Cognizant: Strong deal win momentum continues; company to unlock potential with NextGen programme in FY24-25 Cognizant (CTSH) reported Q2 revenue of $4.89 billion, which was down 0.1% y-o-y in constant currency (cc) but fell within the top end of its guided range. The growth included a significant inorganic contribution of +130 bps y-o-y. The primary driver of revenue growth was Europe, experiencing a 6.3% y-o-y growth in geographies and a 3.7% y-o-y growth in verticals, both in CC. The company’s adjusted Ebit margin stood at 14.2%, showing a decrease of 40 bps q-o-q but surpassing Bloomberg’s expectation of 13.3%. PAT reached $580 million, reflecting a 3.0% y-o-y increase. CTSH’s trailing 12-month bookings reached $26.4 billion, showing a 14% y-o-y increase. In Q2, bookings were up by 17% y-o-y, with an impressive book-to-bill ratio of 1.4x. Q2’s order bookings featured five large deals exceeding $100 million in size, including two net new deal wins. However, the company’s management acknowledged that they are observing softness in smaller, shorter-duration contracts due to weaker discretionary spending. CTSH management has revealed its strategy for Gen AI, which involves harnessing the power of third-party foundational models and enriching them using CTSH’s platforms and intellectual property. To achieve this goal, CTSH plans to allocate $1 billion for the enhancement of its AI capabilities over the next three years.
The Japanese pharma major is also filing a plea before the Delhi HC seeking appointment of forensic auditors to analyse transactions involving IHH, Fortis Healthcare and RHT, Singapore, as directed by the HC on October 18.
The development is likely to create legal hurdles and delay the proposed open offer as IHH had recently told FE that it could only go ahead if Sebi agreed with its legal interpretation that the SC’s September 22 order has lifted all such restraints.
IHH managing director and CEO Kelvin Loh told FE on November 9 that the company would like to go ahead with the open offer “as soon as possible” as there has already been a delay of four years. Ravi Rajagopal, chairman of Fortis Healthcare, had added that their legal counsel has advised that the company can go ahead with the open offer as the SC order has disposed of various appeals, including the suo motu contempt. “We have represented to the Sebi and the matter is with them,” Rajagopal had said.
However, legal observers told FE that the matter is not that straightforward and simple as the Delhi HC has to take the final call on the matter of open offer as well as whether a forensic audit has to be done in the share sale which was executed in 2018.
Also Read: IHH to float open offer for Fortis if Sebi concurs with our legal view: MD & CEO
Loh and Rajagopal had said the possibility that the matter may take a different turn when it comes up in Delhi HC cannot be ruled out.
IHH had in July 2018 acquired a 31% stake in Fortis Healthcare for Rs 4,000 crore through the bidding route. It had also earmarked Rs 3,000 crore to make an open offer for an additional 26% to the public shareholders as required under the law.
Daiichi has written to Sebi that the SC in its September 22 order had asked the HC to consider ordering a forensic audit into the dilution of FHL shareholding, repeated violation of undertakings and assurance by former FHL promoters — Malvinder and Shivinder Singh — and the transaction between FHL, IHH and the clandestine transfer of Rs 4,666 crore to RHT Singapore.
Daiichi is “severely prejudiced” with IHH’s clandestine attempt to subvert the status quo order directed by the SC on December 14, 2018, and September 22 with respect to the conduct of forensic audit and the pending proceedings before the HC by purportedly consulting regulatory authorities, including Sebi, on the proposed FHL-IHH transaction. It has reiterated that the FHL-IHH transaction was currently sub-judice before the HC where FHL is also a party, its solicitors, P&A Law Offices, have said in the letter.
“We further state that any such attempt by FHL and/or IHH to proceed with the FHH-IHH transaction would be in direct contravention of the HC and SC orders,” the letter sent by the law firm has stated. Daiichi Sankyo is pursuing the enforcement of Rs 3,500-crore arbitration award against the Singh brothers pronounced by a Singapore tribunal for concealing information when they sold Ranbaxy Laboratories to it for $4.6 billion in 2008. The apex court had in 2018 put on hold the sale of Fortis Healthcare to IHH on a contempt plea filed by the Japanese drugmaker against the Singh brothers.