Coforge Ltd (NSE: COFORGE) Q3 2026 Earnings Call dated Jan. 23, 2026
Corporate Participants:
Manish Hemrajani — Head of Investor Relations
Sudhir Singh — Chief Executive Officer
Simon Pearson — Head of Transformation, Europe
Saurabh Goel — Chief Financial Officer
Analysts:
Abhishek Pathak — Analyst
Vibhor Singhal — Analyst
Manik Taneja — Analyst
Kawaljeet Saluja — Analyst
Dipesh Mehta — Analyst
Rishi Jhunjhunwala — Analyst
Ravi Menon — Analyst
Dhanshree Jadhav — Analyst
Presentation:
operator
Ladies and gentlemen and welcome to the Coforge Limited Q3 FY 2026 earnings conference call. All participant lines will be in the listen only mode. We will open the floor for questions, post the management’s opening comments. Please note that this call is being recorded. Joining us today from the Coforge Leadership Team, Mr. Sudhir Singh, CEO, Mrs. Saurabh Goyal, CFO, Mrs. Simon Pearson Global Head Consulting and Solutions and Mr. Manish Hem Rajani, Head of Investor Relations. I now hand the call to Mr. Manish Hemrajani over to you sir. Thank you.
Manish Hemrajani — Head of Investor Relations
Good morning and good evening to everyone on the call and thank you for joining us today to discuss Coforge’s financial results for the third quarter of fiscal year 26 that ended on December 31, 2025. As Inba indicated in her introduction, we have Simon Pearson filling in today for John Spade. Before we begin, a reminder that today’s discussion may include forward looking statements which involve risks and uncertainties. Actual results may differ materially and Coforge assumes no obligation to update these statements. With that, I’ll hand the call over to Sudhir for his opening remarks.
Sudhir Singh — Chief Executive Officer
Thank you Manish and a very good day. Ladies, gentlemen, thank you for joining us today as we share our quarter three fiscal year 26 performance and our outlook for the years ahead. As Manish has shared, John is on vacation in sunny Kerala. He sends his regards to all of you and he’s keen to rejoin our call starting next quarter. Simon, my colleague shall stand in for him. During the call today I shall provide an overview of our performance, touch upon the current market context and then do a deep dive on results and operations data. Along with my colleagues in quarter three we registered a growth of 4.4% in CC terms and our year to date dollar revenue growth is now 32.8%.
What we find particularly reassuring about our growth performance is the large deal velocity and the key accounts growth that underpins it. The six large deals that we’ve signed in the seasonally weak Q3, our next 12 months signed order book that is 30% higher than where it was at the same time last year and sustained growth across almost all key and top accounts has set us up for continued robust growth performance not just in fiscal year 26 but in fiscal year 27 and hopefully beyond. Equally importantly on the margin front, it is pertinent to note that our reported 13.4% EBIT for the quarter and our plan to register a 15% EBIT in quarter four will lead us to the 14% EBIT guidance for fiscal year 26.
In the current quarter, excluding hedge losses, the underlying EBIT for The firm is 14.4%. Finally, free cash flow for the quarter came in at 110%, significantly ahead of our guidance of around 70 to 80% FCF on a sustained basis, we believe we are set to close a very successful fiscal year 26 and we are headed towards an exceptional fiscal year 27. With that, I shall now move on to the current market context Outside the usual narrative around discretionary spends linked to macro environment, it is important to note that the tech services landscape is shifting in ways that we at Coforge believe create extraordinary opportunities for firms with the right capabilities and importantly, resolve While two years ago every board was asking how can we adopt AI? That question has now fundamentally changed.
Our customers are no longer interested in AI strategies or pilot programs. They are demanding proof of business impact. They want measurable KPI improvements. They want clear paths to operational transformation. The age of AI experimentation is over. What we’re witnessing is a market inflection point. The new era of enterprise tech is emerging, one where AI driven by cloud and data is becoming the engine of enterprise reinvention. The next gen enterprise will have its business capabilities defined and executed via a combination of humans and AI agents, underpinned by an enterprise data core and a cloud foundation that is purpose built for AI.
This shift is separating those who can talk about AI from those who can actually deliver it at enterprise scale. Today, let’s be frank, most enterprises aren’t truly AI ready. Decades of technical debt, fragmented data landscapes, patchwork infrastructure block AI ambitions. Clients need partners who can modernize their foundations while implementing AI not as separate multi year initiatives but as one integrated transformation. In this emerging world, enterprises are done managing fragmented partner relationships. They’re asking for partners who combine digital native innovation velocity with enterprise grade delivery maturity. Partners who can move at startup speed while managing enterprise scale risk.
It’s in this context that the acquisition of Encora is a defining moment for our organization. It establishes a scaled AI led engineering, data services and cloud services based capability mode for the firm. This, allied with Coforge’s hyper specialized industry expertise and execution intensity is likely to further accelerate our industry leading growth. It also sets us up as the tech services firm that is likely to be the first to deliver upon the promise of the AI infused future that lies ahead of our industry. With that, let me walk you through how all of this translated into our quarter three performance. I shall start with the revenue commentary. First.
As mentioned earlier, the firm registered a sequential revenue growth of 4.4% in CC terms, 3.5% in US dollar terms and 5.1% in INR terms. The 4.4% sequential CC growth came after registering 5.9% and 8% CC growth in the two previous quarters. At the end of quarter three we are now growing year to date at 32.8% in dollar terms on a year to date basis. Healthcare and high tech verticals, which now together contribute 10.5% to the total revenue, have nearly doubled from where they were just a year back. The travel vertical has grown 66% year to date, BFS has grown 21% year to date, government outside India has grown 20% year to date and the other vertical buckets which includes retail and manufacturing has grown 23% year to date.
Ally this data with the six large deals that I talked about. Two out of the six large deals in quarter three came from banking. One came from travel. Yet another one came from insurance. A fifth came from the new healthcare vertical of the organization and healthcare. Interestingly, that one deal was a large NN contract that we won. Our top five clients and our top 10 clients grew 51% and 47% YTD respectively. In dollar terms, they contributed 21% and 30.7% respectively to our overall Q3 revenue. Moving on to order intake quarter three was yet another strong quarter, both from an order intake and a large deal’s closure perspective.
During the quarter, and I’ve said this earlier, we signed six large deals. The total order intake during the quarter was 593 million. It was almost within kissing distance of $600 million. The executable order book, which reflects the total value of signed orders over the next 12 months, is now at a record $1.72 billion. This number is 30% higher than at the same time last year. People Front Our total headcount in the end of quarter three stood at 35,341. We saw a net people addition of 445 during the quarter. We continue to hire aggressively from campuses and laterally.
Utilization during the quarter stood at 81.8%. This is a metric that we think will sharply increase in Q4. Last 12 month attrition for the quarter fell further and is now at 10.9% only. We remain, as always, one of the lowest attrition firms across the industry. I will now hand over the call to my colleague Simon Pearson who is the head of Consulting and solutions for Coforge, and I’ll request him to provide insights into our operations and our capability creation. Over to you Simon.
Simon Pearson — Head of Transformation, Europe
Thank you Sadheer. I’ll now highlight this quarter’s delivery and capability milestones. We continue with our strong progress in agentic AI delivering business impact at scale. Through our AI assets we are making engineering faster, smarter and more resilient, enabling speed to market, architectural modernization and precision in delivery. For example, in a recent landmark win at a leading global systematically important bank based in Europe, we deployed autonomous agents across data silos to transform cash flow forecasting for its corporate clients. It was a win that proves at the intersection of deep domain expertise and emerging technologies, coforge is the partner of choice for mission critical transformation this quarter.
4Jax our integrated AgentIQ AI engineering platform delivered on further strategic engagements, each addressing complex engineering challenges. Some examples include a leading global airline where we have accelerated delivery and improved operational resilience for a critical program through an AI led software development lifecycle. In a large US Financial services provider, we have built a platform with a roadmap of more than 20 domain specific agents to industrialize automation and governance. We have modernized the legacy architecture of one of Australasia’s largest general insurance brokers using eagentic AI accelerators to automate the refactoring processes, strengthening reliability and quality. And in a leading investment management company, we have deployed intelligent agents for product ownership and quality engineering to automate testing and defect Analysis.
Along with 4JX, our AI asset portfolio continues to grow with two further additions this quarter, Integration Studio and Extender AI. These assets along with the broader portfolio are deployed at scale across 54 clients solving complex engineering and business challenges. Our cutting edge Genai Power Platform Code Insight AI is a state of the art legacy modernization toolkit available directly in the Microsoft Marketplace, deployment ready in Microsoft Azure’s Secure Cloud native platform, it is already in use across large format programs in travel insurance and banking, reducing risks, bridging legacy skill gaps and accelerating transformations onto our successful engagements.
Delivered in quarter three in banking and financial services, we have been acknowledged by Elite leading UK bank for our work in secured loan migration, advanced mortgage transformation and deploying end to end bereavement automation. This program was recognized as their transformation of the year at a global bank. Our conversational analytics solution went live, reducing turnaround time by over 60% and improving case resolution quality. We executed platform upgrades and experience modernizations across multiple financial institutions, rebuilt a core digital interface For a major U.S. utilities provider, enabled process lid savings for an Australia New Zealand financial institution, and completed a complex SAP HANA upgrade for a global manufacturer.
In insurance, we delivered a surety claims platform for a large US insurer migrating bonds and payments from a legacy estate into a modern digital platform for a major supplemental benefits provider. We completed one of the industry’s largest conversions migrating more than 5,000 groups and 2.6 million policies to a new policy administration platform. We also implemented governance uplift for a specialty insurers excess and surplus casualty clearance process, reducing manual entry by about 80% and enabling straight through processing via AI driven rules and digitisation. Moving on to awards and recognition this quarter analysts have reaffirmed our leadership positioning across AI based analytics and automation, AI driven ADM services, application development and application managed services and the travel and hospitality ecosystem.
ISG has recognized coforge with a Star of Excellence award in IT Operations and secured two ISG provider Lens awards in Multi Cloud Public Services. Additionally, ISG has positioned coforge as a leader in insurance ITO services specialists in the ISG provider Lens Quadrant Study Insurance Services Strategic Capabilities 2025 and finally Nelson hall have positioned Coforge as a leader in AI based analytics and automation, Genai Use Case capability overall QE Services and SAP Testing capability in the Nelson hall Quality Engineering 2025 neat and with that I will now hand over to our CFO Saurabh Goyal.
Saurabh Goel — Chief Financial Officer
Thank you Simon. We’re pleased to report revenues of 41881 million rupees in Q3 of FY26 reflecting a sequential growth of 4.4% in CC terms and 5.1% in INR terms. EBIT margin for the quarter stood at 13.4% up 191bps yny and down 60bps quarter on quarter. The reduction in EBIT was mainly on account of wage hikes which had an impact of 150bps on margins which is partially offset by various margin initiatives that we’ve been delivering within the organization for last 3/4 and lower ESOP cost. We also had a headwind on account of increase in hedge loss during the quarter.
The hedge loss reported for the quarter amounted to Rupees 434 million as compared to 307 million in the previous quarter reflecting an adverse impact of 26bps in the current reported EBIT. As you know we take hedge losses in the top line. The same had an impact of 90bps on reported EBIT margins. There were exceptional items to the extent of 147 crores during the quarter out of which 118 crore is on account of new Labor Code introduced by Government of India. There is 13 and a half crores related to expenses for the proposed Encore acquisition and there is 16.2 crores on account of legal legal expenses which have been booked on conservative basis related to the cyber security incident.
We have ENO cover and part of these expenses will be reversed once we receive the money from the insurance company. As we have just concluded a large acquisition and are in process of taking regulatory approvals, we are expecting expenses associated with the transaction including integration, funding and WNI Insurance and other others over the course of next two quarters and that would be in a range of 10 to 15 million dollars which and details of that would be shared as we move along but that’s the ballpark range we are expecting. Excluding exceptional items during the quarter earning per share for the quarter stood at 10.9 rupees per share.
EPS for nine months stands at rupees 31.6 per share which is 83% higher than the last year same period. This is further expected to go up post approval of signity merger because minority interest will get added back to profits and which will be far more than the the impact of that will be far more than the impact of increase in number of shares. Coming on to the cash flows, we pleased to report that FCF increased to $45.7 million resulting in an FCF to normalize PAT of 110%. We excluded the impact of exceptional items to arrive at this ratio bill DSO at 67 days, unbilled at 20 and contract assets at 14 totaling to 109 days.
We also have deferred cost, deferred revenue and current liabilities to the extent of 60 days reflecting a working capital of 49 days. This was 48 days in the previous quarter. Capital expenditure for the quarter stood at $3 million. During the quarter the company entered into a share purchase agreement for the acquisition of equity shares of Encore for an enterprise value of $2.35 billion out of which $1.89 billion are getting financed through a share swap arrangement and balanced through term loan to retire the borrowings of Encore Group during our Last call on 26th December we had mentioned that we are looking for multiple options like Bridge Loan or a term loan or QIP of 550 million to retire the term loan of Encore.
We are very close to finalizing a term loan of $550 million for a period of three years with a consortium of four to five banks. We are comfortable with the pricing that we’ve negotiated with the banks and have concluded that we will not need a QIP for retiring the term loan in the target company. The guidance related to no dilution of EPS NFY 27 of the combined business stays intact even after this debt. With that I will hand over the call back to Sudhir.
Sudhir Singh — Chief Executive Officer
Thank you Saurabh. Proceeding with the summing up and the outlook over the last eight and a half years the revenue run rate of coforge has gone up almost five times and the market cap has increased almost 20 times. As we’ve shared in the past, it remains our intent to ensure that the next eight years see us maintain and improve upon the sustained business performance of the previous eight years. We hope to continue to be the industry leaders when it comes to growth with increasing margins and Investor value creation. 5.9% cc, 8% cc and now 4.4% cc sequential growth are the numbers are the growth numbers that we’ve recorded in the first 3/4 of this year.
Top 10 accounts growing at a 47% YTD clip. Our next 12 months signed order book which is 30% higher year on year. A sales execution engine that has that signed 14 large deals last year and this year in three quarters has already closed 16 large deals, a pathway to 14% EBIT in fiscal year 26. All of these factors cumulatively set us up to close a very successful fiscal year 26 and head towards what will hopefully be an exceptional fiscal year 27. With that I conclude my prepared remarks and my colleagues Saurabh, Manish, Simon and I look forward to hearing your comments and to addressing your questions. Thank you.
Questions and Answers:
operator
Thank you very much 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 bottom toolbar on your screen. We request participants to restrict their questions to two and then return to the queue for more questions to rejoin the queue, you may click on the raise hand icon again. We will wait for a moment while the question queue assembles. The first question is from Abhishek Pathak from Otilal Oswal. Please go ahead.
Abhishek Pathak
Hi, I’m audible.
operator
Yes sir.
Abhishek Pathak
Yeah. Hi. Hi team. Morning. Congrats on a good strong quarter. So a couple of questions Sudhir. Firstly on the vertical mix, you know, very very strong showing in healthcare, high tech, transportation, etc. BFS and insur seem to be a little bit soft on a Y basis for the past couple of quarters. Just wondering on the BFS side, is this temporary and sort of, you know, is this partly attributable to the transitional leadership you’ve seen in this vertical? And do you expect this to kind of, you know, reverse meaningfully, you know, over the next couple of quarters considering, you know, BFS remains a very strong vertical from a, from a macro discretionary perspective as well.
And the second question was around pricing the deals and how the delivery is changing for us in context of using AI tools. So just wondering sort of how are we pricing deals differently? How are we structuring these deals differently from a year back? Do you see more and more margin gains coming in as we use, I mean as we change that balance between humans and AI? And just lastly a bookkeeping question for Saurabh. The unbuilt revenues long term seem to have kind of increased a bit. YOY and qq if you could just explain sort of, you know, why, I mean what’s happening there and how should we kind of model that going forward? Thank you.
Sudhir Singh
Thank you for all the three questions as you’ve noted. I’ll take the first two and I’ll request Saurabh to take number three vertical mix. Let me start off by saying, just reiterating Abhishek that we signed six large deals in quarter three, a short quarter and one third of those two out of those six were from banking. Given the large deal momentum we’ve seen in quarter three and what we think is likely to happen in quarter four, we would suspect that while healthcare and high tech will continue to grow at a tier that they are banking might, might be the fastest growing core vertical of the firm next year given the growth momentum that we see ahead of us both in terms of large deals and in key account growth that’s ahead of us.
So banking, we’re very assured about where things are banking again as you noticed, YTD is still growing 20% plus as far as insurance is concerned, insurance is not degrown. Insurance has grown on a QoQ basis. One out of those six large deals was insurance. We expect robust growth in insurance. FY26 is almost done. Very robust, possibly higher growth in insurance in FY27 than what we registered even in FY26. That’s the growth momentum there. We feel extremely assured. And finally the, the sector that did see a QOQ decline was government outside India. We expect to close one of the largest deals that we’ve ever signed in that sector in quarter four.
So outside the QOQ mix, if you were to look at YTT numbers, they are strong and given the large deal velocity and the very strong growth of our top accounts and key accounts, I guess you’re going to see them getting stronger starting Q4 itself. That was answer to question one. Question two pricing delivery. We’ve talked about delivery. We’ve always talked about execution in the context of delivery and the fact that our clients believe that the age of AI experimentation is over and they need digital native velocity. With enterprise grade delivery maturity, we have transformed our core delivery model.
We’re not adding AI as a separate offering but we are infusing it into every engagement. Our platforms, code, insight, AI, Blue Swan, 4 Jacks, Quasar have helped us now for almost two years to embed AI in the way we deliver value to our customers from day one and that’s important. We’ve restructured how we deliver. We are moving towards hybrid delivery models that combine agentic workflows with human expertise. And finally to the other subtext around that question, Abhishek, critically we’re also willing to underwrite outcomes, our risk reward commercial models, tie our fees to our clients achieved results. We believe in the integrity and the strength of our delivery execution to be able to do that. And when we say we put skin in the game, we mean it contractually as well. That was answer number two. Saurabh, I’m going to request you to take number three please.
Saurabh Goel
Sure Sadh. So Abhishek, the increase in whether it is debtors or it is long term unbuilt, it is tied to the nature of the contracts that are being signed up. And the way we are tracking our numbers internally is we are making sure that there is FCF to pat as a ratio that is getting delivered quarter on quarter on quarter and that are the guardrails that we have put which will restrict the investments beyond a certain point in any particular account. So I think that’s the, that’s the short answer to that.
Abhishek Pathak
Got it. Thank you and all the best. Thank you.
operator
Thank you. Our next question is from Vibhor Singhal of Nirvama. Please go ahead.
Vibhor Singhal
Yeah, hi, thanks for taking my question and congrats coforge team on our rock solid performance yet again. Sudhir, I my question was, my first question was on basically the changing mix of the business that we might see over the coming quarters. You had mentioned in the analyst me that healthcare, high tech and public services are the verticals that we are focusing on going forward as the basically in terms of diversifying our base this quarter. Also you mentioned that we have won a large deal in healthcare and probably another in the public service coming in the coming quarters.
So if you could just take through the dynamics of these two sectors, how are we positioning ourselves in this pre encore. Of course there is Ancora also which will start contributing into it. In healthcare how are we looking in terms of payers and providers in public services? Are we looking more at UK public services or is it in the US as well as and what are the kind of growth avenues that we are looking in these verticals as we look to expand these verticals?
Sudhir Singh
Thank you, thank you for the question and for the kind comments. As we discussed earlier in the investor meet that we’ve done in Mumbai, we believe healthcare high tech public sector will will grow on steroids next year. If I were to put it euphemistically, even if you were to reflect on their performance right now, these two verticals, just healthcare and high tech and this is all pre in quora. We’re not factoring in everything that will happen after Encore comes in. On Hitech are already 10 and a half percent of our aggregate revenues and if I remember my numbers right we are growing 95%.
We’ve almost doubled it over the last four quarters. As I said earlier, we signed NN large deal in Q3. In Healthcare we believe we’ll sign another NNlarge deal in the quarter that has started Q4. We also believe that in the allied vertical which you refer to UK public sector we sign one of the largest deals that we ever have in that sector in the current quarter that’s going on right now, which we haven’t announced because this was the Q3 result call for now in healthcare we continue to focus on life sciences and we continue to focus on payer.
However, please recognize that we are still relatively small. The encore in the co forge business once it comes together will only be about 171/75 odd million and therefore we will also be we will also look for tactical wins. The large win in health care that we do expect to close in quarter four is likely to come from a provider client and in client even though our primary focus longer term is going to be around life sciences and peers public sector we continue to focus as we have. It takes a long time to build those relationships on UK and on Australia public sector largely we have no plans, no intention of approaching the US public sector. I trust I’ve answered your questions. River, thank you once again for the question.
Vibhor Singhal
Yeah, very much Sudeep, thanks a lot for that. So in that context, do you see that going forward the breakup of our dealings are also going to change a bit? Maybe so. For example, in this quarter out of six large deals, four were in our traditional Segments of banking, travel and insurance. Do you think we could see a mix of more large deals in healthcare and public services maybe going forward? Or do you believe banking, travel and insurance will continue to remain the forte of our growth and that is where still the large part of the large deal and the demand remains.
Sudhir Singh
We believe that the total number of large deals on an average will go up. Banking as I said earlier, we feel really confident about the pipeline that’s building up. So banking even this time two out of the six large deals came from banking. Banking is likely to do extremely well. Travel we think is likely to do exceptionally even. So out of the three core verticals, Insurance we think next year will do better than it has even in this year fiscal year 26. Having said that, banking and travel should outpace insurance, high tech, healthcare and this is all pre and quora will we believe continue to grow on steroids going forward?
Vibhor Singhal
Got it, got it. Thank you so much for the detailed explanation. Just one last question for Swarab. I think so. I think this time the numbers are quite very well explained and there just on the timelines of the two things. So I think signity shareholder approval as you mentioned, I think we’ve all seen as a wall come. So when do you think Signity could finally get fully integrated into a numbers in terms of financially and in terms of Encore Also what is the timeline that you’re looking for the share swap to be executed and thereafter the term loan to be retired.
Saurabh Goel
So before two things one shareholders approval was received and the application to the second motion application to NCLT was fin filed in the month of December itself. There’s a hearing with NCLT in March and I guess we should be able to get a result in one or two hearings. Our take is that maybe by March and latest sometime before a results for sure we’ll be able to get the approval for signity merger and as and when the merger notice is received, as I mentioned earlier, the effective date of the merger is 1st April 2025. So which means we will if we have not reported our numbers for Q4 and the financial year FY26 we will restate the 3/4 and when we report the full year numbers hopefully there will be no minority interest and new shares to Signity shareholders would have got issued.
So that is on. That is on. So from a financial perspective the integration would happen or the merger would get consummated by the time we report FY26 financials. That is point number one. Number two when it comes to Encore acquisition number one, we had mentioned last time, and I mentioned that in the call as well, that we are looking at a bridge loan or a qip. I think with the discussions that we have had with multiple banks and the rates that have got negotiated, we have finally decided that there is no need of qip, that we need to kind of do to retire the term loan in Ankora and the interest rates are very, very lucrative.
The terms, the other terms in the term sheets, the agreements with the banks are now getting finalized and that the period of the loan will be three years. More details around the loan that we will take will be shared once we have kind of signed up the loan with the banks. That is one second on the timeline for acquisition closure. We’ve already filed all the, all the, all the regulatory approvals that had to be filed either with RBI or with the exchanges or with the US Competition Commission which is HSR or any other geography approvals will start coming in.
The, the, the HSR approval which is Competition Commission equivalent approval in India will, is expected sometime in February and I think by March time frame we should be able to get pretty much all the approvals between March and April and that’s the time when we’ll start consolidating in quota as well.
Vibhor Singhal
Got it, Got it. Agreed. Thank you so much for taking my questions and I wish you all the best. Sure.
operator
Thank you. Our next question is from Manik Taneja of Access Capital. Please go ahead.
Manik Taneja
Thank you for the opportunity and congratulations for the steady performance. I basically had a question related to some of the cost split up during the quarter as well as the segmental margins first. So sort of, basically is there some, some sort of a one time element to the other expenses line item in 3Q because that seems to jump up very sharply in 3Q. If you could help us understand that. That’s question number one. The second question is with regards to our segmental margins, if you could help us understand what drives the sharp move across segmental margins on a quarter, on quarter basis that will be helpful.
And the last question is with regards to Saber deal, even we’ve been executing on that through the course of now, I guess probably about anywhere between six to nine months. If you could help us understand how that essentially shaping up. Are we on track with regards to some of the, some of the product delivery there and talk about, talk about the progress there. Thank you.
Saurabh Goel
So Manik, the other cost typically includes a cost related to either if there is any large SI deal which includes any third party component. So that Cost is included there and that goes up and down depending upon when a milestone is achieved. So the cost gets recorded accordingly and then it goes up and down. It had happened the same quarter last year also when the third third party cost had gone up significantly. And I’m not referring to the subcontractor cost but the third party cost. So that is because of that. But you will also note that when we look at the expense lines and we look at people cost, this was a quarter wherein we give wage hikes and but the wage hikes have not are the cost lines around people cost has not significantly gone up purely because of the, the optimization initiatives that are going on within the organization. So that is the answer to other cost. And yes, it is seasonal. It’s not that it will continue to stay where it is. It keeps moving up and down depending upon when the costs are hitting and when the revenue is getting recognized. What was your second question?
Manik Taneja
My second question was with regards to the segmental margins from a geography standpoint given the volatility that we see across regions to the B day.
Saurabh Goel
Yeah, so yeah, so one is a large impact is one is because of the currency. I think that’s the biggest impact that we are seeing because hedge losses get allocated not to the overall revenues but largely to Americas and Europe. And that is where the hedge, the amount of hedge losses that we are having in our top line, because we report hedge losses in top line that is impacting the reported EBITDA margins of the segments that we are in. And the third thing is about Sabre deal. I think from a saber deal standpoint, when we look at the ramp up that was expected to happen in quarter one and quarter two, the deliverables that had to be delivered during that time frame, we are on track and the cost that had to be incurred, we are lesser than the plan that we had to incur.
So I think from a saber deal standpoint we feel very, very comfortable in terms of what we have delivered so far. What our roadmap is as we move along and we get into next calendar year, which is calendar year 26 and from A, from a, from a comfortable around the, the, the contractual obligation standpoint, I think we are on track. And Sudhir, maybe if you want to add something on saber.
Sudhir Singh
Thanks. Thanks Manik to your question on how the Sabre project is doing, we would characterize it and I guess John and Sunil would characterize it more, more appropriately, possibly aptly as it’s going swimmingly. Well, we had a meeting earlier this month around the first week of the new calendar year with the CEO, the cao, the CIO and the head of the transformation program. The feedback from them was exceptional. The feedback from our team to them around the partnership and where we are against the agreed upon milestones again was exemplary and of the highest order. So things are doing, things are moving exactly where we expected them to be and possibly slightly better than that. Did we answer your question, Mani?
Manik Taneja
No, that. That’s quite helpful. Thank you. And all the best for the future.
Sudhir Singh
Thank you, Mani.
operator
Thank you. Our next question is from Kavaljit Saluja of Kotak Securities. Please go ahead.
Kawaljeet Saluja
Hey. Hi. Sudhir Saurabh. Congratulations on a good print. I have a couple of questions. First is on the nature of deal that drove strong growth in India. Can you just elaborate on the type of deal you know that would have contributed to such a large number and would this end up being a headwind to your growth as you move into 4Q? That’s the first question. Yes.
Sudhir Singh
Okay, sorry. Okay, I’ll start off and please add on at this point in time, beyond reliant on 1, 2 or even 3 access for growth, we referred earlier to the kind of growth that we see around health care, around public sector potentially getting accelerated post and quora coming together around high tech banking. We’ve alluded to the fact that not almost two out of the six deals came from banking itself. Banking is likely to do really well next year, as is travel, given the large deal strengths we’re looking at. So we think, and I think we said this earlier, we think fiscal year 26 has been a very good year for us.
Fiscal year 27 is likely to be an exceptional year if the growth momentum continues. A lot of our confidence is also coming from the balanced nature of the growth across account size cohorts. The pipeline, the relationship status across the top 10, the top 20 clients is extremely robust. And then it’s also coming from the next 12 months signed order book that we talked about. It’s 30% higher than where it was four quarters back. So we have a lot of prongs that give us significant confidence that what has been a very good year is likely to be followed by an an exceptional year coming our way. Did, did we answer your question? And Swara, would you like to add anything else?
Kawaljeet Saluja
AB if you can just elaborate what was the nature of contract in the India business that drove that sharp growth in the December quarter? So.
Sudhir Singh
Sorry, go ahead. Yeah, yeah.
Saurabh Goel
So. So k. A couple of things. One, when we look at the. The other direct cost. Okay. So it has grown almost 4 1/2% y on y and so there was a seasonality. So it same similar spike in quarter three last year had happened in the other cost and it happens in case there is any third party component which is included as part of the solution to the customer and you recognize revenue and book cost once the solution is delivered. So that spike came in in quarter three which led to increase in DSO and also increase in liabilities and also increase in direct cost.
Kawaljeet Saluja
Okay, got that. The second question that I had sort of is that what is your hedging policy? And you know, are the hedge losses purely on account of the euro lag of hedging GBP or USD? And if that’s the case, what’s the average rate of CA actual hedge book that you are carrying right now?
Saurabh Goel
So one counties we’ve been using the same hedging policy consistently for last I guess a decade or so. And we look at, we take 90% of the, we hedge the 90% of the exposure in a respective currency for next quarter followed by 80, 70, 60 which is total exposure of 75% over a course of one year. And we do cash flow hedges and our hedges are effective because of which the hedges the hedge gains or losses goes and sit in the top line. The reason why the hedge losses have come in, it’s not because of just dollar pound. It’s because of, I mean largely because of dollar because dollar has just continued to run up quarter on quarter month on month. We are also now revisiting the hedging strategy wherein we will stop taking the cash flow hedges which will then allow us to at least take the hedge gains or losses as part of the other income so that it does not impact our EBITDA or operational EBIT performance. And so that’s where we are.
Kawaljeet Saluja
Yeah. Okay, so are you going to basically pull back from hedging of cash flow so it will largely balance sheet hedges in future?
Saurabh Goel
Again, nothing finalized yet, but yes it is between cash flow or balance sheet hedging. Maybe we’ll do something balance maybe something to do with debt that we are taking. Maybe there’ll be natural hedge that will come in. So allow us a quarter or two and we’ll be able to provide more clarity on that. But it is under works and there will be some update on this if not later, but maybe next quarter for sure.
Kawaljeet Saluja
Thank you so much for answering my questions.
operator
Thank you. A quick reminder to our participants, if you wish to ask a question, you may click on the raise hand icon. Again we take the Next question from Dipesh Mehta of MK Global. Please go ahead.
Dipesh Mehta
Yeah, thanks for the opportunity. A couple of question I think first about you said risk reward where we are taking a risk of about let’s say delivering deliverable kind of thing. So can you help us understand how. We get the sense about it whether. It would be part of contingent liability, about the potential risk which we are working as a part of contract so. Some color around it. Second question is about the employee cost. I think SARO partly touch upon about some of the cost optimization actions or initiative which we have taken. Can you elaborate and provide more detail around it? Thank you.
Sudhir Singh
Let me take a quick stab at it. Risk reward as you can imagine is multiple flavors. Each one of those goes through our own risk assessment framework. This is something that Saurabh as the CFO of the organization owns and this is some something that our controller also gets into as does the pricing hit the head. When it comes to commercial constructs there are decisions that are made strategically around engagement structures whether they are joint ventures, bots, reverse bots, standard fixed price contracts or milestone based deliverables. Decisions are taken jointly by the CFO’s office along with the CDO’s office which is Sunil Fernandez, the global head of delivery of the organization.
These are reported three times in a year to the risk management committee of the board to make sure that we stay aligned with where we are. You will have noticed given the given the increasing margin and the very sharply increasing growth rate, not over one, two or three years but for now eight and a half years. This approach where we’ve been commercially judicious but also been open to newer paradigms has worked very very well for us. So that’s the broad risk management framework that we apply. I’m going to hand this over to you Saurabh to address the employee cost issue that was asked.
Saurabh Goel
Sure. And also on the continent liability piece Dipesh, typically what we do is we contain the revenue recognition because there is a risk and reward. So we do a balance assessment and we contain the revenue recognition and once we pass the toll gate of which is a contractual toll gate then the revenue gets recognized. So there is no contingent liability in the balance sheet that you will see but it is the revenue recognition which is contained. So that is one second employee cost you would recall. I mean in quarter four of last year we had said that we’re taking margin improvement initiatives maybe we’ve actually been talking about it for over a year now wherein we were looking at improving ARCs, we were looking at containing bench and we were looking at containing overheads.
So I think those initiatives were on and we had taken a lot of actions between quarter two, quarter one and quarter three is the period when at least we have seen the impact of those in the P L because of which even after wage hikes the salary costs have not gone up and because we have not been able only able to optimize the headcount. But even after headcount addition and wage hikes the salary cost has not gone up significantly. And you will continue to see this and, and which is a function of actually reduction in arc and you will continue to see this benefit flowing down. And that is what gives us confidence for quarter four EBIT margins as well.
Dipesh Mehta
Whether it partly reflect your pyramid change kind of thing.
Saurabh Goel
It is function of everything. The patient, it is even not just the pyramid at the same band, people getting replaced with lower cost. It’s even function of that as well.
Dipesh Mehta
Thank you.
operator
Thank you. Our next question is from Rishi Junjunwala of IIFL Capital. Please go ahead.
Rishi Jhunjhunwala
Yes, thanks for the opportunity. Two questions. Firstly, Sudhir and Swab. You know, ESOP costs have been a lever for us over the last year or so has has given us 100bps on margins. We have mentioned in the past that we do not expect this number to go up. In fact, if at all it may trend downwards with a large acquisition like Encora. Do you think the trajectory may again change on the ESOP side given any potential, you know, retention through ESOP schemes in there?
Saurabh Goel
So as a percentage of revenue, Rishi, you will not see impact on margins. Absolute number might change. We’re not going to come right now for any incremental pool. But The Even if ESOPs are getting issued, the cost, the margins that we have spoken about will continue to be intact.
Rishi Jhunjhunwala
Fair enough. The second question is on headcount, right? So if you look at in the last one year our headcount has grown at about 8,9% year on year 3q to 3q without any material improvement in utilization, which Sudhir called out as a lever going forward, whereas our revenues of course have grown at 25%. Is it possible to just give a breakdown in terms of what is driving this gap between revenue and headcount into how much of it is non headcount linked revenues versus how much of it is driven by automation, productivity and some of the other initiatives and how do we expect it to trend going forward?
Saurabh Goel
So I’ll answer that in two parts. One, obviously it is a function of the kind of contracts which are outcome based which are getting signed which gives you higher realizable revenue. And that’s what you see which is getting reflected in revenue per employee that we report. You look at current quarter, we Almost, we’ve crossed $71,000 per annum. So that is reason number one. Second, we’ve continued to the, the utilization levels that we are reporting today. I think there is a significant upside that is possible. The reason why we are right now not seeing an upside is because we continue to induct freshers and that’s why we continue to maintain lower levels of utilization.
But as those freshers are getting built, that has helped us in bringing down our arc. So that is answer number two. Number three is that the, the point that Sudhir was making that not just contracts which involves third party cost but outcome based contracts which has now become a significant portion or which is now continuing to come become part of our deals. As we are signing those deals over there, it’s not just the revenue per employee but the margin margins are high because of the risk that is being taken in those deals that is leading to higher revenue per employee and leading to lower headcount addition as compared to revenue growth.
Rishi Jhunjhunwala
Understood. Thank you. All the best.
operator
Thank you. We take our next question from Ravi Menon of Macquarie. Please go ahead.
Ravi Menon
Hi. Thank you for the opportunity and congrats on good revenue performance. Two questions here. One is, you know, this unbilled revenue trend, you know, as we take on more of these system integration contracts, you know, is this likely to continue going up and is there an absolute kind of unbilled DSO number that you’d be comfortable with? Because this is the level of risk that we are taking on. And how do you actually plan controlling that? Second is on this other direct cost again there is seasonality to understand. I mean this is also something that we should see going up because as you do these large system integrated contacts, this is another line item that might go up.
Saurabh Goel
So I’ll take one by one. So Ravi, when we look at our, our balance sheet, we look at total working capital cycle. Okay. So I think today sitting around close to 48, 49 days and I think that is a number. So there are two lenses. One, you look at overall working capital cycle. Second, you look at FCF2. Pat, we’re committed to make sure that we continue to deliver an FCF2 pad that we’ve already talked about and also maintain a working capital cycle which is closer to 50 odd days. If these two guardrails are kind of there in place, we will continue to Sign large deals.
We will make sure that as I mentioned, if sift to pad is getting delivered, EBIT margins are getting delivered and within these guardrails we’ll continue to kind of invest in the customers or sign deals which if requires investment in the customers upfront, we’ll do that. So that is answer to question number one. Number two, other cost. It’s not that this will continue to go up. I mean as I said over last one year the revenues have grown almost 28 odd percent. But if you look at year on year this cost has only grown 3, 4%.
So it’s not that the, the this line item will continue to grow. It is seasonal in nature. It will come start coming down from quarter three or quarter four or quarter one onwards and you will also see as a percentage of revenue, even the subcon cost for us has now started as a percentage of revenue started coming down. I had mentioned that it has gone up because of certain either deals getting signed or certain acquisitions that were done which had a larger subcontracting cost. So these costs will start coming down because end of the day, if these costs continue to go up, there is no way we can keep delivering the EBIT margin margins.
Ravi Menon
Thanks so much. And you know, it’s all that the sales people cost has gone up a little faster than revenue. I mean is this because of payouts related to some of the last deals you signed or is this a sign that we are investing a bit more in sales to scale up some of these smaller verticals?
Saurabh Goel
You’re referring to quarter on quarter or year on year?
Ravi Menon
Year on year looks like it’s a bit faster than revenue.
Saurabh Goel
Yeah, I mean year on year. 23%, 25%. So if I look at growth between 23% is revenue growth year on year, salespeople cost is 25 odd percent. So I think it’s the function of the investments that we have done. But you will look at that the GNA cost has gone down. So what our focus has been that we make sure that the investments in the sales is there because it’s not because of the commissions but it’s because of the absolute investment in the sales people.
Ravi Menon
Thanks. And one last question on travel. You know, because of the Sabre deal and the whole new platform that Sabre is creating, do you think there is a cross opportunity with airline customers, you know, and their own transformation programs?
Sudhir Singh
Yeah, I mean I think. Ravi, thanks for the question. It has, the Sabre deal has already had. It’s not in the realm of the hypothetical. It’s already when we look at the post Sabre scenario for Co Forge. We are on the verge of standing up a $20 million relationship with an airline which was not a material customer by any stretch for Coforge but was one of the biggest customers of Sabre. So that cross sell has already happened and we believe there is significant Runway for more such relationships to get constructed over time because Sabre is not just a client for us, it’s also a partner for us on an ongoing basis.
Ravi Menon
Thanks. And with Ankara, is that something that you think you can replicate in other segments too where you know, you do more product engineering work and use that to cross sell into different verticals?
Sudhir Singh
You’re right Ravi. That’s, that’s the intent. NF Signity is, is any reflection the success of that acquisition, hopefully in Quora at a minimum will be as good as Signity was. And the intent of course is to take it up a few notches from even the signity success.
Ravi Menon
Thanks so much. Best luck.
Dhanshree Jadhav
Thank you Ravi. Thank you. We take our next question from Dhanshri Jadav from Choice Institutional Equities. Please go ahead. Yeah, congrats on good set of numbers team. So it was a great performance. My question is on Ancora integration. So as you said the approvals will. Be done and by the end of March. So should we see the integration, you know or taking off in terms of. Numbers during end of the first quarter. Or how should we look at it. And some qualitative in terms of numbers post EBIT margins with the integration would be helpful. Would you like to take.
Saurabh Goel
Yeah, yeah, yeah. So Dhanshi, we will. We have to. So again as I said, regulatory approvals are going on and there are expenses related to regulatory approvals wherein the legal expenses are getting incurred that will be coming in quarter four and the integration expenses will not be very significant in the current quarter. But there’ll be expenses related to again legal expenses around funding that we are going to tie up with banks and I don’t think other than that material. And there will be WNI insurance expenses also. So I think I as of now I have only this much of detail but the whole integration related expenses would largely hit either towards the end of quarter four or March start coming in then when we are closer to the, closer to the approvals from the all the regulatory authorities or in quarter one.
So but again right now too early to say the the only three line items that I can expect between now and next couple of months that I have visibility of is the line item just I just mentioned the balance integration Related expenses should actually come in. In. In Q1 which would be largely an account of. There could be short clothes of certain contracts, the licenses and whatnot. There should be. There could be other expenses also. So I’ll provide more details once we have more clarity and. But we’ll have to just wait till we get closer to the regulatory approvals and then I’ll have more details around.
Dhanshree Jadhav
That and if can just to get. Some color on the rates at what we are. I mean whatever interaction we are having with the banks. So whether lower single digit or if that should be helpful.
Saurabh Goel
Oh it will be around mid single digit.
Dhanshree Jadhav
Yeah. Thank you. Yeah, that’s it from Ms. Sure.
operator
Thank you. Our next question is from Manik. The nature of Access Capital. Please go ahead. Mr. Taneja, could you please unmute your microphone and ask your question.
Manik Taneja
Hi. Thank you for the follow on opportunity. This was once again a clarification on the other expenses line item. You said there is some seasonality to it related to certain contracts. So just trying to understand is this largely linked to pass through license sales? That’s one. And given you’re talking about very strong robust growth going into the next year, how should we be thinking about. While you’ve given wages only in the prior quarter but how should we be thinking about some of the supply side factors going into FY27?
Saurabh Goel
So Manik, as I said that when we look at our P L which is year on year, the revenue growth in the P L is close to 23 odd percent from a. From a dollar perspective. And the other direct expenses have actually gone up only 4 and a half 5%. If you’re looking at the result sheet then it also includes the subcon expenses which actually shot up for us in quarter one of this year and which have now started getting contained at 50, 51 million dollar levels and have started actually, this is the first quarter it has actually started coming down.
So yes there is seasonality to it and Q3 last year the same thing happened. This number then came down to close to $40 million in Q2 and again gone up. So it will, it. It is a number which will move up and down. We expect this number to come down either as I said in Q4 or Q1 and despite that again the, the, the, the. The pipeline that we have in place, the deals that have already got signed or, or on the verge of signing few weeks or so gives us confidence in terms of the revenue growth that we will see in coming future.
Sudhir Singh
Last question around supply side pressure. As you can imagine, given where the industry is right now. Supply side on the cost side, supply side pressure is very muted. A wage hike has just been announced. It is obviously not going to be done at least for the next four odd quarters. Four quarters at a minimum. Therefore the confidence around margin increase. Further margin increase in FY27 over 26 is also strong.
Manik Taneja
Thank you.
Sudhir Singh
Thank you.
operator
Thank you. That was the last question for today. I now hand the call back to Mr. Sudhir Singh for closing comments.
Sudhir Singh
Thank you Emba. And thank you. Ladies, gentlemen. We know it’s early morning. For those of you joining in from India. We really appreciate the time and the. And the intent. We always find these calls extremely productive and instructive from our vantage. We look forward to meeting all of you over the virtual call three months from now. Thank you very much. Have a great day.
operator
Thank you members of the management, Ladies and gentlemen, on behalf of Coforge Ltd. That concludes today’s call. Thank you for joining us. You may now click on the leave icon to exit the meeting. Thank you all for your participation. Goodbye.