Coforge tanks 10% following acquisition of Cigniti Technologies, declares 95% jump in Q4 profits

Shares of Coforge tanked 10% on Friday following the firm’s announcement of the acquisition of Cigniti Technologies which appears to have disappointed the street. The firm also reported its fourth quarter and fiscal year results.

Coforge indicated in an exchange filing it will acquire a 54% stake in Cigniti Technologies at a price of ₹1,415 per share. However, shares of Cigniti Technologies were trading near the ₹1,326 per share level on Friday, down over 3%.

Coforge said it believes the acquisition of Cigniti will ensure the firm’s operating margins improve by 150-200 basis points by FY27 itself. Moreover, the acquisition will create three new scaled-up verticals that include retail, technology, and healthcare. The firm believes it will help it realise its objective of scaling up its presence across the southwest, mid-west, and western US markets.

Furthermore, Coforge believes the acquisition will address the significant opportunities that the proliferation of artificial intelligence (AI) is creating for specialised assurance services.

Meanwhile, Coforge reported an 8.7% rise in its consolidated fourth-quarter gross revenues at ₹2,358.5 crore. Earnings before interest, tax, depreciation, and amortisation (EBITDA) rose 4.3% to ₹425.1 crore. EBITDA margin fell to 18% during the quarter compared to 18.8% in the same period a year ago. Net profit jumped 94.8% to ₹223.7 crore during the quarter.

Sudhir Singh, chief executive officer at Coforge said The $400 million TCV deal signed in Q4, the 56% YoY increase in order intake, and the 102 bps sequential margin improvement in Q4 helped the company deliver robust growth in FY25 with expanded margins.

The board has recommended an interim dividend of ₹19 per share and the record date for this will be May 15, 2024.

Shares of Coforge have lost 27% since the beginning of the year. The stock has gained over 10% in the last one year.