Coforge's Strategic Approach Favors Mergers and Acquisitions for Sustained Growth
In the fiscal year 2025, Coforge, a leading global IT solutions provider, demonstrated a strong and consistent revenue growth performance. The company's growth strategy, which emphasizes strategic acquisitions, played a significant role in its success.
One of the key acquisitions made by Coforge in FY25 was the asset purchase agreement with OptML Inc. and its shareholders. This acquisition enabled Coforge to acquire customer contracts, key managerial personnel, employees, and subcontractors/vendors of OptML Inc. However, the company that acquired OptML Inc. in its entirety is not explicitly mentioned in the provided search results.
Coforge's strategic acquisitions extended beyond OptML Inc. In FY25, the company acquired Hyderabad-based Cigniti Technologies to expand capabilities in digital assurance and engineering services. It also acquired US-based Xceltrait Inc., to enhance its ServiceNow capabilities. Furthermore, Coforge strengthened its data practice and cloud engineering capabilities with the acquisition of Rythmos, particularly in the airline sector. The company also enhanced its digital engineering capabilities in the Australian market with the acquisition of TMLabs.
The acquisitions had an impact on Coforge's financials. Non-current contract costs increased 86% YoY to INR 5.8 billion in FY25, making up 79% of total contract costs. Contract costs for Coforge rose 82% YoY to INR 7.3 billion in FY25, with a shift toward multi-year constructs anchored by the Sabre program.
Despite the increased costs, Coforge's management remains confident of achieving an EBITM of about 14% in FY26. This confidence is supported by expectations of lower ESOP-related expenses, continued revenue growth momentum, improved operating leverage from SG&A optimization, absence of one-offs, and a shift toward offshore delivery.
Coforge sustained its growth momentum during the Covid period through diversification and execution strength. The company's strategic acquisitions, combined with its resilience in the face of the pandemic, position it well for future growth.
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