Financials

Financials — What the Numbers Say

Figures converted from INR at historical FX rates — see data/company.json.fx_rates. Ratios, margins, and multiples are unitless and unchanged.

Sagility is a US-payer-focused healthcare BPM business carved out of Hinduja Global in 2021, listed in India in November 2024, and reporting in INR even though most revenue is invoiced in US dollars. Read every number through that lens — the rupee top line is partly an FX statement.

1. Financials in One Page

Sagility delivered $767M of revenue in FY26 (up 29.1% YoY), a 24.5% operating margin, and $108M of free cash flow. Borrowings have fallen from $632M at carve-out (FY22) to $118M at FY26, ROCE has stepped up from 5% to 13.4%, and the stock trades at roughly 19.8× trailing earnings — a multiple that already pays for the visible operating leverage. The single financial metric that matters most right now is operating margin durability through FY27: the bull case rides on sustaining ~24%-25% EBITDA margins while revenue compounds in the high-teens, and the recent quarterly print shows margin progress slowing, not accelerating.

Glossary in one place. Operating margin = operating profit ÷ revenue. ROCE (Return on Capital Employed) = EBIT ÷ (equity + debt) — measures how productively the whole capital base is used. Free Cash Flow (FCF) = cash from operations minus capex; it is the cash actually available to repay debt, pay dividends, or buy back stock. Net Debt / EBITDA tells you how many years of operating cash earnings it would take to repay debt net of cash on the balance sheet.

2. Revenue, Margins, and Earnings Power

Sagility's revenue is over 90% US healthcare payer outsourcing — claims administration, member services, clinical reviews, payment integrity — invoiced in USD and translated to INR for reporting. That gives the top line a structural tailwind whenever the rupee weakens against the dollar, and the rupee weakened roughly 11% across FY22-FY26 (USD/INR moved from ~75 to ~94). Some of the reported growth is real volume; some is FX.

How to read this. FY22 is an 8-month stub because the legal entity was carved out in August 2021; ignore it for like-for-like growth comparisons. From FY23 to FY26, revenue compounded at roughly 14% per year in USD terms — strong for a labour-arbitrage BPM, and stripped of rupee depreciation. (Reported INR growth was closer to 19% per year; the gap is FX.) The acceleration to +18% in FY26 (USD) reflects new client wins, the BroadPath acquisition, and a benign US payer outsourcing demand cycle.

Operating margin has stayed in a tight 23%-25% band — impressive for a people-heavy services business — but the real earnings power story is in the gap between operating margin and net margin. Net margin expanded from -0.5% to 12.9% over four years because interest expense fell from $86M (FY22) to $11M (FY26) on a much larger revenue base, depreciation/amortization moderated as the goodwill amortization layer worked down, and the effective tax rate normalised. Interest cover (EBIT ÷ interest) widened from roughly 3× to 18× — a balance-sheet story masquerading as a margin story.

Recent Quarterly Trajectory

Three points jump off this chart. First, the revenue step-up in 3Q26 ($219M versus $187M the prior quarter) is the BroadPath acquisition flowing through, not pure organic growth. Second, operating margin compressed to 22.5% in 1Q26 — a reminder that wage hikes and onboarding new accounts can absorb a full quarter of operating leverage. Third, 4Q26 margin of 24.0% is below the 3Q26 peak of 25.9% even on a higher revenue base — the kind of step-back that drove the post-earnings stock decline. Earnings power is improving, but not in a straight line, and the marginal quarter no longer surprises to the upside.

3. Cash Flow and Earnings Quality

Earnings quality is the cleanest part of the Sagility story. Free cash flow is the cash a business generates after paying for working capital and capital expenditure — it is what is left for debt repayment, dividends, buybacks, and acquisitions. For four consecutive years Sagility has converted more than 95% of operating profit into cash from operations.

Net income is substantially below operating cash flow because depreciation and amortization of carve-out goodwill is a large non-cash charge ($52M in FY26 on its own). That is exactly the right shape for the business model: the goodwill was created in the 2021 buyout from Hinduja Global, but the cash generation belongs to the operating company. FCF stepped down in FY26 ($108M versus $128M in FY25) for two reasons — working capital absorbed $12M as receivables stretched with the new BroadPath book, and capex rose roughly 30% to support delivery centre expansion. Neither is alarming. Both are worth tracking.

4. Balance Sheet and Financial Resilience

The balance sheet was the major risk at carve-out and is now the major signal of improving quality. Sagility was loaded with $632M of debt to finance the 2021 acquisition; four years of cash generation and roughly $250M of fresh equity raised at IPO have brought borrowings down to $118M.

The change in financial resilience between FY22 and FY26 is the biggest single fact in this page. Net Debt / EBITDA fell from 1.4× to 0.1× — Sagility is effectively unlevered. Interest coverage (EBIT divided by interest expense — how many times over a company can pay its interest bill from operating profit) widened from 3× to nearly 18×, the range associated with investment-grade quality regardless of formal rating. There is no near-term refinancing risk, no debt-covenant pressure, and meaningful room to either redeploy cash into M&A or step up shareholder returns.

The balance sheet gives management three optional moves: (1) clear the remaining $118M of debt and run net-cash; (2) raise the dividend payout from the current 8% to something closer to peer norms of 20%-30%; or (3) make another BroadPath-sized tuck-in. The capital allocation choice from here is more interesting than the balance-sheet risk.

5. Returns, Reinvestment, and Capital Allocation

Returns on capital — the truest measure of business quality — have compounded as the goodwill drag has worked off and operating leverage has scaled.

ROCE of 13.4% is a respectable mid-teens number for a labour-arbitrage services business, but well below the 25%-30% the best Indian IT/BPM names achieve. The reason is the goodwill in the asset base — almost $997M of fixed assets are dominated by acquired intangibles, not operating equipment. If you strip goodwill out, ROCE on tangible operating capital is materially higher (likely 35%-40%); the reported number understates underlying capital productivity but correctly reflects the price paid for the carve-out.

The capital allocation story is straightforward: from FY22 to FY25, every spare dollar went to debt repayment; in FY26, with the balance sheet largely cleared, management redirected cash into the BroadPath acquisition (estimated ~$80M based on cash-flow-from-investing) and initiated a maiden dividend (8% payout ratio, yielding roughly 0.12% at current price). The dividend is symbolic, not material. The acquisition is the live signal — if BroadPath delivers, the next move could be a larger consolidation play.

Share count is a non-issue because Sagility raised roughly $250M of fresh capital at its November 2024 IPO at $0.32 per share and has not done any further dilutive issuance. The 4.68 billion shares outstanding (after IPO) are the steady-state share count.

EPS has grown at a 33% CAGR since FY23 in USD terms; book value per share has grown more than four-fold; FCF per share is up roughly 20%. Management is compounding per-share value, not just absolute size — and they are doing it without dilution.

6. Segment and Unit Economics

Sagility does not publish formal operating-segment financials. The disclosed split is between Core Benefits Administration (claims processing, member services, payment integrity for US health insurance payers — roughly 88% of revenue) and Clinical Services (utilization review, care management, clinical document improvement — roughly 12%). Geography is concentrated: more than 95% of revenue is from US customers; the residual is from UK and Philippines clients.

The segment story matters because the clinical-services book is where the moat sits — it is sticky, regulated, and grows with payer focus on prior authorization and utilization controls. The core benefits book is a higher-volume, lower-mix-margin business that is more exposed to payer concentration and contract renegotiation risk. Within the disclosed envelope, every margin step-up Sagility delivers from here is likely to come from mix shift toward clinical services, not from the BPO core.

7. Valuation and Market Expectations

This is where the investment debate sits. The stock has gone from $0.31 at IPO (Nov 2024) to a 52-week high of $0.61 and back to $0.42 — round-tripping the entire post-listing rally. At $0.42, the market is pricing 19.8× trailing earnings and roughly 17× EV/EBITDA on a business growing 29% with a 24%-25% operating margin.

The de-rating from a peak P/E of about 38× to 19.8× is the story of the past 18 months — earnings have caught up to the share price faster than the share price has fallen. The setup is constructive: the stock is flat while the underlying business compounds. P/E now sits below FSL (India's closest BPM peer, around 22×) and roughly in line with US BPM benchmarks adjusted for the India listing premium.

Against $0.42, the base case implies roughly 40% upside over two years, the bull case roughly 140%, and the bear case roughly 12% downside. The asymmetry leans positive, but valuation is no longer the easy "deep value" setup of a year ago — further upside hinges on either margin expansion (which slowed in 4Q26) or a re-rating back toward the IPO peak (which depends on consensus believing high-teens growth is durable).

EV/EBITDA cross-check

At $0.42 and 4.68bn shares, market cap is $1,973M. Net debt of roughly $74M (borrowings $118M less ~$43M cash) takes enterprise value to roughly $2,047M. FY26 EBITDA is approximately $240M (operating profit of $188M plus depreciation/amortization of $52M). That puts EV/EBITDA at 8.5× — well below US-listed BPM peers EXLS (17.9×) and Genpact (9.6×), and roughly in line with FSL on a normalised basis.

8. Peer Financial Comparison

Sagility has the highest operating margin in the cohort by a wide margin (24.5% versus 14.8%-16.3% for healthy peers), the lowest net leverage, and the second-fastest revenue growth — yet trades at a meaningful discount to EXLS and a modest discount to Genpact on EV/EBITDA. The most relevant transaction multiple is the Capgemini–WNS deal at roughly $3.3bn EV on FY25 revenue of about $1.3bn (~2.5× EV/Sales); Sagility's current EV is about 2.7× FY26 sales — the same range. Either Sagility re-rates toward EXLS or US BPM peers de-rate toward Sagility; either path argues against shorting Sagility on absolute valuation.

The one peer that needs no defence is FSL — same FY-end, same INR cost base, same India listing — and Sagility beats it on operating margin (24.5% vs 16.3%), ROCE (13.4% vs ~17% reported but inflated by leverage), and growth (29% vs 20%). The Sagility discount to FSL on P/E is therefore the cleanest mispricing signal in the page.

9. What to Watch in the Financials

What the financials confirm. A genuinely high-quality services business, with peer-leading margins, peer-leading cash conversion, peer-leading balance-sheet flexibility, and a per-share value-compounding profile since IPO.

What the financials contradict. The market's de-rating from 38× to 20× P/E is hard to reconcile with the underlying numbers — margins held, growth accelerated, debt fell. The stock has acted as if the operating story has cracked; the financials, so far, do not show that.

The first metric to watch is operating margin in 1Q FY27. Margin holding at or above 24% on constant-currency revenue growth of 14%+ would be the setup for a re-rating back toward EXLS multiples (25×+). Margin slipping below 22% on slowing growth would require a larger acquisition to substantiate scale and would re-open downside toward the IPO band of $0.32. Everything else on this page is secondary.