Coforge Ltd (NSE: COFORGE) Q4 2025 Earnings Call dated May. 05, 2025
Corporate Participants:
Unidentified Speaker
Sudhir Singh — Chief Executive Officer
John Speight — Chief Customer Success Officer
Saurabh Goel — Chief Financial Officer
Analysts:
Unidentified Participant
Abhishek Pathak — Analyst
Vibhor Singhal — Analyst
Ankur Rudra — Analyst
Manik Taneja — Analyst
Dipesh Mehta — Analyst
Abhishek Kumar — Analyst
Sandeep Shah — Analyst
Pratik Maheshwari — Analyst
Presentation:
operator
Sadies and Gentlemen, Good day and welcome to Coforge Limited Q4FY 2025 earnings conference call. Please note all participant lines will be in the listen only mode and this conference call is being recorded. We have with us today from the management team Mr. Sudhir Singh, CEO, Mr. John Speight, Chief Customer Success Officer and Mrs. 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 a forward looking statement and may involve risks and uncertainties.
Please refer to the disclaimer to this effect in the company’s Q4 FY 2025 earnings press release. With that, I hand over the call to Mrs. Sudhir Singh.
Sudhir Singh — Chief Executive Officer
Thank you Imba Ladies, Gentlemen, thank you very very much for joining us today as we share our quarter four and our fiscal year 25 performance as also the outlook for fiscal year 26. Fiscal year 25 was a landmark year for the firm where we recorded 31.5% US dollar denominated growth. In addition, quarter four again has been a landmark quarter for the firm because in this quarter we booked $2.1 billion of orders in a single quarter and we’ve signed five large deals paving the way for what is likely to be a very strong growth year in fiscal year 26 as well.
With that preamble and before I run through our commentary, I want to share an important reminder with you. Almost a year back, during the last year annual investor call, we made three assertions. Those three assertions and our performance against those assertions bears remembering as you listen to our commentary today. Assertion number one a year back we had shared was that what we were making, that we were making a contrarian yet high conviction bet by acquiring signity. Assertion number two that we made a year back was we had shared that we were stopping the process of providing annual guidance not because we were unsure of our performance in fiscal year 25, but because in fact we were very sure that we would continue to drive robust and sustained growth in fiscal year 25.
And as you can see, we have. And finally, assertion number three a year back that we made was we had shared that despite the bleak demand outlook painted by some of our peers and analysts for fiscal year 25, we had said that we believed that there were definite areas where a focused firm could pivot and drive significant growth. And we have. We are pleased that our performance was exactly in line with the three assertions that we made a year back on this same call. I shall call out the full year and the quarterly performance in order.
A few highlights before we dive into the details. It is not just the 31.5% growth in fiscal year 25 that is remarkable, but even more important has been the quality of that growth. Our growth in fiscal year 25 has been large deals led and has come off the back of 14 large deals signed through the year. The deal momentum has kept accelerating every quarter over the last four quarters. With five large deals signed in the most recent quarter, our order book at the end of fiscal year 25 is now 47.7% higher than it was at the same time last year.
The growth again has been balanced. Every industry business unit of Coforge has performed well, every service line of Coforge has done well. Every GEO that Coforge operates in has grown and all client cohorts including top 5, top 10 and top 20 clients have grown. As I noted earlier in quarter four we have booked $2.1 billion of orders which is equal to the entire order book that we did in all of fiscal year 24. Therefore, we look at the coming quarter and the coming year with great confidence. With that preamble, I shall now walk you through the annual performance.
Let’s start with annual performance Revenue Analysis in fiscal year 25 we registered a consolidated revenue of US dollar 1.445 billion. We clocked a revenue growth of 31.5% in US dollar terms, 33.8% in Indian rupee terms and 32% in CC terms. Our ability to drive growth in tough macros was aided significantly by growth across each one of the industry verticals that we operate in. The growth was led by the Travel vertical which saw 33.7% year on year growth, followed by Government outside India vertical which saw a 27.1% year on year growth. The banking financial services vertical through the year grew by 20.4% and the insurance vertical grew 13.3%.
Other emerging verticals including healthcare and retail grew by 67.9% in dollar terms. On the margin front, Annual performance commentary is as follows. The adjusted EBITDA margin came in at 18% for the year. Our pro forma adjusted EBITDA including signity was 17% in fiscal year 24 and the margin improvements have borne clear fruit. Our reported ebitda was at 13% and our margin improvement efforts have assured us that our EBIT reported EBIT shall expand materially in fiscal year 26 moving on quickly to quarterly performance revenue analysis, I am pleased to report that following a 8.4% cc sequential growth in Q3, the firm has registered a sequential revenue growth of 3.4% in cc terms in Q4.
In USD and INR terms, the sequential growth was 3.3% and 4.7% respectively. The growth during this quarter was led by the BFS vertical which has grown 13.4% sequentially in dollar terms. Our travel vertical grew 7.5% sequentially and the government outside India vertical grew 8.5% sequentially in dollar terms. Other emerging verticals declined 8.3% QoQ in dollar terms. Our top five clients and our top 10 clients declined 5.9% and 4.6% quarter on quarter. You will recall they had grown 13.5% and 14.4% sequentially last quarter. It is important to note that our top five clients and our top ten clients have grown by 12.1% and 15.1% respectively over the same quarter last year and these relationships continue to be very robust.
We expect very robust growth to return to this client cohort in the coming quarters and through fiscal year 26. Order intake commentary is as follows. Quarter four was an outstanding, I repeat, absolutely outstanding quarter from both an order intake and the number of large deal closure perspective during the quarter we signed five large deals. The velocity and median size of large deals signed by Coforge has been increasing over the years and I’ve remarked upon it often. I shall reflect more upon this in my concluding remarks. The total order intake during Q4 was an exceptional two $136 million.
We have closed fiscal year 25 with the highest ever recorded order intake of three and a half billion US dollars and this metric is up 75.1% year on year. The executable order book, which reflects the total value of locked orders over the next 12 months, now stands at a record 1 1/2 billion USD. This number, some of you might recall, was only $1 billion a year back and has witnessed a 47.7% drop on the people front. Our total headcount at the end of quarter four stood at 33,497. We saw a net people addition of 8771 people during the year and 403 during the quarter.
Utilization during the quarter stood at 82% last 12 month. Attrition for the quarter fell further and is now at 10.9%. We remain, as always, one of the lowest attrition firms across the industry. With those comments, I will now hand over the call to John Speight, Chief Customer Success Officer Forge for providing insights into our operations and capability creation. Over to you John.
John Speight — Chief Customer Success Officer
Thank you Sudhir. I shall now touch on the quarter’s highlights related to our delivery operations. Starting with the progress on our AI and gen AI capabilities, Q4 saw significant process on the implementation of our AI led solutions. We now have over 200 real world solutions developed and deployed. All of these solutions, frameworks and assets are available to our clients by the Coforged Quasar AI Marketplace. I will now share some examples with you. We implemented a Genai infused solution for a large US Insurer that enabled the automated extraction of policy and claims data for insurers integrating seamlessly with platforms such as Duck Creek and Guidewire, delivering 30% operational efficiency.
For another US insurance company, we based sorry a million documents a year, significantly enhancing data extraction, accuracy, quality and speed in the travel sector. For a major European transportation company, we implemented an AI powered solution that provides real time insights on next best actions during customer calls. Meanwhile, for the world’s leading air transport communications company, we implemented an AI based prioritization solution that has been instrumental in reducing by 75% the volume of weather alerts sent to pilots. Agentic AI is driving a lot of interest in the market currently and we are actively building capabilities in this area to deploy agentic AI solutions.
For example, we are developing an agentic AI based product catalog solution for a major US building products distributor to improve their B2B sales effectiveness. We’ve also used the Nvidia MIMO framework to develop our model lifestyle lifecycle as a service offering. This enables organizations to build out their own proprietary AI and Genai models within managed secure environments, enabling them to safeguard their IP and enable data confidentially potentiality embedded within their proprietary models. Within Coforge, our engineering teams are leveraging tools such as GitHub Copilot across the software development lifecycle, achieving more than 30% reduction in time and cost on large modernization programs.
Through our AI Spark program, 94% of our employees are now AI trained and more than 50% of our developers are proficient in GitHub Copilot. Moving on to partnerships, I want to share a couple of highlights. This quarter in collaboration with ServiceNow, we launched the Coforge Generative AI center of Excellence. It will focus on developing agentic AI solutions that help customers accelerate their ServiceNow adoption journey. Areas of focus include payments processing, fraud detection, dispute management and digital operations resiliency. CodeForge and ServiceNow have also partnered to accelerate AI powered dispute management. In March we delivered for a US based branded payment company the first dispute management solution on the ServiceNow platform.
In the cybersecurity space. We achieved Tier 1 MSSP status for Zscaler on the back of a successful client implementation of their Zero Trust architecture, the latest being for telecommunications service provider. On a final note, we are particularly proud of achieving PEGA Global Elite partner status for 2025. This prestigious recognition underscores our exceptional capabilities in delivering client value add with PEGA led solutions. With that I will now hand it over to Saurabh Gola.
Saurabh Goel — Chief Financial Officer
Thank you John Let me take you through some of the financial highlights for the quarter and the year. During the quarter we signed the definitive agreement to sell entire stake of Advantage Core Business at a consideration of pounds 43 million. As a result, the reported financial performance of the quarter reflects performance of the continued operations and all metrics in my commentary will be for continued operations until unless otherwise specified otherwise. During the current financial year, Advantage Co Business generated revenue of$23 million, a bit loss of $5 million and a cash burn of $8.5 million. During the quarter we also acquired Data and Cloud asset in the US generating quarterly revenues of 6 million and our ServiceNow asset in Australia generating a revenue of $2 million per quarter.
Both these acquisitions generates margin in line with company’s performance. Revenues from these acquisitions will be largely set off by the sale of AdvantageCo business. We’ve also ended the year with net cash of 43.3 million as against a net debt of 9.8 million at the end of FY24. From a full year perspective, the revenue for the year stood at $1.45 billion reflecting a growth of 31.5%. In dollar terms, adjusted EBITDA margin for the years were 18.8 18% and EBITDA margins were at 16.6%. EBIT margins for the year stood at 13%. The structural changes executed by US and large deals signed during the year reflects our continued focus to drive profitable growth.
With these changes, we have a clear line of sight of improving margins over next two years. Currently our cash and bank balance totals to $125 million excluding the $82 million working capital loan or net cash position is $43 million full year. OCF stood at 147 million as compared to 108 million last year. Reflecting OCF to EBITDA of excluding integration expenses, the OCF to EBITDA for FY25 stood at 71%. During the quarter, the quarterly revenues stood at $403.8 million. Including AdvantageCo, the revenues for the quarter were $410.7 million. Adjusted EBITDA margin in the current quarter, which was a tough quarter, expanded by 100 basis point to 18.7%.
ESOP cost has come down by 33 basis point as we guided in the previous quarter and now stands at 1.8%. And as mentioned earlier, it will it is expected to come down to a level of 100 basis point from H2 of this year. The exit EBIT margin for the quarter stood at 13.2% which reflects expansion of 123 basis point over previous quarter. Operating cash flow excluding transaction expenses related to integration expenses for Q4 stood at 75 million against 48 million in the previous quarter. This reflects OCF to EBITDA of 108%. With that, I will hand over the call back to Sudhir for his comments and outlook.
Sudhir Singh — Chief Executive Officer
Thank you Saurabh we are entering fiscal year 26 with a record signed order book which is 47.7% higher than where it was at the same time last year. Let’s start with that for outlook. Equally importantly, our pipeline of large deals where we have high conviction that they will be closed in the short term, is unimpaired for more than eight years. Despite the changing macros, both the number and median size of large deals signed by our sales engine has continued to increase year on year. That trend, despite the uncertain macros the industry is currently facing, will continue to be on Track.
The Sabre 1.56 billion dollar deal that we announced through the quarter has seen an impeccable transition and a ramp up so far. We believe that more than the robustness of our growth, what is truly remarkable is the balanced nature of our growth across all cuts, I.e. across GEO units, across industry vertical units across service lines. Our confidence in sustained growth in the future rides out the fact that there is no over reliance on any one growth vector. All vectors including GEO based units, industry based units and service lines are firing. They are not. They are all not just growing, but they’re all growing robustly.
Finally, as we conclude the year, we would like to reflect upon the three key reasons why Team Coforge has delivered robust and sustained growth over eight years. Remember eight years. This is not one, two or three years, including during years when the industry has faced headwinds. Those very reasons give us confidence in our quest to be the industry growth leader in fiscal year 26 as well. Reason number one out of those three reasons is an execution discipline and an execution intensity that is uniquely our own. For eight years the three step iterative process of Plan execute debrief, Plan execute debrief, Plan execute debrief has been repeated by every function and every unit of CO Forge.
It has now become hard coded in the DNA of our function firm. Reason number two is our outsized focus on driving growth essentially through solution based proactive large managed services deals. This large deals based growth approach has meant that our teams count more on wallet share expansion and not client budget expansion as the primary arc for expanding our revenue. We enter every downturn with a strong signed order book and a high conviction short term pipeline ahead of us allowing us to outperform irrespective of the macros. Reason number three is our unwavering eight year dedication to building deep differentiated architect pools.
NSME led industry specific engineering competence. We believe as things stand today after 8 years we are one of the most credible challenges today in the financial services tech partner landscape and we further believe that we have now entered the leader’s box in the travel services tech partner landscape. Our government business outside India and our healthcare business is being built up painstakingly following the exact same approach. Each three of these aspects, the execution intense DNA, the large deal oriented sales mindset and the industry led engineering focus cannot be built overnight. They take years to build but once built they become a lasting growth pillar which does not just sustain high growth but actually accelerates growth every year.
Our growth outlook for fiscal year 26 despite the uncertain macros that the industry faces, is very robust. We believe very significant growth in fiscal year 26 will be accompanied, as Saurabh said, by a simultaneously by a simultaneous and a material expansion in reported ebit. With that ladies gentlemen, I conclude my prepared remarks and Saurabh, John and I look forward to hearing your comments and addressing your questions. Inga, all yours.
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 participant tab on your screen. We request our participants to please restrict your questions to one per participant. You may rejoin the queue for more questions. We will wait for a moment while the question queue assembles. Our first question is from Mr. Abhishek Pathak from Motilal Oswal. Please go ahead.
Abhishek Pathak
Hi, thank you for the opportunity and congrats team on a great quarter. So I got a couple of questions. Firstly you know as you mentioned right over the past eight years the growth has been Quite significant. But would you agree that this is.
Abhishek Pathak
Probably going to be an extended period of downturn for the industry? And if so, does the deal win.
Abhishek Pathak
Engine have to kind of permanently pivot.
Abhishek Pathak
Towards large deals and cost takeouts or.
Abhishek Pathak
There is still room for discretionary and in other areas? That’s one. The second question is on the sabre ramp up. Could you please tell us how the.
Abhishek Pathak
Margins will be impacted in the short.
Abhishek Pathak
Term and how should we model them? And just on the margins as well, how should we expect the reported EBIT margins to. To expand from. From here on in terms of margin work?
Abhishek Pathak
Thank you.
Sudhir Singh
Thanks for the questions. I. As far as the pivot towards large deals is concerned, that’s a pivot. That’s. That’s a pivot that we’ve embraced over the years. That is not just a pivot that we’ve done. That’s part of our approach towards sales. Irrespective of the macros, discretionary spends up or down, we continue to focus on managed services based proactive solutions led large deals. That is not going to change. Difficult for us to comment at this stage in terms of how long the demand downturn is going to last. Irrespective of the demand downturn. As you would have noted from our tone, all three of us, we are confident that the large deal velocity and the large deal median size will continue to grow.
Forge as far as saver margins are concerned, it will not have any downward dip in our margins. Sort of it guided to the fact that by fiscal year 27 reported EBITDA I’m not talking adjusted reported EBITDA will hit 18% this year. You’ve seen we’re at 16.6%. We will deliver on that pledge.
Saurabh Goel
And Abhishek on I bet the Q for exit EBIT is 13.2. As we mentioned that there was a burn of 50 basis point on advantage for business. Now that’s behind our back. So 13.2 is the exit for the year. We were looking at $2 billion of revenue guidance for FY27 EBITDA guidance of 18% that translates to typically a bit guidance of roughly 14 odd percent. But I guess that by end of FY26 we would have done large part of the journey coverage from 13.2 to 40%. So I think that’s where we are.
John Speight
And also just to add regarding the downturn point, I think the continual drive of AI gen AI to deliver long term efficiency gains is focusing many organizations on business transformation, legacy modernization. They’re having to get the value out of AI. So we expect those to continue actually to accelerate.
Abhishek Pathak
Thank you so much. All the best.
operator
Thank you. We take the next question from Vibhor Singhal from Nuvama Equities. Please go ahead.
Vibhor Singhal
Yeah, hi, thanks for taking my question and congrats Sudhir and team for a solid performance yet again. So Sudhir, two questions from my side. One is in terms of growth, you had called out that the pipeline also looks quite thin and the at this point of time despite the very strong bookings that we’ve had in this quarter. So again I, I mean it’s just because we are operating an environment in which there’s quite a benign commentary by a lot of our peers. How do you see this basically pipeline shaping out over the next few quarters? Any specific pockets that you want to call out in which we have seen very good strength that you believe could be the driver of the deal with next quarter, next year? The next year growth is of course taking care of what the deal is this year.
But what could be the driver or what segments could you see be the driver of next year’s dealings? Then I have a question for sort of maybe if you can answer this and I’ll have a follow up with sort of.
Sudhir Singh
Sure. So the drivers in our case the two areas we focused on are the same areas that John talked about. Transformation and legacy modernization. There’s always the cost play out, pay that play that we are all always aware of. We expect growth to come from multiple quadrants, not just one or two. If you just reflect back on the five large deals that we’ve signed in the current quarter, quarter, quarter four, when the industry in general has been, has been struggling. One of course was clearly the saber win. The other deal is a very interesting deal where we are offering GPU as a service at scale.
The third one was for one of the largest banks, AI led QE Services and QE for AI. The fourth has been a very large salesforce led win again for a bank. And the fifth has been a very interesting $62 million TCP win from one of the top three clients of the erstwhile signity organization. So it’s not just one pillar, it’s not just one vector from which we are exploring deals. We see significant avenues. The broad theme continues to be what John talked about. Transformation, legacy modernization with cost outpace.
Vibhor Singhal
Got it, got it. And specifically, if I could just pick your brains on the travel vertical. That is one vertical in which we have seen a lot of airlines coming with profit warnings. United went ahead with a bimodal Guidance in terms of the environment, how is the environment in that vertical looking like? I know we’ve had a largest deal in that vertical in this quarter, but going forward, are you seeing some sort of, let’s say uncertainty or delay in decision making from the airline, specifically the airlines part of the travel vertical?
Sudhir Singh
So it’s a mixed bag. I’ll talk about the the pros and the cons both. On the con side, given the recent change in geopolitics impacting global economy, we are seeing travel industry take a more cautious approach in increasing capacity and sharing their own outlook. Specifically there in the US while year on year reported travel bookings and revenue are higher for travel and hospitality, a number of companies have reported reduced velocity and there’s a fear of booking cancellations in the near term. More or less the same commentary in Europe, right? Low cost carriers, digital first models continue to drive recovery growth, especially in leisure travel space.
However, there again rising labor cost capacity constraints pose ongoing challenges. Interestingly again just continuing on that Geo arc, we were across Asia Pacific, Middle East, Latin America, Africa, travel demand is growing steadily so it’s not the same feedback as it’s coming to North America Europe for fiscal year 26. Despite the cons that I talked about, our outlook on travel is strong and we are well poised to grow while factoring in the industry dynamics that I talked about. And this outlook is based on the bookings in hand, the current sales pipeline and the demand that we are seeing in our existing key accounts in travel.
Still, despite the concept I talked about, we are seeing client opportunities in travel in GCC setup, in modern airline retailing, in data modernization, in MNA integrations and in loyalty and personalization. So that’s, that’s a quick overview in terms of travel, what’s happening and what we see going forward.
Vibhor Singhal
Got it, got it. That’s really helpful that detail explanation. Just one last question for Saurabh. Saurabh, I think our OCF reported a very sharp jump in this quarter. Last 2, 3/4 it had been $50 million. This time it’s around 74. So if you could just take us through that. Will this be the can we expect it to be the ongoing run rate over the next few quarters also? Or are you expecting some headwinds to this number?
Saurabh Goel
So this is how at least structurally over last many, many years that our H2 from OCF perspective has been higher than H1. In fact in prior years the H1 OCF used to be negative or zero and then all the heavy lifting used to happen in H2. So current year also in H1 rocf was low largely because of QIP expenses. If we knock that off, the OCF started, we started the year with 30 odd percent OCA and then which went up to 100% so that we ended up delivering 71% OCA for the year. I guess on an ongoing basis we believe that anywhere between 67 to 70% OCF is what we would generate in the business with the kind of growth that we have seen and that would.
Vibhor Singhal
Have this normal seasonality that the first half will be weak and the second half will be stronger.
Saurabh Goel
Absolutely. We try, we are trying everything to make sure that it is smoothened out to an extent. But then there are certain structural things which result in heavy payments happening in quarter one and quarter two resulting in OCM to be lower. Import one and follow.
Vibhor Singhal
Got it, Got it. Great. Thank you so much for taking my questions and wish you all the best.
Sudhir Singh
Thank you.
operator
We take our next question from the line of Ankur Rudra from JP Morgan. Please go ahead.
Ankur Rudra
Hey, thank you. Maybe just wanted to talk about the outlook to start with.
operator
Mr. Ankurudra, hi, can you hear me now? Yes, yes sir.
Ankur Rudra
Okay. Thanks Suya. Thanks for taking my call. I wanted to get a sense of the outlook. Outside of the Sabre deal, we understand that will be a significant component of the growth outlook. But outside of that, if you can share how does the overall momentum look like given the environment has probably weakened a bit. And if you can give us any kind of update about the medium term target of hitting $2 billion in revenues.
Sudhir Singh
As I said, Ankur, we have, we do not believe that the velocity of large deal closure and in quarter four, as I just shared, we signed five large deals.
Saver was only one of them. We don’t think the velocity or I mean if you leave out Sabre, the median size is going to deteriorate for us. We understand, we acknowledge, and I just shared the commentary around travel as well that the demand outlook has worsened. But given the pipeline that we already have, given the sales orientation which is very sharply structured on proactive proposal creation, we would expect the velocity, we would expect the median size of these large deals to sustain as far as $2 billion is concerned. We would not like to share a timeline but we, I mean given our performance of late, given the commentary you’ve heard, we feel we’re going to get there pretty soon.
Actually let me make that very soon without qualifying what the very is understood and there is no risk to that number for F27 that you previously stated, right? Given the weakness in the short term and you’re seeing very soon. Oh no, I don’t think there’s any risk at all to fiscal year 27 getting to 2 billion. The intent will be to get there faster. We’d be a little disappointed if it took us all of fiscal year 27 and to scrape by to $2 billion. Understood. In terms of the near term, if you can comment anything about revenue conversion from all these large deals.
Anything to note given some of the weaknesses you might be seeing on travel side which you’ve acknowledged nothing of concern, the immediate quarters are going to be very good as well. Fiscal year 26.
Ankur Rudra
Appreciate it. Thank you. Thank you uncle.
operator
Thank you. Our next question is from the line of Manik Taneja from Access Capital. Please go ahead.
Manik Taneja
Thank you for the opportunity and congratulations for the steady performance. My question is for Saurabh Saurabh, if you could help us understand how does the number of working days in April, May, June differ and should be a tailwind to sequential growth in the current quarter. If you can provide some insight into that. And the second question is with regards to the margin outlook, if you could talk about about the different margin levers especially in context of the lower ESOP charge as well as sales and marketing expenses outside of ESOP expenses and the gross margin progression that we should be seeing in F526.
Saurabh Goel
Okay, so a couple of things. One, when we look at number of days so yes there will be a leverage coming in and that’s why I said that between Q3 to Q4 it was a tough quarter and there were number of lesser number of days based even that even then we did a 100 basis point margin expansion in the current quarter number one. Number two, like you remember that we had given wage hikes in quarter two last year. So again it’s not happening in quarter one for sure this year which means that there is no depression on margins that is going to come in quarter one and we believe that we will be able to sustain margins that we are delivering now and with to the extent of the adjustment that can happen would happen on account of visa costs that get gets paid up front for the whole of the year.
Apart from that we believe that the EBITDA margins of the gross margin should hold or gross margin should should marginally expand. So that’s number one. Number two from a lever standpoint 13.2 is the EBIT exit in in quarter four. As you know that by end of end of by Q3 this ESOP cost is going to come down from current levels almost by 70, 80 bits. Further that is going to flow down into ebit number in Q3 which will get marginally set off with whatever rate hikes will happen at that point in time. But we believe that between 13.2 to 14 odd percent EBIT guidance at least that we have a large part will get covered this year largely on account of structural changes that have happened in the business wherein the scale lever will start playing in.
The large deal expansion with no depletion in gross margin will start playing in. And that’s why we believe that whether it is gross margin or EBITDA margin or EBIT margin should sustain and should expand materially over next couple of years.
Manik Taneja
That’s helpful. And if I can check in with one more question, if you could clarify on the segmental margins for Asia they appear to be the highest in several quarters.
Manik Taneja
If you could help us understand what.
Manik Taneja
Drove the big upswing in terms of segmented margins in this geography.
Saurabh Goel
So what has happened is that Australia as a geography and so a large part of that revenue comes from Australia and, and, and, and it comes from asan. These were two regions which earlier were not doing well. But over last couple of years or maybe I would say 18 odd months, the correction in Australia happened because of the investments that we had made there and the new leader that was hired almost two years ago and that margin had already improved. Now the ASEAN business has also started firing and there was some small part of the business which is not doing well.
Even that’s behind us. So smaller geography, not a significant impact on the overall numbers. But yeah, I think there are certain areas which were, which was stressed which are now behind us.
Manik Taneja
Thank you. And we show the best. Thank you.
operator
Thank you. Our next question is from Dipesh Mehta of MK Global. Please go ahead.
Dipesh Mehta
Yeah, thanks for the opportunity. A couple of questions, just want to understand how once you understand our optimal utilization. Right. I am looking at.
Sudhir Singh
We can’t hear you Dipesh. Can you get closer to the mic please? We can’t hear you clearly.
Dipesh Mehta
Is it better now?
Sudhir Singh
Yeah, it is.
Dipesh Mehta
Yeah.
Dipesh Mehta
So my question is about utilization.
Dipesh Mehta
What is the optimal utilization range you are looking for?
Dipesh Mehta
And in the context of people credit.
Dipesh Mehta
Count Edison, it is roughly a percentage.
Dipesh Mehta
This quarter where we are expecting some of the large deal ramp up to play out in next few quarters. So in that context if you can provide some sense that is question one. Second question is if I look your.
Dipesh Mehta
Service mix there is a sharp growth.
Dipesh Mehta
In engineering where while IMS is So just want to get some sense because in geography also America is very soft.
Dipesh Mehta
Compared to rest of the world.
Dipesh Mehta
So there are some quarter specific nuances playing out. If you can provide some color around.
Dipesh Mehta
Thanks.
Sudhir Singh
So dibesh utilization we are at 82% for the quarter. We think that’s a good number because in our utilization we count pressures as well. The second question was around head count, is it?
Dipesh Mehta
Yeah.
Sudhir Singh
What was that specific question?
Saurabh Goel
So second question was on the head count. So see headcount addition for the last deal ramp up had started happening because last quarter itself and it was getting added over a period of time. So that is why you see the current head competition and over next few quarters also you will see material headcount.
Sudhir Singh
Addition that will be happening also. The other thing you have to note around headcount is while we’ve declared a headcount addition of 400 odd from that number we’ve subtracted 600 people of advantage Go. If the business had been continuing as is this quarter would have seen a thousand people headcount improve.
Saurabh Goel
Right.
Sudhir Singh
John, do you want to comment on engineering vs. IMS?
John Speight
I didn’t actually hear the question was.
Sudhir Singh
Engineering contribution seems to be far outstripping the contribution of the infrastructure business.
John Speight
I think a lot of it is down to the sabre deal. A significant proportion of that is pure play engineering. Engineering services. I think that’s the major factor that I see affecting that.
Sudhir Singh
Correct. And the longer term secular trend that we are also seeing the page in addition to that is our engineering business and we called it out repeatedly is very firmly grounded in the functional expertise that we bring in across industries. And whether it’s a geo based unit or an industry based unit, with the new delivery and the new engineering leader that we’ve had in play for the last 12 plus months, that business is picking up incredible speed. While the IMS business continues to grow strongly in relative terms it’s picking up speed. Last question about the saber deal ramp up how once you look the ramp up, whether the linear equation is a good way to look at it the way it should contribute over a period of time.
Well, the saver ramp up is proceeding extremely well. We would expect the ramp up to continue over a three three quarter period and that’s proceeding as per plan and contribution would be roughly linear right across 13 years. If one do that division more or less.
Saurabh Goel
I mean deal of this size the revenues are never linear but as you mentioned earlier it will be as it code of 10 to 20 million dollars plus minus.
Dipesh Mehta
Understand? Thank you.
Sudhir Singh
Thank you. Dipesh thank you.
operator
Our next question is from Abhishek Kumar of JM Financials. Please go ahead.
Abhishek Kumar
Yeah.
Abhishek Kumar
Hi, good evening. Thanks for taking my question. First question is on Sabre deal and it’s a question that is asked to us very frequently by investors given the financial situation of Sabre, you know, do we foresee any risk of ramp down or any challenge to receivables or receivable days and if at all, any risk mitigation that we kind of use to protect ourselves.
Saurabh Goel
So Abhishek, couple of things. One, we’ve been working very closely with the leadership team of Sabre and this is one of those accounts wherein we not only have a connect with the CIO organization or the CTO organization or the CMO organization, but also to a CFO and a CEO and even at board level. So that’s point number one which allows us to get insights on what the strategy of the business is, what they’re planning to do and what are the future steps they’re going to take. That’s number one. Number two, they’ve very recently announced a sale of their hospitality business which we were not supporting.
It was a small business, roughly 250, $300 million of annual revenue at $1.1 billion to pay off the debt. So we were aware of it. So 4 point out of the debt of 4.7, $4.8 billion, 1.1 will be shaved off. And they’ve always been operating at a debt of three, three and a half billion dollars. So we continue to monitor. The point I’m making is that we continue to monitor their financial performance, their business strategy, very, very closely. And obviously we’ve also taken non recourse factoring and we’ve also taken a credit insurance policy in case anything unforeseen happens.
But apart from that, we continue to work very closely with the management team, with the board, so that we know what’s happening into the customer.
Abhishek Kumar
Okay, that’s helpful. My second question is in the others vertical which saw a sharp decline this.
Abhishek Kumar
Quarter, you know, a lot of what.
Abhishek Kumar
Is included in the others vertical, like retail, healthcare, etc. Seems to be where Signity has contributed. So just wanted to understand, is that attributable to some softness in Signity or.
Abhishek Kumar
That’S just, you know, quarter noise?
Abhishek Kumar
Thank you.
Sudhir Singh
No, it’s not. It’s not attributable to any softness in the Signity portfolio of accounts. As I noted, one of the largest deals, the second largest deal during the quarter after Sabre is a deal with one of the top three, three accounts of signity. That is a 62 million dollar, not five year but a three year TCV deal. The incremental revenue from that deal is going to be bigger than the size of the account was when we took it over. So the others vertical also. The second thing I want to tell you is the others vertical.
If, forget the, forget the quarter look at the full year, others vertical has grown 67% over the previous year. So what you’re looking at in this, in this relatively smaller vertical is a temporary quarterly blip not attributable to any softness in Signity, which continues to be a fantastic acquisition from our vantage where the pipeline of large deals from accounts that used to be Signity is growing. So to that extent we feel reassured.
Saurabh Goel
Around Signet and Abhishek. Just to add to that. So Q3, there was a sharp spike that had happened in others. So I think it’s more of that revenue that came in Q3 has just gone away. And that’s why you see a blip otherwise. Structurally, year on year basis you will see that there is growth happening. There is not a single vertical otherwise which is not doing well on an ongoing basis.
Abhishek Kumar
Okay, great. Thank you so much. Thank you.
operator
Thank you. Our next question is from Sandeep Shah of Aquarius. Please go ahead.
Sandeep Shah
Yeah, thanks. Thanks for the opportunity.
Sandeep Shah
The first question is if I look.
Sandeep Shah
At FY 2025 and strip out the.
Sandeep Shah
Inorganic growth, based on my estimate
Saurabh Goel
we have roughly done a mid teen kind of organic growth. And if I look at also the.
Saurabh Goel
Announcement on Sabre deal plus other acquisitions.
Saurabh Goel
It looks like that the coming year with these announcements will also contribute 15%.
Saurabh Goel
Growth automatically through Saber and inorganic acquisitions.
Sandeep Shah
So is it fair to assume the growth momentum?
Sandeep Shah
What we have seen in FY25, which.
Sandeep Shah
Is upwards of 30% can be maintained.
Sandeep Shah
In FY26 as well.
Sudhir Singh
You know, we can’t give a number based guidance, Sandeep, but I will just reiterate what we said. We expect very strong growth in FY26 as well. Without qualifying the number, the growth should be very strong.
Sandeep Shah
Okay, so Sudhir, you expect the macro.
Sandeep Shah
Headwinds may have some paperness or some.
Sandeep Shah
Impact on organic growth in FY26 versus FY25?
Sudhir Singh
Not at all. I would. I don’t see organic growth slowing in any shape or manner in FY26 over FY25.
Saurabh Goel
And Sandeep, just to add to that, I mean last year when we got into FY25, we had a headwind because our quarterly growth rates were actually coming down. I Mean we started the year with the the exit of FY23 was around 44 and a half percent quarterly growth which came down to 111 and a half odd percent quarterly growth when we exited last year FY24. This time when we are exiting port of 4 we have had quarters wherein we have grown 6% 8% on CC basis on an organic basis. And that’s why we believe that at least that directionally I mean that next year should be better than the current year.
Sandeep Shah
Okay. Okay.
Sandeep Shah
Thanks and just I have joined late.
Sandeep Shah
Apology for the same. Can you once again in give a detail about the organic the margin guidance for FY26.
Sudhir Singh
We haven’t given a hard number guidance or we we believe that EBIT will see a significant improvement that’s reported EBIT and our guidance for hitting 18% reported EBITDA in FY27 also stands.
Sandeep Shah
Okay And Saurabh sir has said that.
Saurabh Goel
This year would be between 13.2 to 14.2 at the EBIT level. So I had said that the guidance for FY27 was revenue of $2 billion reported EBITDA of 18 odd percent which would mean an EBIT of 14 odd percent from 13.2%. A lot of that journey to 14 will get covered this year itself rather than leaving it for next year to kind of scraping towards reaching we are reaching 14 number.
Sandeep Shah
So thanks all the best. Thank you.
operator
Thank you. Our next question is from Nirmalpang. Please go ahead.
Unidentified Participant
Hi.
Unidentified Participant
Congratulations on great set of number and.
Unidentified Participant
Thank you for the opportunity. So my question is for you not audible. Hello.
John Speight
Is it.
Unidentified Participant
Is it better?
Sudhir Singh
Yeah, much better. Yeah yeah.
Unidentified Participant
So congratulations on get great set of numbers and thank you for the opportunity.
Unidentified Participant
So my question is on around the exchange rate. So in our flagship what I found the reported rate is around 86.6. However when I calculate who are numbers.
Unidentified Participant
Reported numbers which is USD 404 million.
Unidentified Participant
Versus INR 3409 million it comes with.
Unidentified Participant
A deviation of around $2.
Unidentified Participant
So any color on that.
Saurabh Goel
So number one see our our exchange that is just a dollar exchange rate. When you look at our mix it’s little different from most of the other organizations wherein the almost only 50% of the revenue is actually dollar denominated revenue. A large part of also comes from pounds, Euros, Australian dollars and Singapore dollars. So that’s number one. Number two we also take hedge losses in the top line which actually translates into a very different number. So these are two reasons why you see just a dollar average rate versus the revenue that’s Got delivered in the quarter from a reported revenue in rupee terms or dollar terms.
Unidentified Participant
Understood.
Unidentified Participant
And sir, a second question on that is around the GCC business.
Unidentified Participant
So any color on our GCC business, how is it ramping up and how significant is becoming in our Asia geography?
Saurabh Goel
Because our Asian geography is, you know, significant revenue growth in this quarter.
Saurabh Goel
So is it primarily driven by GCC.
Saurabh Goel
Or GCC is just a part of.
Saurabh Goel
The higher end growth in Asia geography.
Saurabh Goel
Thank you.
Sudhir Singh
Asian growth has not been driven by GCC’s Weber but a lot of our growth is being driven by GCCs. GCC driven or GCC influence revenue is almost 10% of our aggregate revenues as we speak. The largest deal that we are pursuing right now also is a GCC specific deal currently. So short answer. Asia growth is not necessarily a function of GCC growth but a lot of our pipeline is significantly influenced by our GCC growth. John, would you like to add more to that?
John Speight
The only thing I’d add to that is given the success we’ve had with GCG over the last 12, 18 months with a number of customers that is in itself being used as referencing into new customers and that is driving change. What we’re also finding is a number of organizations are struggling to drive their offshore strategies alone and it’s, and it’s feeding into us significantly and hence why we’re having so many conversations with customers in this space.
Unidentified Participant
Great. Thanks John. Thanks very much.
Unidentified Participant
Understood.
Unidentified Participant
Thank you so much.
Unidentified Participant
That’s it for me.
operator
Thank you. Our next question is from Chirag from Ashika Institutional Equities. Please go ahead.
Unidentified Participant
Hello, congrats on a great start of numbers.
Unidentified Participant
So I have brought in two questions. The signet is offering in one particularly offering testing related services. So how that particular division is now.
Unidentified Participant
Integrated in this consolidated entity and you know, providing some synergy benefit to the.
Unidentified Participant
Existing business of the co force and in advent of this AI related disruption, how this is invented, offering on real time basis will not get impacted by this AI. And second, what risk you see in FY 26 and 27.
Sudhir Singh
Signity QE out of the five large deals that I talked about two of the large deals were influenced by our AI for QE and QE for AI based offerings. That’s a hard data point in terms of how successful the signity business, especially the AI driven QE has been. Second in November this year given our confidence around the AI suite in QE we are organizing an event in New York City four hours workshop inviting every analyst there is in the world just to talk about the differentiation that we have built, which was part of our premise around acquiring Signity in the space.
Third, the Signiti QE team has been fully integrated into the Co Forge unit. There is no longer internally, if you look at us, a standalone Signity team. QE is now a horizontal business unit. It is run by Mr. Raghu Kobeti who used to be the global delivery head of Signiti earlier. As far as the risks are concerned, no outsized risk that I can call out when it comes to the revenue, we haven’t given a guidance but the confidence that you hear in our tone, we believe we’ve considered most risk scenarios. We’ve most importantly considered the demand downturn that our industry is dealing with.
And after baking all of that, we still feel extremely confident about what we’ve shared with you. I’m going to request John to layer on anything else to that? Yes, just one.
John Speight
One thing which we’re seeing is the cross sell upsell opportunities into the the accounts that have been onboarded as part of that acquisition. That is significant because that business that we acquired was 90% QE. Small smashing of RPA digital. But now we’ve got the full gambit of other engineering platform plays that actually can deliver value to those customers and that we are very confident on leveraging.
Sudhir Singh
Thank you.
John Speight
Thank you.
operator
Thank you. Our next question is from Vibor Singhal from Nuvama Equities. Please go ahead.
Vibhor Singhal
Yeah, hi, thanks for taking my question again. Sudhir, just a question on the Sabre deal again, I mean more of a subjective kind of assessment. If I could ask you for, ask you for. So I mean it’s very seldom that we see a company of our size, mid tier company, grab such a large deal. These large deals had always been the kind of forte of the large cap companies that we had always seen. You mentioned of course that this was a long standing client. We’ve had a long standing relationship and our domain expertise in the travel vertical is also known.
But is there a kind of a paradigm shift in which more and more companies like of our size are being called for large cap companies in your pipeline? Are there any more large deals that you are chasing and are the customers now becoming more open towards, let’s say including more companies of our size into these large deals as compared to let’s say three or four years ago?
Sudhir Singh
Yeah, thank you for the question, Vivore. Well, our size, we believe we are within touching distance. It’s a question of which year we touch $2 billion. We no longer a small firm as we see ourselves and as our clients see us With 33,000 engineers across the world, hopefully likely to be 50,000 pretty soon, it’s a fairly significant cohort of engineering talent that we have. The Sabre deal was one against two of the largest sis in the world. When I look at the final shortlist of four, two of the folks who were against us were two of the largest sis that do play within our industry.
We believe the Saber deal was won not just because of our industry expertise in travel, but also because of the iterative series of workshops around the engineering solution that we delivered for Sabre which gave them comfort to choose us as their deep engineering partner for a 13 year period. So that’s how we see this when it comes to pipeline. There are significant, a significant number of large deals in the pipeline which are of a significant scale as well. John, do you want to add the.
John Speight
One thing I want to add is that what we’re seeing certainly in Europe is a number of the the segments proactively bringing in and even defining frameworks which are their barriers to entry to to encourage engagements with an organization of co forges size and quite often it is to break up those mega deals into smaller smaller chunks and to do risk and also to ensure outcomes are delivered.
Vibhor Singhal
Got it, got it. Thank you so much. That’s for the detailed explanation. This one last bookkeeping question from Sourabh Saurabh. If you could provide some update on the Signity share swap proposal. What is the status, where is the approval pending and what is the timeline that we are looking for for the full integration of Signity into our business.
Saurabh Goel
So Vibor right now it is with sebi. So exchanges have already cleared and it’s, it’s sitting with sebi and then there are, it went to SEBI around end of March and there are no, I would say turnaround times that are there typically with regulators but one can expect anywhere between two to three months and then, then NCLT then shareholders approval. We believe that somewhere toward December to January is a time frame when, when the merger should get consummated. But having said that, as far as we are concerned from a business standpoint and from operation standpoint other than apart from the fact that there are two separate listed legal entities running the business synergies, the operational synergies have started flowing in already and that’s why you see the margin expansion 100 basis point margin expansion on a pro forma basis over last year to current year or a unit which was 220an asset which was $220 million in revenue with 12% of EBITDA going up to exit of say 80% in the current quarter.
I mean, is the result of synergies that have come in between both the businesses.
Vibhor Singhal
Completely agree. So thank you so much. Thank you so much for taking my questions and wish you all the best again.
operator
Thank you. Our next question is from Abhishek Pathak of Motilal Oswal. Please go ahead.
Abhishek Pathak
Yeah, hi Sudhir.
Abhishek Pathak
Just very quickly on the client complaint.
Abhishek Pathak
That we, you know, it’s been an.
Abhishek Pathak
Ongoing issue for the past, I guess 18 months, but just a brief update on that and how do we expect to, you know, sort of close this?
Abhishek Pathak
Thanks.
Sudhir Singh
Thank you for the question. Abhishek. The client complaint claims that a hacker tricked service desk agents into resetting employee passwords, allowing access to the client’s customer loyalty database. It misrepresents the company’s engagement terms, role regarding the database and the service desk agent responsibilities. The company did not handle. And when I say the company, I mean co for approach. The company did not handle core cyber security services for the client. We had no access to or responsibility for the database and we were not involved in its management. We are consulting our insurance provider and consulting legal counsel.
Regarding the complaint. The liability amount cannot be determined at this time. We do not want to comment on the name of the client, but the company continues to serve the client regularly since the last 18 months. The client is not a material client of the company and does not form part of Even the top 50 clients of the company. So that’s a, that’s an overview in terms of the complaint.
Abhishek Pathak
That’s very helpful.
Abhishek Pathak
Thank you so much.
operator
Thank you. We take a last question from Pratik Maheshwari from HSBC Securities. Please go ahead. Mr. Pratik Maheshwari, could you please unmute your microphone and ask your question?
Pratik Maheshwari
Sorry guys, I was on mute.
Pratik Maheshwari
Thank you for the opportunity.
Pratik Maheshwari
Guys, I just wanted to ask on.
Pratik Maheshwari
Your net other income, it continues to be negative and just wanted to check if this could be a strong lever.
Pratik Maheshwari
For PBT margin growth next year.
Saurabh Goel
So a couple of things. If you look at our presentation, so we explained where the net other income is coming from. So there are two things there. Number one, there is interest on borrowings which is there on the working capital. That’s number one. And then there is lease discounting which is standard because of right of use of assets that’s being created. But yeah, over a period of time, once the working capital utilization starts going down and with the improvement in the cash flows, the interest income will start going up and will become a lever for PBD expansion.
But right now with the growth that we are sitting at and with the, with the, the working capital requirement that we have and we continue to pay dividends so we believe that at least it will continue for a year or two for now and then we’ll kind of start thinking of PBT or interest other income as a lever for margin expansion. But right now we first focused on improving a bit of the organization and then we’ll start focusing on this.
Pratik Maheshwari
Thank you so much.
operator
Thank you ladies and gentlemen. That was the last question for today. I now hand hand over the floor to Mrs. Sudhir Singh for closing Commerce.
Sudhir Singh
Comments thank you ladies, gentlemen. Thank you very much for your time, for your interest and for your support and mentoring and guidance over the years. We look forward to these conversations. We enjoy these conversations, we learn from these conversations and we look forward to more of these conversations. Thank you very, very sincerely. We wish you a very good morning or a very good evening or a very good night. Thank you.
operator
Thank you members of the management, on behalf of Kofuj 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.