabh Goel
Yes. Just wanted to understand this nature of the data center capex. So is it more like we own this asset effectively on behalf of the client and over a period the client pays for it or any, any say additional color here in terms of how this is structured? Shared. Good hand.
Saurabh Goel
Yeah, yeah. Ashwin. So we own the asset and we control the asset. It is in our. We have placed them in the location where we identified that location and that is why it’s been capitalized and we’re providing services on this data center. So client doesn’t, client is not concerned about how much is the capex behind it and client is not concerned about what we do with it. So it’s, it’s it’s in our books and we are in control of these assets. You’re right.
Sandeep Shah
And we can use this asset for any other client or is it a dedicated one for the client?
Saurabh Goel
It is not dedicated. It is not dedicated. We can use it for whomsoever we want.
Sudhir Singh
Okay. Okay. And the second question was in terms of like there’s a more broader question like if I look at your free cash flows over the last five years your free cash flows have been largely flattish despite the fact that EBITDA has gone up by 2.6x or revenue’s gone up by 2 1/2x. So while you’ve given a CFO to EBITDA outlook of 65 to 70% what are we looking at from a FCF to PAT perspective because of the fact that the nature of deals is coming in with a much higher capex versus earlier.
Sudhir Singh
So two parts to it Ashwin. One capex is something which has only happened in a this kind of a data center deal only for last two quarters and that’s about it. And hence when you look at current quarter it’s a blip and not reflective of the FCF of the company number one. Number two FCF it also we’ve been acquisitive so FCF is a function of whether you do an acquisition or not. And that is why when we look at investment in clients it gets reflected in OCF and how the OCF is progressing until unless we are investing in a client in form of a capex which is getting reflected in the current quarter while building a data center.
So I guess when we’re comparing 5 year FCF I don’t know which as a which is the base year being taken but it could be a function of function of because the current quarter is heavy on the on the capex investment and that’s why we’re talking about it.
Sudhir Singh
So just to clarify, I was looking at FY21 to FY25 excluding this quarter and this is the FCF before acquisition which also appears to be more flattish.
Sudhir Singh
No, say that again. So I’m looking at FY21 to FY25 and the FCF is before acquisition and on that also it appears flattish. I will look at FY21 versus FY25 because FY20 was a stressed year and that’s why FY21 cash flows went up. It’s a point in time view and probably if there is any more detail that you need around it you can reach out to me Separately.
operator
Sure. Sarah.
Sudhir Singh
Thank you very much. We take that as the last question. Over to you, Mr. Sudhir Singh for closing comments.
Unidentified Participant
Just one second. We can take one more question. Yeah, we’ve got another eight minutes in case we have questions. Sure, sure. Maybe our last question or two. That’s it. Yeah. We will now invite Mr. Ankur Rudra from JP Morgan. Could you please unmute your connection, Mr. Morgan? Mr. Rudra, hi. Thank you. I think just a broader question. Sudhir and team, how are you thinking about overall balance sheet investments and intensity as you go after this opportunity? You’ve laid out a lot of differentiation that you have but not specific to this data center deal. But would you be able to do a lot more of this and what are the different types of asset intensive or balance sheet intensive deals that you would be open to doing as you look to capture more market share hunger?
John Speight
We don’t, we don’t plan to go any further into the, into the data center space. Data center space. As Saurabh has talked about in the past, the total CapEx was $85 million, 62 million of which has already been realized by the firm. And it’s a shared data center which, where we are offering services to one and over time more, more clients. The balance sheet leverage is largely going to be for acquisitions that fit the valuation and the capability profile of assets that we’re looking at. But you will not see more by way or anything material by way of data center plays in the short to medium term.
Unidentified Participant
Thank you, appreciate the clarification. Just the second question, you know, overall, you know it has been a fantastic start to the year and growth momentum has been very strong. Do you see, you know, because the environment is somewhat uncertain in your own business momentum, do you see growth in the second half on a year over year basis equally strong or stronger or weaker? Because we’ve had different comments by some of your larger and smaller peers. I just wanted to know what you are seeing in your business.
John Speight
Oh, second half has to be much stronger than the first half. That’s axiomatic from a sales execution perspective. That underlies the budgeting planning that we do and that stems of the fact that we approach sales execution from a large deals mindset. Everything that we are going to close in quarter two by way of large deals, a lot of what we already closed in quarter one has to start translating in the second half is new revenue. So H2ankur will be, has to be, forget will be, has to be much stronger than H1 and that’s how we’re looking at things.
But thank you for that question.
Sandeep Shah
And if I can just clarify that one does that mean that on a year over year growth perspective, constant currency, you know, like for like the growth will be similar or better than first half?
Unidentified Participant
I mean, I mean I don’t want to put a hard number to this, but all I can tell you is as I said, quarter one has been a robust growth year growth quarter. Sort of talked about the fact that we’ve grown organically excluding acquisitions by almost 6% cc. I would expect quarter two also to be an equally robust quarter and H2 just using that term for a third time should also be a robust second half for us. We feel very confident Ankur if, I mean if that’s the question. We feel very confident. We see with the advent of AI clients trying to optimize the run budgets but being extremely open to proactive business case led large solutions and that is a place that’s playing out at this point in time incredibly well for us.
Unidentified Participant
Thank you. Appreciate the color and best of luck.
operator
Thanks a lot. Thank you very much for the question.
Abhishek Pathak
Mississing there are no further questions from the participants. Over to you for closing comments.
Prateek Maheshwari
Thank you Emba thank you Ladies, gentlemen, these are very exciting times. The industry has pivoted the opportunities on the change the business, the transform the business size side are many and clients are increasingly open to having conversations which are grounded and led through workshops and a solution based approach. We aim to stay very closely connected with you for your advice, for your comments and for your insights. And we thank you once again for having joined us today for what was once again for us a very insightful set of questions that we were able to address.
Thank you. See you next quarter. Bye bye.
operator
Thank you members of the management. Ladies and gentlemen, on behalf of Coforge Ltd. That concludes today’s conference, thank you for joining us. You may now click on the leave icon to exit the meeting. Thank you for your participation.