Uncertainties significant, but order book at record high: Coforge CEO

'Macroeconomic environment 'significantly uncertain, but varies across industries: Sudhir Singh

Coforge, the Noida-based IT solutions company, crossed the $1 billion mark in annual revenue in FY23 in constant currency terms as the global macroeconomic environment became uncertain. Sudhir Singh, chief executive officer and executive director of Coforge, told Sourabh Lele in an interview there are clear opportunities to drive growth.

Here are edited excerpts from the interview.

How would you summarise Q4FY23? There is a sequential dip in fresh order intake from $345 million to $301 million.

It was in line with expectations. This was the fifth quarter where the order intake has been more than $300 million. Of course, our twelve-month order book is now at a record level of $869 million, which is 20 percent higher than where it was at the same time last year. It was a good quarter and also a very good quarter in terms of the fact that despite what was happening with the macroeconomy we closed another two large teams. We closed the full year with 11 large deals, two of which came at a time when macros are very upset.

Coforge has provided decent revenue growth guidance for FY24. What will drive growth?

It (the macroeconomic environment) is significantly uncertain, but it's also very varied across industries. Demand in the travel vertical is very buoyant. Banking demand is under a lot of pressure. For insurance, the demand seems to be resilient. But that's the broad story.

There are many nuances even within these verticals. For instance, within insurance, you will find that commercial specialty small and medium business (SMB) areas are spending a lot while life insurance and annuity (L&A) are not. Within insurance, if you look at geographies, Asia Pacific (APAC) is doing extremely well; North America is not. It is nuanced. A lot of people paint this as a general doom and doom. It is not so. There are clear pockets of opportunities, which can help drive growth.

What is the impact of the economic slowdown on your key verticals like insurance and travel?

Sequentially, insurance has grown 5 per cent in Q4. FY 23 was a tougher year for insurance. But it has been the fastest-growing vertical during the quarter. It is on a very sharp bounce back and that's good.

This quarter, travel grew two and a half percent. But for the year it has gone more than 21 percent. If there is a silver lining to the industry, there is no industry that has more buoyant demand than travel has right now.

You have guided that margins may improve by 50 basis points in FY23. What are the factors leading to this?

Gross margin in FY24 may go up by 50 bps over FY23 and we think EBITDA will be at the same level. Increments are coming down. We don't have to give the same kind of increments that we had to give over the last two years. Secondly, in our case, structurally, our offshore revenue is going up significantly because we are signing a lot of large deals. So these are the two big factors that are driving it.

The share of Business Process Management and product engineering in total revenue shrunk by two percent each in Q4 YoY, which is taken over by software engineering, cloud, and data horizontals. Will this trend continue going forward?

No, I don't think so. Their percentage share would have come down, but they have grown. It is just that the others have grown much faster and therefore their percentage has shrunk. It's not as if any of these is declining. They are all growing, and the relative pace is different, which is why the percentage contributions change.

Which horizontals of your business will be on top priority in FY24?

For us, it is going to be data and analytics, integration, as well as low code and no code horizontals.