Coforge Ltd on Tuesday said it has struck a mega 13-year deal worth $1.56 billion with Sabre Corp., a Southlake, Texas-based travel technology company. As part of the deal, Coforge will handle the software product delivery for Sabre and will also execute artificial intelligence-led tasks for the travel technology company.
The deal size implies that the Noida-based information technology (IT) services provider is expected to get $120 million on an average every year from Sabre, making it the company’s biggest deal.
This contract also marks a rare instance of a mid-cap IT company getting a mega deal, one that is valued in excess of $1 billion.
“Both Sabre and Coforge share a similar DNA as technology firms with a strong focus on cutting-edge engineering solutions, customers and the travel industry,” Sudhir Singh, chief executive of Coforge, said in a statement.
This deal comes at a time when even the country’s largest software services companies, including Infosys Ltd, HCL Technologies Ltd, Wipro Ltd, and Tech Mahindra Ltd have been struggling to secure big-ticket deals.
Mumbai-based Tata Consultancy Services Ltd was the last of the country’s top five software service providers to land a mega deal, when it signed a 15-year deal worth $2.5 billion last year with Aviva, a British insurance company.
Revenue boost
Coforge got almost a fifth, or $201 million of its FY24 revenue of $1.12 billion from clients in the travel, transportation, and hospitality sector. Its revenue from the sector is expected to increase by 60% with the latest deal.
Its revenue from the Americas, the company’s largest market, fetched about 48%, or $537 million of its business as of the year ended March 2024. With this deal, its revenue from that geography is expected to rise further.
“This is Coforge’s largest deal. It tells you that some of these mid-cap guys are able to carve out large transactions and convince customers to give them business as against the larger players,” said a Mumbai-based analyst working at a domestic brokerage, on the condition of anonymity.
“Coforge might have taken over certain workforce from Sabre as well,” said the Mumbai-based analyst.
Mega deals play a crucial role for IT companies as they guarantee a fixed amount of revenue every year.
Inorganic expansion strategy
The country’s seventh-largest IT services company completed the acquisition of Cigniti, a software testing services firm, in December last year. This acquisition, its biggest, boosted its October-December 2024 revenue by 40.8% on a yearly basis to $397 million.
Coforge shelled out $220 million for a 54% stake in Cigniti. The acquisition was expected to increase business for the IT company by establishing three new verticals – retail, hi-tech, and healthcare.
The retail vertical would operate at almost $100 million per annum, while hi-tech and healthcare would operate at about $50 million per annum immediately after the merger, Coforge had said in a statement to the stock exchanges on 2 May, 2024.
Coforge, which entered the $1-billion revenue club in March last year, now expects to achieve sales of $2 billion by FY27.
Another chapter forming Coforge’s growth has been stability at the top. Sudhir Singh, a former Infosys executive, has been at the helm at Coforge since May 2017, making him one of the longest-serving chief executives amongst the country’s 14 largest IT outsourcers.
Coforge, formerly NIIT Technologies, started as an independent firm in 2004. It was acquired by Baring Private Equity in 2019. It is owned entirely by the public and has a market capitalisation of ₹48,176.05 crore.
