Coforge Ltd

NSE:COFORGE

Earnings Call Transcript 2024-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Coforge Limited Q4 FY '24 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Vikas Jadhav, Vice President, Investor Relations at Coforge Limited. Thank you, and over to you, sir.

[Vikas Jadhav, executive]

Thanks, Inba, and good evening to everyone. You'll have received our Q4 FY '24 results by now. I -- they have also been filed in the exchanges. So we have with us today our CEO, Mr. Sudhir Singh; our Chief Customer Success Officer, Mr. John Speight; and our CFO, Mr. Saurabh Goel. We'll begin the call with opening remarks from the management team. And post that, we'll open the floor for questions. Before we begin, please note that some of the statements made in today's discussions relating to the future should be construed as forward-looking statements and may involve risk and uncertainty. Please refer to the disclaimer to this effect in our Q4 earnings press release. Also, I would like to highlight that today's call will be of 90 minutes duration. With that, I would like to hand over the call to our CEO, Mr. Sudhir Singh. Over to you, Sudhir.

[Sudhir Singh, executive]

Thanks very, very much, Vikas, and a very good morning, good afternoon, good evening to all of you across the world, ladies, gentlemen. Thank you for joining us for the conversation today as we share our results for quarter 4 and for full year fiscal year '24. FY '24 has been a year of continued strong organic growth for Coforge. The year was a test case of the ability of Team Coforge to continue to drive robust and sustained organic growth despite very significant macro headwinds, and we are all aware of them. We are pleased to share that this is the fourth consecutive year where we have met our annual organic revenue growth guidance, making us 1 of the very few IT services firms that shared an annual guidance at the beginning of the year and have delivered on it.

We have closed the year with 13.3% CC organic revenue growth, $1 billion plus next 12-month signed order book, and with 2 greater than $300 million TCV deals under our belt. Importantly, despite the challenging macros in fiscal year '24, Coforge continued to make strong investments through the year to ensure that we sustain our growth trajectory even in FY '25. We did this by very significantly enhancing our sales, solutioning and presale spends. By remaining 1 of the few firms that materially increased employee headcount remain primed for future growth, and by providing full increments to the entire employee base from day 1 of last fiscal itself to ensure that our high employee retention and commitment levels stay unimpaired.

In the course of the call today, I shall share details of the definitive agreement that we have signed to take over Cigniti Technologies Limited. This acquisition will allow us to stand up 3 new industry verticals across retail, healthcare and high tech. It will expand our footprint very materially across the Southwest, the Midwest and the Western markets of the U.S. And it allows us to acquire new, yet tenured client relationships that we believe will scale up very appreciably in very short order. This will also further our corporate AI-led transformation agenda to create a horizontal AI assurance offering.

With that preamble, ladies and gentlemen, I shall now take you through the quarterly performance and the fiscal year '24 performance. Let's start with the quarterly performance revenue analysis. I am pleased to report that during the quarter, the firm registered a sequential revenue growth of 1.9% in CC terms. In U.S. dollar and INR terms, the growth was 1.7% and 1.5%, respectively. The growth during the quarter was once again led by the BFS vertical, which grew 6.6% sequentially in dollar terms. Our Insurance vertical was flat sequentially and the Travel vertical grew 1% sequentially in dollar terms. The other emerging verticals together saw a decline of 2% Q-o-Q in dollar terms.

Our top 5 clients and our top 10 clients grew 2.8% and 2.1% Q-o-Q, respectively, and they contributed 23% and 34.4%, respectively, to our overall Q4 revenue. Offshore revenue as a percentage of total revenue continues to climb up. And for the quarter, it stood at 52.5% compared to 50.7% in the same quarter last year.

With that, moving on to quarterly performance, margins and operating profits. In what has proven to be a very tough quarter on margins for our industry, we are pleased to report that both our gross margin and our adjusted EBITDA in quarter 4 grew sequentially by 102 bps. The big drivers of our continued sequential expansion in margins during the quarter were a significant jump of 230 bps improvement in utilization to 81.7%, and the continued ramp-up in offshore revenue percentage noted earlier.

The consolidated PAT for the quarter stood at INR 2,237 million, and it was up by 94.8% on a Y-o-Y basis.

I shall now move on to the annual performance and start with the revenue analysis. FY '24, we registered a consolidated revenue of USD 1,118.7 million, and we have clocked an organic revenue growth of 13.3% in CC terms, 14.5% in Indian rupee terms, and 11.7% in U.S. dollar terms. Our ability to drive growth in tough macros was aided significantly by growth across each one of our industry verticals that we operate in. The growth was led by the BFS vertical, which saw a 17.1% Y-o-Y growth. The Insurance vertical through the year grew by 9.6%, and the Travel vertical grew 4.9%. The other emerging verticals grew 12% in dollar terms, as I said and as you possibly noted, every vertical group.

Moving on to annual performance, margins and operating profits. The adjusted EBITDA margin came in at 17.6%. The decrease by 64 bps in FY '24 over FY '23 was on account of a 60 bps increase in sales, solutioning and presales cost, which is bucketed under SG&A. As noted earlier, not only did we continue to invest very robustly in sales and solutioning, but we also rolled out employee increments on time on day 1 of last year itself. There was no delay. There was no deferral.

Since the SG&A cost now stands at 15%, which was the target threshold that we had shared with you for this metric 2 years back, we remain confident that in fiscal year '25, our adjusted EBITA margin shall increase by 50 bps.

Moving on to order intake. Quarter 4 was an excellent quarter from an order intake perspective and also an excellent quarter from a large deal signing perspective for us. During the quarter, we signed 2 large deals. The first was a $400 million TCV 6-year deal in the BFS vertical. The other 1 was a $55 million 3-year transformation deal in the Insurance vertical with a client, which is a new client for us. The total order intake during quarter 4 was an exceptionally robust USD 774 million.

We have closed fiscal year '24 with the highest ever recorded yearly order intake of USD 1.97 billion, that's almost USD 2 billion, and this metric is up 56% year-on-year. Our investments in sales and solutioning, despite tough market conditions, have resulted in an increasing velocity and median size of large deals through the year.

Our confidence in delivering robust organic growth in fiscal year '25 also stems from the existing pipeline of future opportunities ahead of us. What made fiscal year '24 a landmark year for us was not just that we signed 11 large deals through the year, and this was a tough year, remember, for the industry. But more importantly, the fact that 2 out of these 11 large deals were more than USD 300 million TCV in size.

The executable order book, which reflects the total value of locked orders over the next 12 months stands at a record $1.02 billion. This number, some of you might recall, was USD 869 million a year back and witnessed a growth of 17.3%. People front, our total headcount at the end of quarter 4 stood at 24,726, and we saw a net addition of 1,502 people during the year and 119 during the quarter. Utilization during the quarter stood at 81.7%.

Our last 12-month attrition for the quarter fell further and is now at 11.5%. We remain, as always, 1 of the lowest attrition firms across the industry.

I will now hand over the call to John Speight, Chief Customer Success Officer, for providing insights into our operations and capability creation. Over to you, John.

[John Speight, executive]

Thank you, Saurabh. I shall now touch upon the highlights of the quarter related to our delivery operations. In the banking and financial services sector, we recently renewed, as Sudhir mentioned, a 10-year contract valued at around $400 million to provide technology and business process services. In the insurance sector, we have seen significant activity with a 3-year build, operate, transfer deal signed with a leading U.S. firm. This is a $54 million TCV deal with a $17 million ACV in FY '25. We also secured a 3-year $16 million deal with a U.S. insurance major to transform their core insurance plan. And lastly, we won a 5-year $35 million deal to provide application management services for a leading U.S. P&C firm.

In the U.K., our public sector business continues to [indiscernible] speed. We won 2 key deals in Q4, a $28 million deal to provide enterprise architecture, quality assurance and development services for a large government agency. The other, a $10 million deal to develop their enterprise content management solution used to digitize citizen records. We are at the forefront of innovation having introduced a range of GenAI solutions to transform various sectors. This includes a bespoke knowledge management tool for contact center agents, enhancing access to essential client details.

We launched a novel job search platform for a global staffing organization that uniquely matches candidates with jobs that fit not only their skills, interests and aspirations. We also launched [indiscernible], an autonomous self-service solution that revolutionizes customer service by automating both inbound and outbound [indiscernible] responses. In collaboration with Microsoft, we ventured further into the realms of productivity and decision-making enhancements, launching the M365 Copilot offering and adviser Copilot to optimize the insurance underwriting processes. This we have made available on the Microsoft Azure Marketplace.

We also introduced our QE360 platform. This transforms the landscape of quality engineering with AI-powered test life cycle automation, whilst fostering a culture of continuous learning within our workforce, a considerable number of whom we have now trained and certified in GenAI fundamentals.

Lastly, we have earned leadership spots in Everest Group's 224 PEAK Matrix assessments and received accolades from Avocent, Forrester, HFS, ISG for our solutions and services.

With that, I will now pass back to Sudhir Singh.

[Sudhir Singh, executive]

Thanks a lot, John. Now for some exciting news. As you would have noted from our release earlier, we have signed a definitive agreement to take over Cigniti Technologies Limited, which is listed on the NSE and the BSE. Cigniti Technologies is a leading AI and IP-led digital assurance and digital engineering services company and has grown at a 13.2% CAGR over the last 5 years. In fiscal year '24, the firm has registered revenue of USD 219.2 million. Coforge believes, all of us believe, that the acquisition of Cigniti will not only help us grow into a $2 billion firm by fiscal year '27, but equally importantly, the ensuing synergies will ensure that the Coforge operating margins shall improve by 150 to 250 bps in that same time frame.

There are 3 key reasons why this acquisition will be a game changer for Coforge. These 3 reasons are: number one -- number one, 3 new scaled-up industry verticals will be added to Coforge. The acquisition of Cigniti enables Coforge to scale up and create 3 new verticals, in retail, in high tech and in healthcare. The merged firm's retail vertical will be operating at close to USD 100 million per annum in size. The high-tech and the healthcare verticals will be operating at around $50 million per annum size immediately post-merger.

Ladies and gentlemen, you have heard me say this many times in the previous quarters, our off-stated intent to create scaled up verticals in these 3 industries gets a significant head start with what we believe is a significantly complementary acquisition. The second reason why we believe this acquisition will be a game changer for Coforge is that our objective of materially scaling up our presence across the Southwest, the Midwest and the West U.S., again, something we've talked about many times on calls, will be realized.

Coforge currently derives only 48% of its global revenues from its North American operations because our presence has largely been East Coast-centric in the U.S. Rapid expansion in North America has been a key objective for us. The acquisition of Cigniti will expand Coforge's North America revenue by around 33%. And it will help us establish a significant beachhead in the crucial West, Southwest and Midwest markets.

Across these 3 regions, with this acquisition, 28 new Fortune 500 companies shall enter our customer base. We believe very strongly that we will grow these relationships further through cross-selling of additional services. Illustratively, the largest global client for Cigniti is one of the world's leading airlines where we have been attempting to sign a partnership for over a decade. So that was the second reason. The third reason why we believe the acquisition will be a game changer for us is because it will help us address the significant opportunities that the proliferation of AI is creating for specialized assurance services.

Increase in adoption of AI is expected to increase the need for assurance as new complexities and opportunities arise in areas like model validation, model performance testing, core algorithms enterprise LLMs and output validations to reduce AI hallucinations. Illustratively, especially in our context, let's imagine a scenario where an airline utilizes AI for price optimization. A malfunction in the algorithm could lead to massive revenue losses for the airline. Traditional functional testing alone will not suffice. We will need specialized approaches to ensure that these AI systems perform as intended with factors like security and performance becoming paramount.

Cigniti brings a strong record in precisely these emerging areas. Their expertise in nonfunctional testing, encompassing security, performance and automation will be crucial in the development and deployment of trustworthy and reliable AI-powered applications. Our endeavor as a combined entity shall be to build a horizontal AI assurance offering, including modules for data interrogation, bias detection, stability, precision drift testing and model optimization. So with those 3 reasons on why we believe this will be a game changer: one, 3 new scaled-up industry verticals being created; two, materially scaling up our presence across the Southwest, Midwest and West U.S.; and three, addressing the significant opportunities that AI is creating in this space. I now hand this over for the financial section to our CFO, Mr. Goel.

[Saurabh Goel, executive]

Thank you, Sudhir. Let me walk you through some key financial highlights. In Q4 FY '24, we were able to generate strong cash flow at the back of growth and lower debtor days. Our billed DSO came by 7 days -- lower by 7 days from 63 days in Q3 to 56 days in Q4. This led to significant cash generation of $75 million for the quarter. The OCF to EBITDA for FY '24 stands at 66% adjusted for iPad for employees and $1 billion celebration cost. Robust cash flow generation in Q4 enabled us to repay bank borrowings, which has come down significantly by USD 65 million in Q4. We intend to repay $40 million borrowing towards NCB by end of Q1, and we have -- we are endeavored to be a net cash company by end of fiscal '25.

While Sudhir has covered highlights on Cigniti's acquisition, let me provide some details on the deal structure. To complete this transaction, Coforge will acquire 54% stake from the promoter group under the SPA and public via the open offer, which will be funded by cash raised through QIP. Post that, Coforge intend to merge both the entities, subject to all the regulatory processes and approvals. With that, I will hand over the call back to Sudhir for his comments on the outlook.

[Sudhir Singh, executive]

Thanks very much, Saurabh. And to conclude, let me sum up and share the outlook with you. Our ability to claw out and literally claw out a 13.3% CC organic growth despite a very tough macro environment in fiscal year '24, an enhanced and proven enterprise sales engine that we have continued to invest in again right through FY '24, the continued scale-up of 10 million-plus relationships and the increasing velocity in the median size of large deals signed and also in our pipeline, give us strong confidence that we shall deliver robust organic growth in fiscal year '25.

Over the last 7 years, our realized revenue has been very tightly correlated with our order executable movement. We entered fiscal year '24 with our order executable 20.7% higher on a Y-o-Y basis. And subsequently, we registered a 13.3% CC growth. We are now entering fiscal year '25, with our order executable 17.3% higher Y-o-Y, and hence, our confidence around delivering robust growth again in FY '25 is very high.

On the margin front, and I said this earlier, we are confident that we shall expand both gross margin and adjusted EBITDA by around 50 bps each in FY '25.

Finally, as noted earlier, we believe that the acquisition of Cigniti will help us grow into a $2 billion firm by fiscal year '27, with 150 to 250 bps higher margin.

With that, I conclude our prepared remarks, and we open the floor for your questions and comments, ladies and gentlemen. Thank you.

[Operator]

[Operator Instructions] We'll take the first question from the line of Ravi Menon from Macquarie.

[Ravi Menon, analyst]

Sudhir, first question is on the Cigniti acquisition. You talked about how this will add geographic presence to your sales team. But wouldn't coordination with that sales or access to those clients be restricted until you complete the delisting process of Cigniti?

[Saurabh Goel, executive]

So Ravi, this is Saurabh. So see, the closing will happen when the CCI approval comes in. We expect the CCI approval to come in around 45 to 50 days. And once the CCI approval is done, we'll take control -- we'll take Board control. And post that, the synergies can be brought in. So we'll have to wait for next 45 days till the time regulatory approval comes in. Post that, we'll take Board control and then we move on.

[Ravi Menon, analyst]

So Saurabh, there is no issue even if there is Signet remains a listed firm for beyond that. So is that correct?

[Saurabh Goel, executive]

So after the Board control is taken, we will complete the open offer. We will get 51% share in the company, and we'll have the majority stake. Post that will come to be -- at least the endeavor is to come to shareholders for the merger approval. We'll not delist the company.

[Operator]

We will take our next question from the line of Manik Taneja from Axis Capital.

[Manik Taneja, analyst]

I am slightly surprised with the size of the acquisition that you've made, Sudhir. But just to step back on the organic business side, do you think some of the distractions around the size of the acquisition and the different streams impact our organic growth momentum? That's question number one.

The second question was with regards to the growth outlook across different industry segments. When we started FY '24, you had mentioned we'll probably have a much more broad-based growth, although growth was largely led by the BFS vertical. How should we be thinking about these dynamics getting into FY '25?

[Sudhir Singh, executive]

Thanks for all the questions, Manik, and I hope when you say you were surprised by the acquisition, I trust you were positively surprised because we are really excited about it. And we've spent many months mulling over this. As far as the size of the acquisition is concerned and the impact on the organic growth of the firm, we believe it will have no impact. We're coming in with very significant tailwind. We are coming in off a quarter where the order intake has been $774 million. We are coming in off a year where our SG&A has gone up by 65 bps, and I can tell you that all of that has gone into sales, solutioning and presales. So on the organic front, we feel 100% secure, organic growth front.

We've always believed that the best time to do an acquisition is when the organic growth engine is humming along well and see significant growth ahead so that you don't have to focus excessively on the organic front and so that you don't come from a position of weakness into an acquisition. You should always come in from a position of surety around your own organic growth before you try anything that's inorganic. Hence, we feel very, very positive around the fact that this acquisition, in the longer term, will help us hit $2 billion in less than 3 years from now that I talked about, in the shorter term will have absolutely no adverse impact on what our organic growth numbers for this year are right now.

Coming back to your second question around different industry segments, we did say at the beginning of the year that the growth will be broad based, and we believe the growth has been broad-based. Obviously, the growth is not going to be the same number across verticals. But insurance, you would have seen has grown almost 10%. BFS has, of course, done extremely well at about 20%, and travel has grown 5%. All these 3 verticals grew, all the emerging verticals grew. There has, you're absolutely right, been a disparity in the number, but that is always going to happen. The fact is all verticals grew.

Getting into next year, when you hear the confidence in my voice and in Saurabh's voice and in John's voice around organic growth in FY '25, it really stems from the fact that we think all verticals are in a position where they will register robust growth. We don't feel defensive. We don't feel insecure. We are not really approaching growth organically across any of the 3 current core verticals with any amount of repetition.

[Manik Taneja, analyst]

And if I can ask 1 more question, this was with regards to the margin performance through the course of FY '24 and your commentary about being able to expand margins by FY '27, will that largely be led by organic margin expansion or basically the Cigniti portfolio given the fact that Cigniti's margin profile is lower than ours?

[Sudhir Singh, executive]

See, Cigniti, the PAT is the same as ours, which is why despite the QIP process, we've been very clear, the acquisition is going to be EPS accretive. We believe by the end of fiscal year '25, given the synergies that we've examined for months working very closely with Cigniti, we believe their EBITDA will see a step jump just as the EBITDA of SLK that we acquired 3 years back saw a step jump post the acquisition. So the 150 to 250 bps is margin expansion that we had shared even a year back as our goal for the margin profile of the firm when we get to $2 billion, we are just holding on to it. Most of it will be organic. Our effort will be to make sure that while the PAT is the same for Cigniti, even the EBITDA over time with the AI-led offering starts replicating the Coforge EBITDA.

[Operator]

We'll take the next question from the line of Vibhor Singhal from Nova Equities.

[Vibhor Singhal, analyst]

Congrats on this big acquisition. I wish you all the best for the integration in the times going ahead. So a few questions from my side. Sudhir, in terms of capability wise, if you look at the Signify business that we're looking at is majorly into quality assurance and testing as we would call it. And do you -- I mean, do you see that not as a challenge that we are using a company -- I mean we are using Cigniti and using that to be able to expand our business into the West Coast and into these 3 verticals. Do you see -- don't you see any challenges in upselling the Coforge capabilities to the clients of Ciginiti that they are serving at this point of time?

[Sudhir Singh, executive]

Yes, Vibhor. Thanks for the question. And I can assure you that the amount of due diligence that we've gone into this particular acquisition with has been extremely significant. As I called out, we were -- we were delighted to find an asset that was as complementary as Cigniti is when it comes to 3 new industry vertical creations. We do not expect to be growing the current accounts that Cigniti has by selling more testing services or AI-led testing services only into them. We expect to take the 10 other service lines that we have, everything from cloud data to BPS, and selling it into the same accounts that Cigniti has.

What has struck us as a very powerful upside to the Cigniti team and the brand carries is that for a firm that is only about $220-odd million, their top 10 relationships are exceptionally tenured. And we spent a lot of time looking at whether most of these were under MSA or scattered SOWs, most of them have standing MSAs. We believe, with that advantage, with 10 additional service lines that can be sold in, with the sales team at the front end where we've interacted with them and we feel highly confident about them, we will 100% realize the business case that I talked about during the conversation.

[Vibhor Singhal, analyst]

Got it, got it. My second question was more on the organic growth front. This year, again, we closed the year with a very significant Y-o-Y growth in the 12-month outstanding executionable order book. So looking for -- I mean -- so what are -- what is the kind of organic growth that you are looking in FY '25? I'm sorry if I missed that in the remarks or somewhere in the press release, but I couldn't find the kind of -- I mean, any specific guidance for FY '25 organically that we are looking for.

[Sudhir Singh, executive]

Vibhor, we believe that if you look at us over the last 7 years, order executable movement very closely correlates to actual revenue realized growth movement. As I said, last year, when we entered the year, our order executable was 20.7% up Y-on-Y. This year, it's almost at that level. It's almost at -- it's at 17.3% Y-o-Y. We believe realized revenue in FY '25, therefore, should also be reasonably closely or very closely correlated to these 2 numbers, 20.7%, 17.3% that I talked about.

[Vibhor Singhal, analyst]

Got it. Got it. That's really helpful. Just 1 last question, if I can have for Saurabh. On the margins front. So Saurabh, we are guiding to gross margin and EBITDA margin expansion of almost 50 basis points. But at the reported EBITDA level, what is the kind of, let's say, impact that we are expecting on a Y-on-Y basis from the new ESOP scheme and the continuation of the old ESOP scheme?

[Saurabh Goel, executive]

So see, Vaibhav, we're expecting that at a reported EBITDA level, the margins to remain flat because the new ESOP scheme will come at for the first year, which is FY '25, come at 50, 60 bps higher than the current year -- from the current year. When we move to FY '26, there will be a tailwind of close to 70 to 80 bps on the ESOP cost. So which means that you will see a step jump in the margins in FY '26 at a reported EBITDA level.

[Vibhor Singhal, analyst]

So if I were to get it right, next year, we're expecting flat EBITDA margins in terms of reported basis. And the year after that, we're expecting 70 to 80 basis point expansion on reported EBITDA basis?

[Saurabh Goel, executive]

I think it will be 80 to 100 bps because there will be a gross margin expansion as well in FY '26. So 80 to 90 bps is a structural tailwind without us doing anything because in FY '25, in the current financial year, we will issue ESOPs to employees. And the way we issue ESOPs for 5 years, the first year is front loaded from a cost standpoint. So it's a structural improvement that will come in without us taking any action.

[Operator]

We will take our next question from the line of Sandeep Shah from Equirus Securities.

[Sandeep Shah, analyst]

Yes. Sudhir, just wanted to understand about Cigniti. I think the discussion and the rationale on the horizontal accretion would be more in terms of the digital assurance. But during times GenAI, which is on the start of scale up and BPO and the testing are the 2 services, which would be disrupted significantly. So are you counting a risk to the Cigniti's revenue cannibalization? Because even if you want to proactively do the GenAI into Cigniti's offering, before it scales up, you have to first accept that there could be a revenue cannibalization risk. So are you counting this when you give a target of $2 billion? Because on an FY '24 merge figure, it works out to be a 14% CAGR?

[Sudhir Singh, executive]

Yes, of course. I mean I absolutely assure you, Sandeep, we've counted it in and we've counted it in and validated and revalidated it 50 to 100 times because this is the largest acquisition that we are doing. We've built up what we think is a highly regarded organic growth story. The last thing any one of us wants to do is to do an acquisition, which fails especially at this scale. So we've absolutely baked in the fact that the functional testing area is likely to be disrupted because of AI coming in.

At the same time, and I went into that in great detail when I was talking about it, we also realized that the nonfunctional testing areas: performance, security, device testing, UI/UX testing, which is where Cigniti operates, have very significant upsides. If we do lead with AI, which is what I talked about, and if we do build the AI-based offering, the AI assurance offering that we intend to build with them. So that's -- and what I want to emphasize is, we are baking in the negatives. We are looking at the positives, and testing is not the only lens that we are looking at this asset through.

We are looking at a firm that brilliantly fits our ambition to create a vertical in retail. The merged vertical will start at $100 million. In healthcare and in high tech, again, areas we've been talking about for 2 years where immediately, we get 2 verticals operating at more than $50 million. And the other thing that made it absolutely complementary for us, and you heard me talk about this many times, Sandeep, is our Europe presence is very U.K.-centric, our North America presence is very East Coast centric.

So here, we found an asset that was helping us build 3 new verticals and cover the exact geography across our largest market that was relatively unexploited. It is massively synergistic from an operations perspective. And that's why we feel as positive. That's why you hear all of us sounding extremely bullish because we've sweated over this. We've worked on this for many, many months.

[Saurabh Goel, executive]

So just to add to what Sudhir mentioned. So I think when we did SLK, it was $73 million, $74 million asset, wherein our revenues were close to $620 million. So very significant from our scale at that point in time. There were 7,000 people, which got added due to that acquisition when we had 12,000 people. That business took a hit because of interest rates going up. And while we were acquiring we knew that there is an interest rate risk in the market and the revenues will come down. That business from $73 million, $74 million came down to $53 million over a period of 2 quarters or so. That is all baked in the plan. And today that BPS business for us is running at $110 million.

It's 3 years into acquisition. And after declining -- after the business declining to $53 million, today it's running close to $109 million, $110 million run rate. So I think it's not the first time that we have done an acquisition of this scale. We were $600 million, $620 million when we acquired a $72 million, $73 million firm. We added 7,000 people. We knew there is a risk in the business. Despite that, we've kind of doubled the revenues -- more than doubled the revenues over a 3-year period when the market has been very, very tough.

Similar planning has gone in doing this acquisition. And I think once we have the whole synergy plan created and the whole go-to-market plan created after that, we signed the deal. So -- and that's why we sound confident that why we'll be able to grow the combined business together going forward.

[Sandeep Shah, analyst]

So in your internal budgets and the growth prospects with Cigniti, the $220 million top line, which Cigniti has as per your disclosure, are you budgeting Y-o-Y growth in the next 3 years in your target to achieve $2 billion run rate or you are budgeting some amount of tepid growth or a decline on a Y-o-Y in the Cigniti revenue, which you will make up through the business synergy, cross-selling and upselling?

[Sudhir Singh, executive]

No, no, no. Out here, Sandeep, we believe -- see the Cigniti business, you started off the question by saying is fundamentally focused around assurance and engineering. That's absolutely right, but they have very tenured client relationships. They've effectively been selling 2 service lines. We are going to sell another 9 to 10 service lines. So as we look at that business, we look at that business as an aggregation of accounts. We think that aggregate of accounts should grow at a minimum, more or less on the same lines as the rest of Coforge will.

[Sandeep Shah, analyst]

Okay, okay. And Sudhir, just on the organic business with such a solid order book, which you had in the fourth quarter, why this time you were migrating, not giving a quantitative growth guidance? So is it some client-specific issues are you worried about? Or this has nothing to do with that and the performance could be almost similar to what we have seen in FY 2024?

[Sudhir Singh, executive]

There is absolutely no client-specific issue that we are concerned about. And I'm saying this again. We are walking off a quarter where we've done almost -- we've had an order intake of almost $750 million. Clients appear very well -- their client relationships appear very solid. All the core verticals are firing. There's always a question of which is firing more, but the underlying thing is all of them seem to be fighting very well. So on the organic side, we feel absolutely good about everything. The fundamentals are strong. And we are, in effect, offering an indirect pointer to the confidence by pointing you to order executable movement and the linkage that it's had over the last 7 years with recognized -- with realized revenue.

[Sandeep Shah, analyst]

Okay, okay. And the last question, which I have is in terms of the preferential announcement, about INR 3,200 CR, apart from Cigniti, is there any other M&A, which would also require in terms of your attention? Or this would be the only M&A for which we made a preferential issue announcement of INR 3,200 CR?

[Sudhir Singh, executive]

This is the only one. There's going to be no other acquisition for which we are going to look at equity dilution. Anything we do in the future, we will be looking at debt for it or internal accruals.

[Operator]

We take our next question from the line of Dipesh Mehta from Emkay.

[Dipesh Mehta, analyst]

A couple of questions, starting with the gross margin. At the beginning of year, I think we indicated about 50 bps expansion at gross level. It didn't materialize, which partly reflect into your EBITDA margin miss also, flattish versus slightly lower kind of things. So can you help us understand what played out? And what give you confidence next year we unlikely to recur kind of thing from a margin trajectory perspective?

Second question is...

[Sudhir Singh, executive]

No, go ahead, Dipesh.

[Dipesh Mehta, analyst]

So second question is about salary hike. If you can give some sense about how we [indiscernible] salary hike this year in FY '25. Third question is about the revenue growth trajectory, H1 versus H2 kind of thing. How you look -- you expect normal seasonality to play out based on the deal, strong deal intake what we have witnessed or you are expecting or observing some kind of changes in the quarterly dynamics across the year?

And last is related to maybe a previous question. So broadly, what you're indicating is QIP size will mirror cigniti-related payout, and it won't be any materially different than that?

[Saurabh Goel, executive]

Dipesh, I'll take question number 1 and question number 4. So margins when we guided in the beginning of the year, we didn't anticipate the market to be as tough as it spanned out to be. Our guidance was 13% to 16%, and we were actually pushing towards higher end of the guidance like we have done in the past. The environment continued to be tough through the year. Most of the organizations because of which had to lower their guidance. I think the new business that came in through the year came in at a much lower margin purely because of the lower demand that was there in the market. So I think because -- and we gave all the salary hikes in the beginning of the year, the first quarter itself from April 1, 2023. So I think we were able to negate the impact of 250 bps of the salary hikes that we gave in the beginning of the year during the tough environment. So I think it was purely new business coming at lower margins that impacted the overall gross margin for the year.

The point number 4 around QIP. I think we are looking at cash purchase of up to maximum 54%, and the QIP size will be linked to that. So it will not be INR 3,200 crores, it will be much lower than that.

[Sudhir Singh, executive]

Getting on to the other 2 questions that you asked, Dipesh, as far as the revenue is concerned, we expect normal seasonality. We are not counting on our hockey stick revenue movement. Salary hikes will again be affected from the first of this -- first of April itself, like we've done every year on a regular basis. And the salary hikes will be normal hikes. They will not be higher, they will not be lower, there will be more or less on the same average pattern as it's had over the last 7 years.

[Operator]

We'll take our next question from Abhishek Kumar of JM Financial.

[Abhishek Kumar, analyst]

Congratulations on the acquisition. First question is on the large deal in BFSI, $400 million, probably a deal that large caps would be proud of. I just wanted to understand what kind of deal these are in terms of whether it's RFP, whether it is proactive pursuits. How are we able to now solution and bid for such large deals? And who are we winning these deals against?

[Sudhir Singh, executive]

Thanks a lot, Abhishek. You're right. The $400 million in this quarter, there was a $300 million in quarter 1, and there have been multiple increasingly $30 million plus TCV deals that we've closed. The wins have been a mix of EE, EN and NN. So the $55 million deal in the current quarter that I talked about is with -- is a complete NN deal, and that's $55 million over 3 years alone. We are winning deals because of a few things, which are now coming increasingly into play. One, we believe we've become much more smarter, working off all the investments that we made in terms of using indirect channels like advisers, like analysts and like alliance partners.

This $55 million deal interestingly started off through an advisor connect. The second reason why we believe we are becoming more compelling in some of the propositions that we offer is because our consulting stream and our solutioning stream, which used to be under John Speight, who spoke earlier, seems to be getting together and becoming far more cogent and I'm going to invite John to also step in and talk a little bit more about how he's approaching that entire space around solutioning and RFP response. John, would you like to step in and add on to what I've said, please?

[John Speight, executive]

Certainly. And that's normal, Sudhir. You've given the crux of it. So I'm just adding to what you've said. I'm going to give you a slightly different flavor here. So as you know, we've always prided ourselves on execution, execution and execution. And you've heard me many a time mention it. And many of our clients will always say, we know Coforge will deliver what they promised. But what is also happening now is we're now bringing these new streams in, these new thought processes and we're changing the nature of our conversations with customers.

And how we've invested in AI is adding to that conversation. And such, we're now moving far more into the innovation, the thought leadership space, and consulting, as Sudhir mentioned, embedded within our solutioning presales, our bid management processes is adding to that. And that is also now feeding into the responses and the work we do with analysts, the advisers as well. Actually, Sudhir, I think that gives a slight bit of color to what you said.

[Sudhir Singh, executive]

Thank you, Abhishek. I trust we answered your question.

[Abhishek Kumar, analyst]

Yes, that was very elaborate and helpful. Maybe a related question on margins, these large deals, as we understand, are margin dilutive at least in the beginning. So are we also witnessing some of the margin pressure because of the large deals coming in now, especially to this year?

[Sudhir Singh, executive]

So Abhishek, what we are seeing is that at least when you are with your existing clients, the margins on our overall deals are not as dilutive. They would be maybe 50 to 100 bps lower than what they've been operating currently. But the new deals, new account and a large deal in a new account, when you land into that deal, over there, the investments upfront are high, and the margins on our overall deal are lower. So what we are seeing is that, typically, in a new account, we are landing into a new account and with a large deal, you would expect lower margins. And that's what is also playing back. But we've been able to set off that and, hence, maintain margins because we've been able to kind of at least improve cost structures and not just people cost, but also looking at cost structures across the board through the year, which helps us sustain gross margins.

[Abhishek Kumar, analyst]

Okay. That's helpful. One question I have on travel vertical, Sudhir. Which part of travel is not growing as fast as we would have liked? Is it airlines, is it rail, is it cargo? Anything specific that you want to fall out within the travel vertical that probably is less than what we desire?

[Sudhir Singh, executive]

Yes. The largest account that we had -- have in travel or had in travel in fiscal year '24 in the travel tech space underperformed severely through the year because their business was under acute pressure. It's turning around now, but that is what allowed us only to grow at 5% through the year. Otherwise, we think travel was primed for double-digit growth. The largest account had a very significant drawdown, which is only now plateauing out and we think about the rebound. That's the only piece that came in between travel recording a double-digit growth even in a difficult year like this versus the 5% that it actually did.

[Abhishek Kumar, analyst]

Okay. Okay. And that has plateaued?

[Sudhir Singh, executive]

That has plateaued, Abhishek, and also airlines increasingly are beginning to invest in transformative areas, right? There's the 1 offer, 1 order digital retailing pieces that are increasingly taking off. A logistics cargo again is something which is an area that we're finding increasingly to be of interest because of everything that we see around the low-code, no-code and the RPA areas. And just hospitality again, we all sense this, experiencing high demand, increased spends around digital, especially to create unique guest experiences around web and mobile, data analytics, et cetera. So travel is on the ascendant. I -- we like to think that travel will surprise us positively in FY '25.

[Abhishek Kumar, analyst]

Great. Maybe 1 last question, if I can squeeze. I was just curious to know the motivation of Cigniti tax promoters to sell out at this stage and especially agree to an all-cash deal? I mean, isn't it good even for an acquiring entity to keep some skin of the promoters in the game?

[Sudhir Singh, executive]

So I think the deal structure is such that the promoters are only selling 10% to 15%, okay? So the way the deal has been structured, there is a promoter SPA, wherein promoters are initially diluting 10% to 15%. And then there is a group of public investors as part of SPA, which will dilute another 10% to 15%. And then we'll do open offer. And in case the open offer is not successful, then promoters will come in defense. Otherwise, they would roll over as part of merger.

[Operator]

[Operator Instructions] We'll take our next question from the line of Chirag Kachhadiya from Ashika Institutional Equities.

[Chirag Kachhadiya, analyst]

Congrats on this aquisition. So from FY '25 point of view, which vertical you think like [indiscernible] likely to surprise where expectations from your end currently been low [indiscernible] seeing that some silver lining will come and surprise and [indiscernible]?

[Sudhir Singh, executive]

FY '25, we understand the broad commentary is the macros are difficult, and we relate to it. But I would suggest that all 3 verticals are in a good place. BFS has been the workhorse for the last 2 or 3 years. Before that, Insurance used to be the workhorse. Insurance, as you can see, has turned around very smartly. It's grown almost 10%. BFS has continued to carry most of the weight with a 20% growth. Travel is at 5%. We would expect all 3 of them at this stage to do well. John, do you want to step in and add any more color to that?

[John Speight, executive]

Yes, very, very quickly. One, I would also like to add there, Sudhir, is actually how we're seeing the progression in areas such as public sector. I think we see strong opportunities in that space, especially with a number of the elections going on, for example, in the U.K., which has been a traditionally strong area for us, and we see significant growth there. Again, I think airlines will see more growth. We have seen a significant uptick in the airline business. And it's only, as Sudhir, mentioned, the 1 major client that held that back. And we also -- I think we will also see significant growth for us across some of the newer verticals, retail, automotive, and that's in Europe as we expand there.

[Chirag Kachhadiya, analyst]

My second question is on acquisition. So we aim for a $2 billion kind of turnover and as we saw from organic part of that [indiscernible]. But let's say, the integration of the acquired entity and everything goes as per plan, do you think that we will surpass in $2 billion in the prescribed time?

[Sudhir Singh, executive]

Well, you're an ambitious person and so am I, Chirag. If we do, I think we'll end up surprising ourselves, but we think $2 billion is a reasonable target. It's a stretch, but it's a realistic stretch, and we will do our utmost to meet it. When we have set the target at $2 billion, we have obviously baked in the fact that Cigniti will be a part of Team Coforge going forward, and that synergies will flow through. So $2 billion, could it be exceeded? Could be, but I wouldn't say a very high -- I won't assign a high probability to that.

[Chirag Kachhadiya, analyst]

And just 1 more final one. In integration process, [indiscernible] all of Cigniti will be retained or the priority will be given to the Coforge people [indiscernible]?

[Sudhir Singh, executive]

I'm sorry, you broke up a little. Could you repeat that question, please?.

[Chirag Kachhadiya, analyst]

So in integration process, in the merged entity, when the complete acquisition will be done, so the Cigniti's senior person will be retained, and given the priority in terms of task and positions or it is like the Coforge senior or deserving candidates [indiscernible]?

[Sudhir Singh, executive]

Well, I mean, the only reason why we do acquisitions, the overriding principle is that we bet on people and with our teams and on the client relationships they carry. We will expect the current senior leadership of Cigniti to be integral to driving that business in the future. The biggest reason why we're putting, we are making this big bet is because we've been interacting with them extremely closely across levels, starting with the CEO and his team, his directs and their directs for a long time now, and we feel truly confident of both their capability and their commitment.

And our going in position is going to be, we will do everything we can to recognize them, to reward them and to embrace them.

[Operator]

We'll take our next question from Vibhor Singhal from Nuvama Equities.

[Vibhor Singhal, analyst]

Just a couple of procedural questions, if I may. So Saurabh, in terms of the time line, you mentioned that you are looking for, let's say, CCI approval in a couple of months' time, around 50 to 60 days. And post that, I think we would go ahead with the Board, basically acquiring the Board and then basically the open offer. So by when do you think the teams of the 2 companies could actually be integrated operational wise in terms of the time that you're looking at?

[Sudhir Singh, executive]

So Vaibhav (sic) [ Vibhor ], the way it will span out is 45 days to 50 days for CCI approval. Once that is done, we take Board control and teams can be integrated. But both the companies stay listed, run on an arm's length basis, but the synergies can be start working out. That's point number one. Number two, the open offer has got triggered already and the document will be filed to SEBI. That will take 60 to 65 days from today for approval. Once -- and we can assume that mid of July or end of July, we would get approval from SEBI.

Post that, it will take another month for -- which is mid of August for open offer to get completed, and which is when we will get 51% stake in the company. So the time lines are that mid of June, we take Board control, synergies start coming in, both the companies stay listed, then we take 51% share by middle of August when the open offer is completed, and post that, we come to the shareholders for approval and apply for merger.

[Vibhor Singhal, analyst]

Got it. In between this, I think we would also be looking to complete our QIP as well?

[Sudhir Singh, executive]

Absolutely.

[Vibhor Singhal, analyst]

And for the immediate funding, we've used that $250 million bond that we are going to raise that is a bridge financing. And post the QIP money, you're probably going to pay that back?

[Sudhir Singh, executive]

Okay. See the debt financing is more of an insurance, it's a bridge finance. And the idea is that before the CCI approval comes in, we would want to launch and close the QIP. So that, that debt is never used.

[Vibhor Singhal, analyst]

Okay. So the debt might never be used, just an enabling resolution that we have taken?

[Sudhir Singh, executive]

Absolutely.

[Vibhor Singhal, analyst]

Got it. Got it. And what is the end game that we are looking at here. So like in SLK, we acquired 60% stake upfront and then a couple of years down the line, we acquired 20% more stake. Here we acquired 51% stake thereafter, as you mentioned, that we will not go beyond 54%. So beyond that, are we looking for, I mean, basically a share swap for the shareholders of Cigniti. What is the end game that we're looking at? And what is the timeline for that?

[Sudhir Singh, executive]

So Vaibhav (sic) [ Vibhor ], immediately after the open offer is completed, it will come to shareholders for approval for the merger, wherein the merger will be through share swap. And that's what I mentioned that the -- even the existing shareholders, the promoters of Cigniti will roll forward their share in the company, they're not cashing out.

[Vibhor Singhal, analyst]

Got it. Got it. Got it. Thank you so much for explaining the process. Just wanted to clear these things out in terms of what we are looking at. Just last question from Sudhir, if I may. So Sudhir, in terms of performance, I think we've had industry-leading performance for well over 4, 5 years now despite challenging, and we've seen that in all kinds of environment, pre-COVID, COVID, and post-COVID as well. Given that we are -- where we are heading into at this point of time and especially when the discretionary spend still appeared to be quite basically under pressure and across the basically Board, how do you think -- I mean, are we also looking at enhancing our capabilities in terms of getting those large cost takeout deals that should be able to provide us the kind of growth cushion and the target that you set for $2 billion? And how does Cigniti fit into that capability building thing, if at all it does?

[Sudhir Singh, executive]

Vibhor, thanks for the initial piece and the compliment around the performance over the last few years. We are looking at cost takeout deals. We have done cost takeout deals. If I were to reflect on the $300 million-plus deals that we've done, one of them has been a consolidation against 2 large-scale players. The other one was again a consolidation against one of the largest -- it was a transformation deal against one of the largest scale players out there. I don't think going in and trying to do cost-out deals or transformation deals is going to be something that's going to be new for us. I suspect we will continue to do it as we have done in the past.

Cigniti is going to be a vital cog in that entire exercise. One, because of -- because we work with the Cigniti team to look at the top 10 clients that they have. There are 28 Fortune 500 clients, which are going to be new for us. And in most of them, they have a standing MSA.

We think in some of these, especially the ones where these are clients in the travel and the financial services space, we should be able to replicate the success that we've had in structuring transformation deals there as well. That's how I see this. But John, would you like to add more color to that?

[John Speight, executive]

[indiscernible] Yes, I mean you mentioned the $54 million deal, which was effectively a consolidation deal. On what that and other deals we're seeing on the table is that with our whole approach to those cost takeout deals has matured significantly, such that we have accelerators frameworks and ways of doing it that can deliver value very quickly and mitigate risk as well as we progress. And that we're finding is becoming very, very attractive to a number of our customers and prospects. And it's a key thing for why we're increasingly, a, seeing these deals; and b, why we're winning these deals.

[Operator]

Our next question is a follow-up from the line of Sandeep Shah from Equirus Securities.

[Sandeep Shah, analyst]

Just clarity, so Saurabh, so I just wanted to understand the worst case, we will acquire 51% of Cigniti. And if open offer also becomes successful, we will not acquire more than 54%. And post the open offer, we will acquire 100% by doing a share swap for the balance 49% or 46%. Is the understanding is correct?

[Saurabh Goel, executive]

Yes, absolutely right.

[Sandeep Shah, analyst]

Okay. Okay. Okay. And you believe the effective date of merger could be first of April 2024 itself or...

[Saurabh Goel, executive]

No, no. I think the effective date of merger will be after the shareholders approve. So I think right now, we're looking at closing the open offer, which should be mid of August. That's tollgate #1. I would say tollgate #2 because we will have to first look at the first closing, wherein we take a stake from the promoters. And then the next tollgate is the open offer closure, which will take us to 51% or max 54%, and then comes the merger.

[Operator]

We now take our next question from Sudheer Guntupalli from Kotak Mahindra.

[Sudheer Guntupalli, analyst]

And Sudhir, you have always been a very numbers-focused person and have always been very specific. So in that backdrop, this time, it's a little surprising and curious to understand why you are not coming out with a definitive growth guidance. Like asked by Sandeep earlier, are there some uncertainties, which is -- which are holding you back? That is number one.

And number two, if I understand the correlation map that you are implying, are we talking about high-single-digit growth kind of an organic growth guidance?

And the last question to sort of retain the executives of Cigniti. So are we going to come out with another ESOP plan on top of the recent one, which we had already come out with?

[Sudhir Singh, executive]

Sure. Thanks for all 3 questions, and thank you for the comment, Sudheer. The first question, I'm just trying to recall that was centered around growth. Could you remind me very quickly, please, what that question around growth was?

[Sudheer Guntupalli, analyst]

I was just trying to check as to why this time around, there is no explicit guidance like you have always been giving.

[Sudhir Singh, executive]

Understood. Understood. So if you reflect back over the last 4 years, Sudheer, 2 of those 4 years, we gave a guidance which was not very range-bound. We gave a number, and we said we will grow at least so much. The other 2 years, we gave a band, and that band has been expanding over the last 2 years given the ambient uncertainty. It used to be about a 1% band. Last year, we extended it to a 3% band because the variance can be material given the current uncertain situation. That's why we're pointing to order executable. And the fact that over a 7-year period, that's had a very strong tie in to the revenue recognized, hence the change, largely driven by the uncertainty that is there in the environment.

Second, we're not necessarily guiding to a high-single-digit growth number. We're just saying that we feel very good about the fundamentals of the business. We feel very good about the fact that quarter 4 has been a bumper order intake quarter for us and also very good about the fact that all the core verticals and all the key clients, top clients, seem to be in a good relationship status as we get in.

Third, as far as ESOPs are concerned, whatever were issued earlier, that is the bucket that will be used for issuing ESOPs to the senior leaders and their valued leaders of Cigniti as well over time. Nothing new, nothing additional. No new cost will come into play.

[Operator]

Our next question is from the line of Ashwin Mehta from Ambit Capital.

[Ashwin Mehta, analyst]

Can you hear me?

[Operator]

Yes, sir, please go ahead.

[Ashwin Mehta, analyst]

Sudhir, just 1 question on Cigniti. I was going through the numbers, almost 16% of sales for Cigniti is the cost of hired contractors. So is this related to more manual testing-related work that they do? Or what explains this because this used to be even higher earlier.

[Sudhir Singh, executive]

I'm not sure, Ashwin, fair question. I'm not sure if I can give you a very detailed answer. We believe that from what I know, and I could be wrong here, so I want to give that disclaimer upfront. This used to be a work that was done on site, and this was on-site subcontracting, which is now coming down. We do hope -- and if that reason is actually true, we do hope to work with them over time given our scale, given the maturity of our RA engine to be able to get it as close to 0 as possible.

[Ashwin Mehta, analyst]

Okay. Okay. And the second one was in terms of Cigniti's vertical profile, it seems to be a pretty diverse vertical profile wherein they have retail BFSI, travel, healthcare, ISVs as well and energy and utilities. So is it -- just wanted to get a sense in terms of the depth of their relationships with their larger clients? Is it just a horizontal offering? Or there is more specialized quality assurance related work that they do?

[Sudhir Singh, executive]

Most of what they do is not functional testing. We spend a lot of time with them to understand what they were exactly doing, and we've gone through live demos of what they do on the UI/UX testing, on the performance testing, on the security testing, nonfunctional testing specs. We spent a lot of time with them looking at the BlueSwan AI testing framework that they've created. And this is now a 9-year old framework, started off with an automation framework and is now a suite with 8 different modules, all focused on AI-specific testing.

So it's -- when we look at the mix, you're right. They work across multiple verticals, but the verticals that have appealed to us are verticals where the existing revenue stream, when allied with our revenue stream, is helping us stand up $50 million to $100 million verticals. Those 3, as I said, are retail. The merged entity will have a retail vertical of almost $100 million from day 1. Healthcare and high tech, the merged entity will have a $50 million plus each merged verticals. And the fourth, there are 2 other verticals that I haven't talked about too much, but which are clearly of interest to us. One is travel. And as I said, the largest client of Cigniti is one of the world's largest airlines, and we've been knocking on their doors for more than a decade, possibly 2 decades.

Most of what they're doing there is assurance and product engineering. The merged entity, we think can actually expand very rapidly by selling 9 other service lines. And of course, the fifth vertical that's of interest, we didn't spend a lot of time talking about is BFS, which incidentally interestingly is their second largest vertical. And they have some marquee financial services clients as part of their remit who are not our clients today, and we think we'll be able to remind them as well.

[Saurabh Goel, executive]

And just to add to what Sudhir mentioned. So for their size, the -- not just the tenure of the relationships, but just with 1 service line, they have quite a few $5 million plus and $10 million plus relationships, which is very, very exciting. So that talks about the depth in the relationship that they have with their clients.

[Operator]

We'll take our next question from Kawaljeet Saluja from Kotak Securities.

[Kawaljeet Saluja, analyst]

My question is, once again, on the depth of relationship of Cigniti. I mean for a business which is $200 million of revenues, that some change, and let's say, the top 20 clients are just 50%, so that's like $100 million, so our average relationship for top 20 clients is $5 million. And then there's a long tail of business.

Now typically, such a long tail of business is not associated with appropriate depth and quality of revenues. So how does one gain comfort around the quality of asset acquired. That's one. And second is that this company you had irrecoverables write-off of noncurrent assets in the past, would you know what does that pertain to?

[Sudhir Singh, executive]

Sure. So let me take the questions in order Kawaljeet. When we looked at Cigniti closely, we were focused on the number of relationships that can scale up beyond $10 million in the short term. And by short term, I mean in FY '25, at most in FY '26. You know this, we as an organization at current size have 24 $10 million plus clients. We think working with Cigniti, in the next 12 months, using the repository of clients that they have, our number of $10 million clients will go up materially. And I say this after both parties having looked at those clients, looked at the nature of the contract, MSA versus SOW, and after having interacted through third party, we had engaged Bain with the kind of feedback that exists about this asset.

So the comfort we've derived is comfort that's been derived by speaking directly with their sales team all the way down to minus 3 to their clients, to analysts in the market and working with Bain to do anonymous NPS on the strength of the relationships.

As far as the second piece is concerned around the write-offs. Those write-offs date to 2017, 2018. We looked at the Board composition. Mr. Batni is sitting on the Board. We work with him in Infosys, some of us. He was on the Infosys Board. The Audit Committee chair has been the head of audit of Pricewaterhouse in India -- of EY India, 2018 onwards, we had financial due diligence done on the asset. We've had forensic due diligence done on it. We feel extremely reassured about the people running the firm today, the composition of the Board, the governance processes and the confirmation that we have from the forensic due diligence and the financial due diligence that we've done.

[Kawaljeet Saluja, analyst]

Okay. Fantastic. That's great to hear. Just a final question. Just a final -- that's fairly comforting to hear. Just a final question on this, okay. I just lost my stream of thought here.

[Operator]

We'll take our next question from the line of Keshav Parikh from Pi Square Investments. Mr. Parikh, you may go ahead and ask a question. There seems to be no response from this connection. We will, therefore, move to our next question from Ravi Menon.

[Ravi Menon, analyst]

Why would you choose to do like a mix of cash and share sway, why not a full fledged share swap? Would have been cleaner, simpler perhaps more efficient even for the promoters.

[Sudhir Singh, executive]

So Ravi, we looked at that option as well. So there were a couple of issues. Number one, there were public shareholders, which wanted an exit. There were promoters who wanted cash down payment at the time of transaction. And the overall merger process would have initiated and it would have taken us 12 months to integrate the asset. So I think the idea was that looking at the interest of both the sides, I think we then decided to kind of first do a cash purchase and then do a merger.

[Ravi Menon, analyst]

But that would have lined interest much better, wouldn't that? Now -- and they could have, of course, disposed off Coforge shares whenever they wanted. So still not quite sure about why it's structured this way.

[Saurabh Goel, executive]

No, I think see, the point is again getting cash today versus getting cash 12 months down the line, it's very different. So because until merger process would have got sold, they wouldn't have been able to kind of do the -- I mean, do the sale of shares. So that is why there were complications around there because of which we kind of moved ahead with the structure, wherein we said we'll do a first cash purchase, take control of the Board, and then do a merger.

[Ravi Menon, analyst]

But Saurabh, wouldn't it have been just enough for a shareholder approval to do the merger and you keep talking about it would have taken 12 months, but I'm not sure why it would have taken 12 months.

[Sudhir Singh, executive]

No, NCLT approval will take that long 8 to 12 months, it will take.

[Operator]

We'll take a next question from Abhishek Shindadkar from Incred Capital.

[Abhishek Shindadkar, analyst]

Congrats, Sudhir, for the quarter and the acquisition. My first question is completely understand your comments about the relationship and the [indiscernible], but has it happened in the last 12 months or so that any of the clients, Cigniti got displaced being an incumbent like you have been doing so to others?

And the second thing is, my question is on the EBITDA number. Now we understand that the EBITDA margin commentary of flattish and expansion next year. But post merger, what would be the incremental depreciation, amortization on the line, or that comment stands for EBIT as well?

[Sudhir Singh, executive]

Sure. I'll take the first question, and I'll request Saurabh to take number two. When we looked at the long tail of the Signet clients, there was an earlier question that Kawaljeet also had asked, there is churn in the long tail as one would expect going into a transaction of this sort. There is, however, significant and very impressive stability in the $5 million-plus client cohort. So coming into, looking at a firm that's at about $220-odd million, the fact that there are a lot of 10-year plus relationships is the first thing that impressed us from a tenure perspective.

The second thing that impressed us was the fact that the $5 million-plus client cohort, or the cohort that is likely to become $5 million plus in fiscal year '25, again is tenured. So just abbreviating the answer, if your question is, and I know it is, is there churn in the client portfolio? Yes, there is, especially in the tail accounts, and we know that for a fact, and we baked that in.

Is there -- and if the question -- I mean the flip to that is, and the question we were trying to answer was, is there stability in the top 10 and the top 20 account relationships and are they tenured? When the answer came out as a yes in most cases, that's why we went right in. I request Saurabh to take question number two.

[Saurabh Goel, executive]

So from an EBITDA perspective, I think once the merger happens by the time we would have kind of started working on the synergies, I think we believe that their EBITDA currently, which is around 14.5-odd percent, would converge towards EBITDA at which we operate at, and which will -- and their current PAT is a little higher than our PAT. So I think with roughly 200-odd bps jump in their EBITDA will flow down to PAT at their end. And the merged entities put together, even after the amortization of the intangible, which anyways we'll get to more the final number when a purchase price allocation is done, it should be EPS accretive. But I think what will happen is that today, they are operating at 10% PAT. It will go up because it's coming in at a 14.5% EBITDA. I think there are significant upfront synergies that would come in, which will take this EBITDA to close to the levels that we operate.

[Abhishek Shindadkar, analyst]

Got it. That's helpful. And just a follow-up to your answer, so should we assume that the fund raise would be roughly $250 million?

[Sudhir Singh, executive]

We'll come back with the final number. But yes, I think we have also already mentioned that INR 3,200 crores was an outside number. We will not be anywhere close to it. And I think $250 million is a fair number to assume.

[Operator]

We will take our next question from Manik Taneja of Axis Capital.

[Manik Taneja, analyst]

While you already answered a lot of questions around the proposed acquisition. I just wanted to step back and ask a question around the organic business. What we've seen is that we've seen a very solid order intake in the current quarter. But when I look at the executable order book, that number essentially isn't moving up very sharply. So just a clarification question if the [indiscernible] in the current quarter essentially are largely expansion of existing score? That's question number one.

The second question was with regards to our client metrics. Sudhir, since you stepped in, we have seen a significant focus in terms of new customer logo additions all through the course of the last 5, 6 years. When I look at the client, new client logo additions in FY '24 compared to the typical additions that we've seen in the past, that number appears to be low. So is there something changing in terms of the go-forward strategy?

[Sudhir Singh, executive]

Saurabh, why don't you take number one, I'll take number two?

[Saurabh Goel, executive]

So see, when you look at our order intake in the current quarter large deal that is obviously for a longer period, it's not for a 4-year, 5-year deal. It is 1 of our top clients, wherein 18 months ago, we had signed $30 million, $40 million, $50 million deal with them and displaced the large cap in the account. The whole contract was coming up for renewal when the large cap was knocking on the doors because $400 million today, even for a large cap is a sizeable deal. We were able to kind of make sure that they don't get even a small pie of the overall contract and were able to lock it in. So point number one, we were able to lock it in from a revenue perspective for next 10 years. And without letting anyone get into the account, we are pretty much the sole vendor in the account today. And hence, you don't see an uptick in the executable order book today.

[Sudhir Singh, executive]

Manik, as it comes to question number 2, I'm going to give you my point of view, and I'm going to request John also to chime in. Your observation is right. We are trying to be more choosy about who we sign up as a new client. We believe that by the end of the current fiscal year, we should be running at around $1.5 billion in terms of run rate. It is absolutely imperative that we have multiple $100 million-plus relationships and multiple $50 million-plus relationships. The BFS business under Gautam has led the way in terms of constructing these scaled-up relationships.

Our ask of our enterprise sales team increasingly is that empirically, we should not be opening logos where we believe that we will not be able to scale them up to at least $10-odd million over the next 3 years. So you're absolutely right. 6, 7 years back, we did go pell-mell under my leadership because at that point in time, we were just trying to aggregate logos. Right now, we think we have a significant number of marquee clients with huge wallet spends that we can address more effectively following the model that the BFS team under Gautam has been replicating, and we want to make that enterprise wide.

Hence, the stronger qualification and the higher degree of, if I might call it choosiness, when it comes to who we work with and who we sign contracts with. John, would you like to add to that?

[John Speight, executive]

I think the scalable is key to us. It has to be an account, as you say, that has significant IT services spend that enables us to breach that $10 million-plus, $20 million-plus type engagements. The other aspect is where the marquee customers, we also look at ones that actually position us well in those respective markets and help us reference this into those larger engagements. And that's the -- you covered most of the points, Sudhir, very well.

[Operator]

Our next question is a follow-up from Sudheer Guntupalli from Kotak Mahindra.

[Sudheer Guntupalli, analyst]

Sudhir, so once the first subject to the open offer, let's say, the remaining stake of 46% to 49%, eventually, that will be merged with Coforge. And my understanding is that there will be a share swap with Coforge shares. So the promoters who will get a proportionate share of Coforge shares, have we negotiated any lock-in period for them because I think their stake in Coforge at that time will be sizable?

[Sudhir Singh, executive]

No, we have not insisted on a lock-in with them, Sudheer. They've indicated to us that they will clearly price the Coforge shares that come to them. and we want them to be free agents. If they trust in the Coforge story, which we hope they will, they will continue to hold it for a while. I do want to point out that as part of this transaction, we are very keen to make sure that the CEO of Cigniti, who's actually scaled it up to being this large, is someone who continues with Coforge, and he has also indicated his willingness, this is Mr. Srikanth to continue with Coforge as one of our exec leaders.

[Operator]

Ladies and gentlemen, that was the last question for today. I now hand over to Mr. Sudhir Singh, CEO of Coforge Limited, for closing comments.

[Sudhir Singh, executive]

Thank you very much, ladies and gentlemen. Today is possibly one of the most exciting days in our corporate history. We have announced the largest acquisition that we have attempted to date, and we've done that after very significant and very detailed due diligence of every sort. We really appreciate the fact that all of you made time to spend 90 minutes with us rather than the usual 60. We were very, very gratified to see the interest that you continue to carry in our story. And some of the insights that you shared with us through the last 90 minutes will be very useful for us as we chart the road ahead. Thank you very much once again, and we look forward to speaking to you 3 months from now. Stay safe. Thank you. Good night.

[Operator]

Thank you, members of the management. Ladies and gentlemen, on behalf of Coforge Limited, that concludes today's conference. Thank you for joining us. You may now click on the leave icon to exit the meeting. Thank you for your participation.