Coforge reported free cash flow of $53.8 million in the September quarter, with free-cash-flow-to-profit conversion at 92% for the first half of fiscal 2027. However, the integration of Encora has delayed some invoicing and collections as contracts are transferred from US entities to India, leading to an increase in unbilled revenue.
Chief Financial Officer Saurabh Goel said the company remains confident of achieving its full-year target of 100% free-cash-flow-to-profit conversion, with the impact of delayed collections expected to correct as the integration progresses.
Encora Integration Delays Collections
Goel said the transfer of contracts from US entities to India had resulted in delays in invoicing and collections. The process involves the transfer of contracts following the acquisition of Encora, whose entities were based in the US, while Coforge's parent company is based in India. The company is also undertaking legal entity rationalisation and tax structuring as part of the integration.
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These changes have led to an increase in unbilled revenue, according to the CFO. He expects the situation to improve as the contract transfer progresses.
Also Read: Coforge Raises FY27 Margin Guidance As AI Changes Its Cost Equation
Coforge Confident Of Meeting Cash Flow Target
Coforge's combined organisation generated $53.8 million in free cash flow during the September quarter, translating into a free-cash-flow-to-profit conversion of 89%. The conversion ratio stood at 92% for the first half of fiscal 2027.
Goel reiterated the company's guidance of 100% conversion for the full financial year, saying it expects to exceed that level by the end of fiscal 2027.
The cash flow target comes alongside the company's broader focus on improving profitability following the Encora acquisition. Coforge raised its consolidated EBIT margin guidance for fiscal 2027 to 16% from 15.5%, while reiterating its expectation of achieving a 17% EBIT margin in the March quarter.
The company said integration-related cost efficiencies and the use of artificial intelligence across existing fixed-price projects and general and administrative functions are expected to support further margin improvement.
Coforge Q2 FY27: Key Highlights
- Net Profit: Rs 588 crore, up 13.4% sequentially
- Revenue: Rs 6,171 crore, up 11.6% sequentially
- EBIT Margin: 15.2%, compared with 14.8% in the June quarter
- Order Intake: $1.04 billion, with eight large deals signed during the quarter.
Also Read: Coforge Q2 Results: Profit Rises 13% To Rs 588 Crore As Margins Expand, Revenue Up 11% Sequentially
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