Softness in banking vertical may pose growth challenges for Coforge in FY24

Bengaluru, 21 June: Weakness in the banking, & financial services vertical in key geographies including the US and Europe is likely to create growth bumps in the short-term for mid-tier IT firm, Coforge.

Owing to interest rate hikes in western economies, lending by banks have been subdued. Technology spend is expected to be impacted adversely as revenue of banks get affected.

“Management (of Coforge) believes FY24 could be a tough year for growth due to BFS (banking, financial services) where slowdown in growth in FY24 vs FY23 may be higher for Coforge. Banks are more cautious around spending and focusing on cost savings likely because their lending growth is slowing down due to high interest rates,” ICICI Securities wrote in a note post their discussions with the management of Coforge Ltd.

Coforge Ltd has plans to achieve a revenue target of $2 billion within the next five years, a doubling from its FY23 revenue of $1 billion. The company has been posting industry leading revenue growth rates in the last two financial years and guided for 13-16 per cent growth in its top line for the current financial year in constant currency term.

On growth in insurance segment, insurance growth is expected to be at mid-point of 13-16 per cent revenue guidance as per the company. “In property and casualty insurance, demand is driven by tier-II and tier-III players around adoption of Guideware, DuckCreek platforms. Coforge is working with clients to drive policy coverage, moving underwriting function from back office to front office and data & analytics demand driven by an increase in regulations,” the brokerage firm said.

In the travel vertical, demand environment remains robust with airlines and airports spending heavily on the back of rising demand. The vertical is seeing good momentum post pandemic as travel has touched a record high level globally.