Indegene Ltd.: Growth on track; margins to normalize - Company Update

Indegene’s Q4FY26 earnings were in line with our estimates, EBITDA margins were slightly lower than our expectations due to higher SG&A expenses. While Indegene delivered 16.3% margins in Q4FY26, we expect margins to revert to 18%+ by H2FY27 as new AI lead deals scale up and revenue from large deals (outcome based) start reflecting. In addition, profitability was also affected due to one-off cost on account of legal provision and forex hedging losses. Indegene continues to focus on deepening relationships with top 20 pharma clients, aiming to convert them into larger (USD 25mn - USD 50mn) accounts. At the same time, it is expanding aggressively in mid-size biotech and emerging pharma companies. We have broadly maintained our estimates for FY27/ FY28E along with our target multiple.

Strong execution drives growth:

Indegene’s reported Q4FY26 revenue crossed Rs 10bn, growing at 32.8% YoY, driven by GenAI-led deal wins and strong execution. For FY26, revenue stood at Rs35.1bn (+23.6% YoY), supported by expansion across top clients and faster growth beyond them along with Biopharm acquisition (USD 21mn contribution). Platforms like Tectonic and Cortex are beginning to contribute, with rising opportunity to capture spend from traditional agency and CRO models.

Margins impacted by investments, recovery ahead:

Indegene reported Q4FY26 EBITDA of Rs 1,636 mn with margins contracting by ~150bps to 16.3% due to continued investments in AI, R&D, and go-to-market initiatives. They are heavily investing on AI models, physical infrastructure and AI training for existing employees. Their revenue per employee improved from USD 56k to USD 75k (best among its peers). For FY26, EBITDA grew 15.9% with underlying profitability remaining strong despite one-off impacts like legal provisions, acquisition led expenses and forex losses. Adjusted PAT was lower QoQ and YoY on account of lower other income and higher amortization cost (on account of Biopharm acquisition).

Strong pipeline and AI-led deals to drive growth:

Indegene’s strong Q4 execution reflects conversion of a healthy deal pipeline with multiple USD 1mn+ and a USD 10mn+ deal supporting visibility into FY27. Client expansion remains robust across top 20 clients and beyond, with increasing traction in mid-size biotech firms. Even though there was a dip across top 5 and top 10 clients, volume pick-up over the next few quarters should compensate. Their focus on growing their tail is starting to reflect with 91 clients vs 73 in FY25.  Platforms like Tectonic and GenAI-led omnichannel solutions are scaling, creating new revenue streams (USD 2-3mn run-rate) and replacing traditional agency spend. While pipeline strength and deal momentum support medium-term growth, revenue conversion is expected to be more back-ended given outcome-based contracts, with meaningful acceleration likely through FY27 and beyond.

Valuation:

We expect Indegene to grow at a CAGR of 17.4%/ 17.1%/ 14.2% Revenue/ EBITDA/ PAT to grow over FY25-28E. We arrive at a TP of Rs 630 (Rs 610 previously), valuing the stock at 25x Mar’28E EPS. Revision in TP is on account of rolling over our EPS from Q3FY28e to Q4FY28e. Indegene will outperform the industry as it is able to use AI improve productivity and increase its overall volumes. We also believe Indegene wont lost clients due to its domain expertise and its asset light business model (not following the per seat pricing). Key Risks: Increased competition globally, slower deal wins, mining of top 20 clients and delayed industry recovery.

Company website: https://www.indegene.com/

*CMP is as per report published date

Click to download the full Indegene Ltd Q4FY26 Company Update

Analyst:

• Vinay Menon - Senior Research Analyst, Institutional Equities (NISM-201600112117)
• Miloni Mehta - Research Associate, Institutional Equities (NISM-201800127664)

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FAQs on Indegene Ltd Q4FY26 Company Update

What drove Indegene’s Q4FY26 performance?

Strong execution, AI-led deal wins, and expansion across clients drove revenue growth, despite margin pressure from investments.

Why were margins lower in Q4FY26?

Margins were impacted by higher investments in AI, R&D, go-to-market initiatives, and one-off costs such as legal provisions and forex losses.

What are the key growth drivers ahead?

Expansion in pharma clients, GenAI-led solutions, platform scaling, and a strong deal pipeline will support future growth.

What risks should investors track?

Risks include slower deal conversions, increased competition, delayed recovery in pharma spending, and client concentration concerns.

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