Coforge Limited (COFORGE) Earnings Call Transcript

Good day, ladies and gentlemen, and welcome to the Coforge Limited Q2 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference to Mr. Radhika Aurora, Head of Investor Relations. Thank you, and over to you, ma'am.

Good day, everyone, and thank you for joining us today. Many of you on the call already know me. For those of you who may not, I am Radhika Aurora, Head of Investor Relations at Coforge. It is pleasure to welcome all of you to our Q2 FY '27 earnings call. Joining us today from the leadership team are Mr. Sudhir Singh, Chief Executive Officer and Executive Director; Mr. John Speight, President and Executive Director; Mr. Saurabh Goel, Chief Financial Officer. Before we start, I would like to reiterate that we take as having read the safe harbor statement available in the presentation. With that, let me hand over to Sudhir. Sudhir, over to you.

Thank you, Radhika. Ladies and gentlemen, a very good day to all of you, and thank you very much for joining us. The call today is particularly exciting because we have now reached, we believe, a critical tipping point of AI adoption within cohorts. Consequently, we are pleased to reset expectations around our operating margin profile and equally importantly, our expected large deal closure velocity going forward. I wish to start today with a bulleted list of the 6 key messages that we'd like to leave with you before delving into the details of what has been another exceptional quarter. Bullet point message number one. We are pleased to raise our consolidated EBIT margin guidance for fiscal year '27 to 16% from the 15.5% we had shared at the beginning of the year. We also plan to achieve a reported Q4 EBIT of 17%, thereby establishing the glide path to further and significant margin expansion in fiscal year '28 as well. This improvement in margin at a time when our industry faces acute pricing pressure is driven by our execution ethos. Not only are we making the promise of AI real for enterprises, but we are equally with the same intensity embedding AI across our internal processes and functions. We believe that AI is breaking the link between scale and margin leadership for the tech services industry. Time and material effort-based economics face pressure as automation reduces labor content. In this evolving world of the new age Tech services firm, it is our intent to get to being within the top 3 highest EBIT margin tech services firms in our industry in the short to medium term. That was bullet point number one, message around margins. Bullet point number two, equally importantly, the message around revenue growth. Our focus on revenue growth excellence is unimpaired. This year, we will be the industry growth leader for the third consecutive year. In quarter 2, we signed 8 large deals. This is the highest number of large deals we have signed in any quarter in our history, equally importantly, in quarter 3, which has now started, which incidentally is the shortest quarter of the year, we hope to again sign 8, if not more large deals. Our increasing large deal velocity offers assurance of sustained robust growth in the future as well. It is also, we believe, a testament to the world-class on-site-based solutioning engine we have built. Most of our large deals are sole-sourced and driven by proactive solutions. That, we believe, is the only part to growth in an industry which faces AI-led deflationary wins and yet is also an industry where clients are keen to work with differentiated partners like co forge who do not just go out there and offer assets and platforms, but can actually craft and deliver upon solutions which are deeply embedded in the very specific operating context of an individual enterprise. That was point number two. Point number three, commentary around order intake. I wish to share that our order intake for the quarter for the second time in our history as a firm is more than USD 1 billion. More than this number, impressive as it has given our size, is the fact that this order intake is truly broad-based. $455 million of this came from North America, $485 million came from Europe and $101 million from the rest of the world. Interestingly, of the 8 large deals we signed during the quarter, 2 came from BFSI, 3 came from public sector, 2 from high tech and 1 from retail, broad-based again. And once again, geographically, of the 8 large deals, 3 were from North America, 4 from Europe and 1 from the rest of the world. As we stand today, ladies and gentlemen, every business engine of Coforge is firing despite the very tough macros that we're going through. And what that does is not just import as great growth momentum, it equally importantly, derisks that robust growth outlook. Bullet point number four, key accounts, I'm very pleased to share that starting Q2, there is now a second client of Coforge that has crossed the $100 million annualized relationship run rate. Large deals are important. But equally important is the ability to nurture and sustain that initial growth in impetus. The growth of the second client relationship to more than $100 million annualized run rate is testament to the fact that both the farming and the hunting sales engines continue to excel with an execution ethos that is uniquely [Indiscernible]. Bullet point number five, free cash flow. FCF to PAT came in at 90% for the quarter. Short note, we expect it to be 100% for the year. Finally, bullet point #6, of course, enterprise AI. Enterprises are deriving the highest AI value from redesigning and automating business workflows, which shifts the IT services opportunity from supplying technology effort towards owning transformation and business outcomes. AI-enabled operations and end-to-end workflow transformation have become more important than stand-alone coding. Domain expertise, process mining, data and change capabilities are increasingly becoming more important. In that context, there are 4 fronts on which we continue to address the AI imperative. Number one, first, through Coforge neuron, our enterprise autonomy enablement suite. AI, as you know, is only as useful as its understanding of your business. Neuron is the digital brain behind enterprise agents, grounding them in enterprise context and enabling them to drive autonomous operations one step at a time. The second way in which we're helping drive enterprise adoption is through a proven set of enterprise-grade AI assets, including [Indiscernible] These are all agentic AI solutions. These assets, in turn bring new on to life in specific areas of the enterprise with proven solutions for engineering, operations and business processes. They gave us a faster starting point to solve real client problems and take AI into production. The third way we're doing this again is through Momentum blue, our dedicated forward-deployed engineering unit supported by [Indiscernible] to take AI solutions from idea to scale. Our FDs work closely with clients to build and improve solutions in their specific business environment. [Indiscernible] which are hybrid human agent pods, then scale these solutions across the enterprise and continuously improve them. And finally, the fourth way is that enterprises increasingly want more choices in the models that they use and more control over where the intelligence sits. They also want better visibility and control over AI costs as usage grows across the organization. To address this, and you would have seen this, we recently announced AI LaunchPad, the open weight AI ecosystem for the enterprise. AI LaunchPad helps enterprises select, adapt govern and deploy open weight models at scale. It gives clients the flexibility to use the right models for different workloads while keeping control of their enterprise context, intellectual property and AI economics. With that, let me quickly turn to our quarter 2 fiscal year '27 performance. In FY '27, quarter 2, we registered sequential consolidated growth of 10.9% in [Indiscernible] 10.1% in U.S. dollar terms and 11.6% in Indian rupee terms. Organic sequential growth stood at 3.8% in CC terms. What we find particularly reassuring about our growth performance is the large deal velocity that I alluded to and the key accounts growth that underpin it. Our top 10 and our top 20 accounts are both growing at 20 or more percent Y-o-Y at the current point in time. In quarter 2 fiscal year '27, our order intake exceeded $1 billion. Order intake increased 51% Q-o-Q and 102% Y-o-Y. Q2 order intake was broad-based across geographies and industries, as I noted at the outset. 8 large deals, the highest in our history for a quarter was signed, as I said. One of the 8 large deals won during the quarter was a $230 million U.K. public sector engagement signed in July 2026. Equally importantly, we delivered a consolidated EBIT margin of 16%, above our current guidance of 15.5%, while the stand-alone business delivered an EBIT margin of 17%. Quick revenue commentary. Consolidated revenue for the quarter stood at USD 652.2 million. In Indian rupee terms, revenue stood at INR 61,708 million. On an organic CC basis, BFS grew 8.3% sequentially. Insurance grew 3.6% sequentially. Travel, Transportation & Hospitality grew 1.8% sequentially. Health care, high-tech declined 6.4% sequentially. Government outside India grew 20.8% sequentially and emerging verticals grew 2.3% sequentially. From a geographic perspective, organic growth was led by the Americas and the rest of the world, which grew 4.1% and 16.3% sequentially. AI led engineering, data integration and cloud, the key growth drivers of the combined organization contributed 86% of consolidated revenue during the quarter, reflecting the consistent growth and increasing scale of these businesses. Our top 5 clients contributed 18.1% of Q2 revenue. Top 10 contributed 26.4% and as I have noted, our top 20 clients are growing more than 20% Y-o-Y. Order intake, backed by a fresh order intake of over USD 1 billion during the quarter. Our next 12-month executable order book rose to an all-time high of $2.4 billion, increasing 45% year-on-year from USD 1.64 billion, and significantly strengthening growth visibility for the rest of FY '27. Encora, very important. This was the first full quarter following the Encora acquisition. We are exceptionally pleased with the manner in which the 2 teams have come together, and we feel extremely bullish about the outlook for that business. Margin expansion at Encora is ahead of the acquisition plan. Deal momentum is building very appreciably, and we continue to expect, as we had said last quarter in the investor call, we continue to expect Encora's revenue growth to mirror Coforge's growth from quarter 3 onwards. Equally importantly, the largest team that cohort is pursuing as of today, within our pipeline is with Encora client. And if all goes well, we hope to announce a win either in Q3 or in Q4 around this. The largest health care client of Coforge also today is a client that's come over from the -- from the Encora table. And that client also, 1 of our top 10 clients continues to grow extremely robust. People, we added 1,137 employees. The total headcount now stands at 47, 365, and the utilization rate stands at a healthy 82.4%. Last 12 months [Indiscernible] remained stable at 10.4% amongst the lowest in the industry, reflecting the strength of our people practices and excellence in employee retention. With that, I will hand over to John for delivery-related updates.

Thank you, Sudhir. I will now highlight the quarter's delivery and capability milestones. AI is in production at scale across our client base. We are running more than 520 AI engagements for more than 225 clients today with over 260 agents deployed in live operations. Two capabilities launched in July now sit behind that work neuron, our enterprise enablement suite connects enterprise knowledge, workflows and decisions in one intelligence layer. Momentum Blue puts our forward deployed engineers inside client teams to accelerate time to value for our clients on their AI investments. I will share a few examples of how we are driving business outcomes for our clients through AI. For a global HR solutions provider, we built a secure, governed AI foundation layer to accelerate the delivery of their AI business use cases. These included an AI customer service system, a consensus to quote assistant and an AI Investor Relations assistance. The AI quote agent has cut turnaround time from about 3 weeks to less than 5 days. The AI customer service now handles more than half of the inbound service periods, bringing capacity for higher value interactions. At the North American property and casualty insurer, legacy integration services carried heavy technical debt and little documentation. Our AI-powered [Indiscernible] reverse engineered the legacy APIs and modernize them as micro services on AWS. The insurer now runs a cloud-native architecture with delivery 30% [Indiscernible]. For a North American wealth management platform, we built a governed agentic AI solution, AI trade systems, that gives advisers portfolio insights and recommendations through natural language conversations within their compliance areas. The AI assistant has unlocked additional adviser capacity by the way of agentic support without adding any additional headcount. As a leading energy services company, a multi-agent AI drilling adviser combines historical well analysis, drilling parameter recommendations and the knowledge graph that engineers query in natural language. Half of their new well drilling projects are now planned with it and analysis that took weeks now takes hours. For a global pharmaceutical company, we applied AI across the R&D portfolio and program management. it consolidates project data from several sources and drafts executive ready status reports, which program managers now estimate scope changes themselves. The work released around 15,000 business hours, including more than 1,800 hours from monthly reporting. On partnership, we joined the AWS forward deployed engineered pilot in September, and AWS is investing with us to show to grow that footprint. We expanded our partnership with Pega, a pivotal shift in how Cohort goes to [Indiscernible] we now build and deliver Pega powered offerings under our own brand and take them to market jointly with Pega across our industries and markets. These successes were complemented by multiple analyst recognitions during the quarter. [Indiscernible] name Research named us as an exceptional performer in application services and in cloud and infrastructure services in its 2026 U.K. and Ireland IT sourcing study. HFS research identified us as a standout nonlinear growth leader Meanwhile, [ Nelson Hall ] positioned us as a leader across 6 segments in its 2026 need assessment for AI-enabled cloud infrastructure management services. With that, I will hand over to our CFO.

Thank you, John. We reported CC revenue growth of 10.9% in Q2, reflecting revenues of $650 million on PC basis. Revenue growth in dollar terms is 10.1% in the quarter and INR terms is 11.6%. On EBIT margins, while consolidated EBIT margin stood at 16% which is ahead of our consolidated margin guidance of 15.5% for the year. The organic business reported margin of 17% in the quarter, reflecting continued operational discipline. Following the 40% reduction in Encora G&A in Q1, the full quarter benefit of the cost actions is now visible with combined G&A improving further to 6.3% in the current quarter versus 6.6% in the previous quarter. Beyond the benefits already delivered, we retain multiple company-wide levers of further margin expansion. Utilization is currently only at 82.4%. Most of the peers are already operating at 86% plus, and we have a significant headroom on this front. AI-led efficiencies have been triggered in our fixed price contracts, which will start reflecting in our Q4 margin numbers. AI efficiencies across G&A functions will support continued productivity gains and incremental benefit on margins. Intangible amortization is largely fixed, creating operating leverage as the company scales. Net losses for the current quarter stood at $10.2 million, broadly in line with Q1 FY '27. On a mark-to-market basis, we expect a loss of $7.1 million in Q3 and $1.2 million in Q4. This is going to provide a significant tailwind in EPS in coming quarters. We now have natural hedge in the balance sheet on account of the U.S. dollar-denominated loan. On exceptional items and acquisition-related expenses, during the quarter, we recognized exceptional items of $5.9 million, this primarily comprised of integration-related expenses on accounts of layers and consultant fees for legal entity rationalization and tax structuring. At the time of acquisition, we have guided for exceptional expenses of $15 million to $16 million of acquisition and integrated costs, whereas we have ended up spending around $17 million. This increase was on account of overruns related to tax planning for overseas and entities and strategy related to rationalization of 95 entities that we have today. EPS stood at 13.3% in the current quarter as compared to 12.3% in the last quarter. As guided earlier, we remain well on track to deliver EPS accretion in FY '27. Turning to cash flows. The combined organization generated cash flow of -- free cash flow of $53.8 million, representing a [Indiscernible] conversion of 89%. At the end of H1, we are at [Indiscernible] PAT conversion of 92%. We remain confident of delivering FCF to PAT guidance of 100% for FY '27. To conclude, with H1 behind us, this is where we stand against for our FY '27 outlook. EBITDA margin, H1 is at 20.5%. We remain confident of the guidance of 20.5% to 21% range. EBIT margin, we are increasing our FY '27 consolidated EBIT guidance from 15.5% to 16%. H1 consolidated EBIT is already at 16%. And with levers I described, we are confident of reaching 17% in Q4 of FY '27 and expect EBIT margins to be more than 17% going forward. Free cash flow, as I mentioned, guidance of 100% [Indiscernible] for FY '27. Tax on a steady-state basis, 23% to 24%. EPS with no exceptional expenses in Q3 going forward, lower hedge losses in Q3 and almost negligible improvement in EBIT margin in Q4 to 17%. We see a significant upside on exit EPS of Q4 of FY '27. With this, I will hand over the call back to Sudhir.

[Indiscernible] stated, ladies and gentlemen, we are upgrading our FY '27 consolidated EBIT margin guidance from 15.5% to 16%. Our revenue outlook remains very robust. Signed next 12-month order book of $2.4 billion, an in-quarter order intake of more than $1 billion, the highest ever number of large deals signed in quarter 2 which incidentally is a record that is likely to get eclipsed in quarter 3. The broad-based nature of order intake and the broad-based nature of large deals, robust I would say, more than robust key account growth and the derisked profile of our top 10 clients and our business assures us of delivering best-in-class growth numbers this year and even beyond this year. This resilient performance in the face of AI-led deflationary wins is driven by an exceptional solutioning engine and an execution ethos that is uniquely our own. The Encora acquisition is ahead of plans on every aspect. When we consummated the acquisition, we had indicated that the margins of Encora would go up appreciably. They are now significantly ahead of what our plans were. We had also told you last quarter that starting Q3, the revenue growth rate of Encora will start mirroring the cohort growth rate in light of the large deal pipeline that I described across the health care client and across the high-tech client, that again, is going to be true. It's been an acquisition that continues to [Indiscernible]. Finally, to conclude, the ultimate arbiter of sustained performance is the people in a tech services firm who drive it. We are one of the if not the most tenured leadership teams in our industry. We have a track record of sustained performance, which is measured not in quarters, but in years. This is year 10 of the sustained robust Coforge growth [Indiscernible]. The trust across and the competence of the leadership team, allied with a collective sense of purpose and an execution intensity that is uniquely our own is likely, we believe, to propel us to even greater heights beyond what we have achieved over the last 10 years. Taken together, exceptionally strong deal momentum, margin expansion [Indiscernible] success with the Encora acquisition, reinforce our confidence in the sustained continued robust growth of the firm and the profitability trajectory outlined at the start of this fiscal year. With that, we conclude, ladies and gentlemen, our prepared remarks, and we now look forward to your questions.

[Operator Instructions] We will take the first question from Vibhor Singhal of Novama Equities.

Congrats to Sudhir and team for a super performance yet again and strong deal wins. Sudhir 2 questions from my side and then I have 1 bookkeeping question for Saurav. You mentioned in your opening remarks that we are now at a critical tipping point with respect to AI in the Coforge journey. So just wanted to pick your brain on that a bit, that -- is the margin upgrade guidance that we have given also related to that itself? I know there are operating levers, which Saurav about in terms of margin expansion. But the kind of deals that we are winning right now, with an increasing AI component in them, is that -- what is the change in the nature of those deals? Are there deals more short tenured or longer tenured, do they come without definitely a better pricing than the deals that we have been going until now, whatever that would be helpful as to how that is helping us in terms of our growth and especially the margin trajectory.

Thank you for the comment, Vibhor, let me take question number one, from you. You're right. We believe that for us, we've now reached a critical tipping point on AI adoption within cohorts the margin upgrade that we have done and the very strong confidence that we've shared around our margin outlook, the plans to potentially be one of the top highest-margin players across our industry in the near to medium term with, rights of massive, in some cases, post injection of AI-led technology and automation into our internal processes, not just delivery processes even across every function that we operate with and through. As far as the deals are concerned, the 2 points that I believe will add some color to this, the second $100 million-plus client that we have for the firm. Incidentally, we signed a very large deal with that client in the current quarter is one of our highest margin clients. So it's not just one of the highest growth clients. That growth is coming at one of the highest gross margins that we operate across any client with. Second, as I said, most of our deals tend to be somewhat atypical in that they are proactive deals. We realized that in the intense pricing at [Indiscernible] that prevails across our industry. The only way to sustain both growth and margin simultaneously is to make sure that we lead with proactive solutions through an exceptional solutioning on-site engine that we have and close deals without getting into [Indiscernible] with other providers around pricing. That's how we're approaching deals. That's how we are making sure that we insulate our margins while driving best-in-class growth.

Got it. That was really helpful. Just a related question on that, Sudhir, since we've now reached revenue rate of almost $2.6 billion. Deal wins were over $1 billion plus in this quarter, and you mentioned it might be another quarter, Q3 that we do another $1 billion deal wins. Do you think at our size of revenue and deal wins we can sustain the growth momentum by focusing only on the solely of basically those deals? Or do you think at some point of time, we will also have to take the plunge of being part of the basically vendor-driven deals so to sustain that growth momentum.

The short answer there is I don't think we can only just sustain the intent is to actually accelerate the growth going forward. We have a very strong collective belief across the firm that the demand slowdown that we are talking about is largely on account of the fact that the procurement-driven RFPs have slowed down. The intensity of the ask around delivering AI-led transformation for enterprises is only getting stronger, and the tech services partners who have the ability, the understanding of the domain and technology to craft proactive solutions have a very strong -- a very long and we believe a lengthening runway of growth ahead of us. John, would you like to add anything to that?

Yes. The only thing I'll add to that is in parallel to the leveraging the solutions capability for proactive deals. We've also started of increasingly use some of the more advisory channels, and we're starting to see deals come in through those routes, which traditionally we've never had.

Got it. Got it. Great, John. My just last question to Saurav, just a bookkeeping thing on the revenue part. If I cut our revenue number in this quarter of around $652 million and the organic growth rate on CC terms that we have called out at 3.8%, it looks like there was a slight miss or maybe a small basically number -- the Encora -- because if I back calculate, I think the revenue for Encora comes out to be around $145 million, whereas last quarter, I think we had 2 months of [Indiscernible] and also which ties up with a $600 million revenue that we had kind of acquired it. So if you could just help me reconcile the math, that would be really helpful.

So Vibhor, number one, the organic -- the reported dollar is 652, which is 10.1%. The CC growth is 10.9%, which actually reflects $650 million and $658 million of revenue. So now if you apply 3.8% of organic growth, we left at $147 million, $148 million of revenues in Encora in the current quarter. Last quarter, we reported 2 months, which was $100 million. The average for the quarter, the last quarter, the full quarter number was close to 148. So it's largely flat in the current quarter. And as we already mentioned, that with all the actions that we have taken with all the deal pipeline that we've built up over 5 months of equity, Q3 is going to mirror. The Encora is going to mirror the growth of Coforge from Q3 onwards.

Got it. Got it. So the Encora revenue was largely flat Q-on-Q Q2 over Q1.

Exactly.

And Q3 onwards, we can expect Encora plus Coforge to be at the -- Encora and organic Coforge should be the same growth rates.

Absolutely right. There is no -- because this is full quarter integration that has happened. There is no internal within [Indiscernible].

Our next question is from Abhishek Pathak of Motilal Oswal Financial Services.

My question was on margins. If you look at our margin gains. Most of them have actually come from SG&A optimization and our gross margins have been kind of flat. From that perspective, when we talk about slightly higher margins going forward as well. Do we see some gains on the gross margin side from selling IPs or selling sort of, let's say, Momentum Blue, for example, I don't know what margins we are earning on that. But is there a possibility to kind of increase GMs a bit from these levels? And as a corollary to that, does it mean we can kind of invest a bit of that into SG&A as well because this SG&A number is kind of the lowest we've had in a while. And of course, I mean, we are growing very well. But just wondering if kind of recycling that back into SG&A could be to even higher growth rate from where we stand. That's the first question. And the second one is just largely on the growth outlook for the next couple of quarters. So again, I mean, the deal wins were pretty solid. I do understand the schedules for this order intake. Should we see a meaningful acceleration in organic growth in 3Q, 4Q? And if so, how should we just model that in the short term?

No. So let me just take those in order. The first question around margins. We've been investing very significantly in the 4 AI initiatives that we talked about. Momentum blew the forward-deployed [Indiscernible] factory that we are building. As you can imagine, as a factory, we're building on site, and we are pumping in an exceptionally high order of investment to sustain it. I suspect if not in Q3, starting Q4, you will see a material spike in gross margin at the consolidated level of the fund. So that's answer one. As far as SG&A reduction is concerned, it is only because the G&A part with AI injection is being and will continue to be very aggressively reduced. So that's answer to. The third thing as far as the trade-off between SG&A investment and growth is concerned, the one thing that we wish to reassure you is that for 10 years, we've been a growth firm. There is zero change of heart, there is zero likelihood of ever there ever being a change of heart. We continue to be the firm that prioritizes growth over everything else. It's just that at the current point in time, with the advent of AI, we believe there is an opportunity also to materially delink margin profile from scale, and we will ride that wave. But growth is the first, second and the third imperative. As far as we are concerned, we will not let anything come in the way of it.

And maybe just to add to that, Abhishek. Our revenues over Y-on-Y has grown 53%. S&M was has actually [Indiscernible] 52%. G&A, which is only [ 115.6% ]. So there is no reduction which has happened on the front end. When it comes to sales efforts, sales motions, solutioning marketed and presales team. It is the G&A, which again has grown 15.6%, so no reduction has happened there. It is optimization. And with the growth in revenues that have come in, we then have to hire more people purely because we've been investing in [Indiscernible].

Got it. And the second one on just the deal [Indiscernible] and how I should build in the organic growth rate for the next couple of quarters?

There are no deals which will take a long time to ramp up, and [Indiscernible] asked you to wait for next year or end of quarter 4 to see the ramp-up. The ramp-up will be near immediate in most cases, and growth outlook continues to be very robust.

Sorry, just very quickly, [Indiscernible] sort of on a bookkeeping one. FCF net income is extremely healthy, but the OCF EBITDA conversion seems to have like fallen off a bit. Is that temporary? Or I mean, is that a result of Encora being integrated? Or how should we just look at that particular metric going forward as well?

So I think a couple of things. One, we are currently in a process of and I talked about legal entity rationalization and tax -- investment in tax content. So we're moving contracts from U.S. to India. The contracts are getting novated because when we acquired Encora, it was the entrepreneur was U.S. entity and [Indiscernible] parent is an Indian company. So contracts are getting novated, which has led to delay in certain invoicing and certain collection because of that. And that's why you see a certain increase in unbilled as well. So as we move forward, you will start seeing correction in that, number one. Number two, we have guided for FCF to PAT of 100%. We are sitting I guess by the time we end the year, we should be more than 100% of that front.

Our next question is from Prateek Maheshwari of HSBC Securities.

Congratulations on strong deal wins this quarter. I wanted to check on the order book. So fantastic deal wins that on the executive order book, I wanted to check if you could break it up for Encora as well. And based on that, I know it started [Indiscernible] growth in the third and fourth quarter. Is it equal [Indiscernible] that it will probably grow as good as Coforge has in FY '28 as well?

Absolutely. I mean -- and you'll hear both John and me say the same thing, equally confident, and we did allude to the pipeline on the order book. The largest deal in the company's [Indiscernible] today is from the Encora's table. The largest health care account, which offers the most promise and health care is the most promising vertical for the firm is from the Encora table. We feel rock solid about where the Encora acquisition is. We feel really solid about how it's progressing. But John, would you like to add anything around what you see Encora as well.

Yes. I mean what I'm seeing is a steady integration of the capabilities within the wider Coforge ecosystem, and that is actually helping us differentiate increasingly and drive the deal -- the large deal momentum and backing that with a very, very strong capability around areas such as data, cloud, AI and the core engineering sort of muscle that is underpinning a lot of what we're doing.

Just one more. So I was looking at your S&M expenses. And within marketing, so marketing cost, I know it's lumpy, it was strong last quarter. It has cost has fallen this quarter. And I was tying it up with the comment that John made earlier that advisory relationship and analyst marketing has held a lot in this deal wins this quarter as well. So I just wanted to understand your marketing investments, like how do you see the outlook for that going forward?

See, advisory costs are [Indiscernible] part of marketing costs. Those are largely events and conferences, which will be lumpy because of depending upon when you're attending a conference. Advisory cost will sit as part of either sales cost or other S&M process. It's largely around that. It's not that the advisory cost is very, very significant. It is more about how they take us to clients and how they recommend us to client is more about that. It's not that it's a significant portion of our cost base when it comes to S&M.

We'll take our next question from Dipesh Mehta of Emkay Global.

Just a couple of questions more about clarity. Now the deal intake would we report in next 12-month order book would we report. Can you hear me?

Yes, yes, go ahead.

Yes. So deal intake in next 12 months order book would we report now started including Encora or it is yet not including Encora?

It includes Encora.

The executive are actually included in a previous quarter as well, [Indiscernible] was not included.