Axis Capital initiates coverage on Sagility India with buy rating; expects 20% upside

The Rs 60 target is based on a 17x EV/EBITDA multiple for March 2027 estimates, in line with sector peers such as FSOL

Axis Capital has initiated coverage on Sagility India Ltd with a "Buy" rating, setting a target price of Rs 60 per share, implying a 20 percent upside from the current market price. This follows Jefferies’ December coverage, which also assigned a "Buy" rating with a target price of Rs 52 per share.

The Rs 60 target is based on a 17x EV/EBITDA multiple for March 2027 estimates, in line with sector peers such as FSOL. However, the stock's recent 40 percent rally has narrowed its valuation gap relative to other business process outsourcing (BPO) firms. Axis Capital identified high client concentration and the potential impact of generative AI in certain service areas as key risks, Axis Capital said.

Sagility India stands out in the BPM sector due to its steady growth and superior margins. The company has delivered a 12 percent USD revenue compound annual growth rate (CAGR) between FY18 and FY24, supported by a high offshore delivery mix, with 94.4 percent of its workforce based offshore. Its EBITDA margin of 24-25 percent significantly exceeds industry peers, driven by cost efficiencies and a favorable workforce distribution. Additionally, its seasoned leadership team, which transitioned post the carve-out of HGS’s healthcare business, has ensured strong client relationships and operational stability.

Axis Capital said while high client concentration remains a concern, Sagility has made progress in diversifying its client base. The company’s focus on the healthcare vertical is supported by a large total addressable market (TAM) and a history of successful execution. Axis Capital forecasts robust growth, projecting CAGRs of 11.9 percent, 31.6 percent, and 40 percent for USD revenue, EBIT, and PAT, respectively, over FY24-28, aided by steady margins, lower amortization, and reduced interest costs.

Sagility’s superior cash generation further positions it for strong shareholder returns, aligned with typical private equity funding structures. Growth leverage and incremental contributions from the fragmented provider segment are expected to sustain its margin leadership. Axis Capital emphasizes Sagility’s strong fundamentals, steady leadership, and differentiated positioning in the BPM sector as key factors underpinning its optimistic outlook.