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Mint
5 days ago
- Business
- Mint
Cognizant wins $1 billion deal from US-based healthcare company
Bengaluru: Cognizant Technology Solutions Corp. recently bagged a big-ticket deal from a US-based healthcare company, at a time when clients are renegotiating their engagements with information technology (IT) service providers due to artificial intelligence (AI) tools and macroeconomic uncertainty. In the early hours of Tuesday, Surya Gummadi, Cognizant's president for the Americas region, said the company had won a mega deal worth 'approximately a billion dollars" during a fireside chat with Jason Kupferberg, a senior analyst with Bank of America Merrill Lynch. To be sure, Gummadi did not announce the client's name. Mint has learnt from people with knowledge of the matter, including at least two analysts, that Cognizant might have renewed its partnership with UnitedHealth Group (UHG). 'This (deal) has an element of renewal, an element of expansion and a new (component) as well. It has all three components," said Gummadi, adding that the deal was a transformation deal with an average span of five years. The Cognizant veteran said the deal also has an AI component, where the IT services company is passing productivity gains to the client. Also read | Cognizant eyes a place amongst world's four largest IT services firms Should the client be UnitedHealth, a $1 billion contract translates to roughly $200 million in annual revenue for Cognizant, which counts UnitedHealth amongst its largest clients in the health sciences space. Cognizant has had a two-decade partnership with UnitedHealth. The health sciences vertical made up almost a third of its full-year revenue of $19.74 billion at the end of 2024 and is its biggest vertical. Cognizant, based in Teaneck, New Jersey, is an Indian-heritage IT firm, as more than three-fourths of its employees are based in India. UHG is among the largest healthcare companies in the US, providing healthcare plans to people. The company ended 2024 with $400 billion in revenue, almost 20 times the size of Cognizant. Close ties Notably, one of UnitedHealth's subsidiaries was hit by a ransomware attack last year that impacted more than 100,000 people. The company had to pay out $22 million to hackers to protect valuable patient data, said chief executive officer (CEO) Andrew Witty. Incidentally, Cognizant CEO S. Ravi Kumar and UnitedHealth chief digital and technology officer Sandeep Dadlani were former colleagues at Infosys Ltd. Kumar took over as Cognizant CEO in January 2023, whereas Dadlani joined as UnitedHealth's chief digital and technology officer in September 2022. Both worked together at Infosys between 2002 and 2017. Kumar and Dadlani both served as the Bengaluru-based company's presidents. At least one analyst said the win was a step in the right direction. 'It's a sign of strong forward momentum for the firm," said Phil Fersht, CEO of HFS Research. Also read | Captive concerns: Why Cognizant has called out the risk from GCCs This renewal deal comes as a shot in the arm for Cognizant, which has struggled to grow, discounting its recent acquisitions of Belcan and Thirdera, in the last two years. Acquisitions made up almost half of its full-year revenue growth of 8.2% in constant currency terms. For Cognizant, this is the second mega deal that the company signed in the last two months. Gummadi, in his chat with Bank of America, said the company had announced another deal fetching upwards of $500 million two weeks back. This is an unnamed client in the company's communication, media and telecommunications division, which makes up about 16.6% of the company's revenue. Gummadi said Cognizant is saving money for clients by using AI tools, and this is being shared with those clients, who are in turn putting these savings and some of their own investments into new IT-related work, which is helping create more volume of business for Cognizant. Cognizant declined to comment while an email sent to UHG went unanswered. Scarce deals 'And by the way, both the mega deals that I spoke about, they were originated by us. They did not come from an RFP (request for proposal). They (the mega deals) originated from a solution with this construct," he said. Cognizant's recent deal win comes amid a drought for the country's largest IT outsourcers, which have struggled to bag such large deals. Coforge Ltd was the only listed Indian IT outsourcer to win a deal greater than $1 billion in total contract value over the last year. Also read | Cognizant fared better than peers, but concerns linger In March, the country's seventh-largest IT services company signed a 13-year deal worth $1.56 billion with Sabre Corp., a Southlake, Texas-based travel technology company. As part of the deal, Coforge will handle Sabre's software product delivery and execute artificial intelligence-led tasks for it. Mumbai-based Tata Consultancy Services Ltd was the last of the country's top five software service providers to land a mega deal. Last year, it signed a 15-year deal worth $2.5 billion with Aviva, a British insurance company.
Mint
30-04-2025
- Business
- Mint
‘Persistence' pays off as India gets a new ninth-largest IT company
Persistent Systems Ltd got more revenue than Hexaware Technologies Ltd in the January-March 2025 period, making it the country's ninth-largest information technology (IT) services company. This marks the fourth instance of a change in the pecking order of the country's $283 billion IT industry in a year. The big four—Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd and Wipro Ltd—accounted for 26% of the country's IT industry. Tech Mahindra Ltd and LTIMindtree Ltd are the fifth and sixth-largest IT outsourcers, followed by Mphasis Ltd and Coforge Ltd. For the three months ended March 2025, Persistent Systems recorded a 4.16% jump in revenue to $375.2 billion. During this time, Hexaware, relisted on the stock exchanges in February, saw its revenue shrink 0.21% sequentially to $371.5 million. Also read: Infosys misses growth guidance, estimates slowest start to fiscal For now, Persistent gets bragging rights among investors, shareholders and clients for going up a notch, but this is not the first time there has been a shuffle at the top. Since HCLTech overtook Wipro as the country's third-largest IT outsourcer in 2018, there has hardly been another change in the revenue ranks. But something appears to have changed in the last eight months. Infosys briefly overtook Cognizant Technology Solutions Corp as the country's second-largest IT services company in October, only for the Nasdaq-listed company to reclaim its lead less than a fortnight later. Cognizant is considered an Indian-heritage IT firm as more than three-fourths of its workforce is stationed in India. To be sure, Hexaware and Cognizant follow the calendar year for accounting purposes, while the remaining homegrown IT services firms follow the April-March financial calendar. Also read: TCS beats analyst estimates but reports slowest full-year revenue growth in four years Then came the shuffle in the middle between companies earning between $1 billion and $1.5 billion in annual revenue. Coforge overtook Persistent Systems in October to become the country's ninth-largest IT services company. Three months later, it overtook Hexaware to become the country's eighth-largest IT services company, after reporting $397 million in revenue for the December quarter. The company's revenue got a big boost from its biggest acquisition in May last year, that of Hyderabad-based Cigniti Technologies , an AI & IP-led digital assurance and engineering services company. Coforge shelled out $220 million for a 54% stake in the company. Christmas bore fruit even for Sonata Software Ltd, which overtook L&T Technology Services as the country's 11th-largest IT services company. While Sonata ended December with $336.8 million in revenue, up 30% sequentially, LTTS ended 2024 with $312 million, up 1.7% sequentially. Also read: Many Indian IT companies now station their CEOs where the grass is greenest There is a tug-of-war between the country's IT mid-cap companies as they are scrapping for every dollar. As of March, the country's seventh-largest and twelfth-largest IT outsourcers are separated by only $85 million. An analyst attributed the rejig in the Indian IT to the neck-and-neck positioning of the mid-caps. 'There is more shuffle amongst the mid-caps as compared with the large-caps because the former are very close to each other in terms of revenue. If any of the mid-cap companies probably bag a big deal, then that also can make a difference in the quarterly revenues," said Abhishek Kumar, equity research analyst for JM Financial . Mphasis, Hexaware Technologies, Persistent Systems and LTTS ended January-March 2025 with $430.4 million, $371.5 million, $375.2 million and $345.1 million, respectively. Coforge and Sonata Software are yet to declare their fourth-quarter results. The spotlight is now on the latest rejig in the order of India's largest IT outsourcers. Persistent Systems was founded in 1990 by Anand Deshpande, a former Hewlett-Packard employee. Intel Capital, the investment arm of chip-maker Intel, invested $1 million in 2000, and the company was listed on the stock exchanges in 2010. Almost a third, or 29.35%, of its shares are owned by promoter Deshpande, whereas public shareholders own about 68.5% of the company. The company grew the fastest among its peers between March 2022 and March 2024, with a compounded annual growth rate of 24.46%. 'PSYS' (Persistent Systems) unique value proposition and its strong play around regulated verticals are keeping it more resilient in this adverse environment," said PL Capital analysts Pritesh Thakkar and Sujay Chavan in a note on 24 April, after Persistent Systems announced its full-year results. 'Additionally, the investments around hiring senior leadership team within key verticals have been instrumental in fuelling client mining/hunting activities and closing large strategic deals." Meanwhile, Navi Mumbai-based Hexaware Technologies Ltd, which was relisted on the stock exchanges in February, has raised question marks. Its quarterly revenue has declined for two straight quarters, starting in September 2024. Its second consecutive quarter of revenue decline meant it lost its place to Persistent. Atul Nishar incorporated Hexaware as Aptech Information Systems Ltd in November 1992. Five years later, Aptech Information Systems was listed on the country's stock exchanges, before it was rebranded as Hexaware Technologies Ltd in 2002. It traded on the stock exchanges for another 18 years before delisting in 2020, the same year Happiest Minds listed. US-based Carlyle Group Inc. acquired 95.51% of the company in 2021 through its investment holding company, CA Magnum Holdings, for $3 billion. The company still has not fared better than its peer, Persistent, in the last two quarters. In terms of profitability, Persistent did better. Its profitability jumped 160 basis points to 15.6% at the end of the three months through March 2025, while Hexaware's operating margins widened 60 basis points to 14.3%. Persistent also enjoys a bigger market share. Its market cap of ₹ 841.9 billion is almost double that of Hexaware's ₹ 442.7 billion. Key takeaways
