Coforge's chairman resignation may have triggered a sharp reaction in the stock yesterday, but CLSA does not view the development as a major governance red flag, retaining its High Conviction Outperform rating and a target price of Rs 2,170, implying about 11% upside from the levels cited in its report.
Coforge Chairman and Non-Executive Independent Director OP Bhatt resigned with immediate effect on September 8, after an internal audit raised concerns over the handling and disclosure of information in the company's board evaluation report. Coforge subsequently clarified that the issues related to the board evaluation exercise and did not involve financial statements, financial reporting or the company's business operations. It also said the matter had no bearing on its near-, medium- or long-term business guidance.
CLSA's assessment pointed to Coforge's governance framework and the increase in the proportion of independent directors since FY24. It also noted that the company's books are subject to scrutiny from its current and previous private-equity investors, as well as KPMG, its internal auditor, according to the report.
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The brokerage also highlighted what it described as a proactive exchange filing by Coforge management following the resignation and said it had seen no major governance lapses relating to financial reporting or business operations.
The development comes shortly after shareholders rejected Bhatt's proposed reappointment for another five-year term at Coforge's August annual general meeting. His existing term was originally due to expire in April 2027.
Meanwhile, the market reaction has been sharper. Coforge shares fell as much as 8.67% to Rs 1,780.10 on September 9, before paring some losses.
CLSA remains focused on the company's operating outlook, particularly the potential for revenue synergies from its Encora acquisition. Its estimates show revenue rising from Rs 16,238.3 crore in FY26 to Rs 24,549 crore in FY27, with net profit projected at Rs 2,672 crore.
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