Indegene Ltd – Steady Q2FY26 Performance; Deal Wins Support Growth | MNCL Research Update

We retain BUY with target price at Rs 635. Indegene reported a stable performance in Q2FY26, delivering healthy revenue growth driven by continued deal wins and new client additions. Margins were under pressure due to wage hikes, marketing costs (IDS) and one-time M&A-related costs (60 bps one-time). We expect them to normalize in the coming quarters and remain in the 19–20% range over the next 4-6 quarters. ECS segment continued its strong growth, while brand activation was under pressure. We continue to model mid-teens growth, supported by strong commercial execution, rising digital adoption across pharma, and a healthy deal pipeline.

Topline growth aided by deal wins:

Indegene delivered robust revenue growth in Q2FY26, led by sustained momentum across its ECS and EMS segment. ACV stood at US$14mn, marginally higher QoQ. Deal wins and client additions helped offset the softness seen in the Brand Activation segment which is expected to last for a few more quarters. The company continued to diversify its client portfolio, reducing top-client dependency (55% vs 58.9% from top 10 clients YoY) and convert 2 clients from US$1-10mn to US$10-25 mn, in-line with its efforts to mine existing clients. Tectonic contributed US$1mn in Q2 (US$ 2mn in H1FY26), with the company converting multiple clients to paid contracts, though initial deal values remain modest.

Margins impacted by wage hikes and M&A costs, expected to normalize:

EBITDA margins were impacted in Q2 due to annual wage hikes (July), higher marketing spends (IDS), and one-time M&A integration expenses (60 bps). Excluding these, core margins remained steady YoY. We expect margins to gradually improve and stabilize at 19–20% over FY26e–27e, supported by operating leverage, offshore mix improvement and normalization of marketing costs. Continued investments in GenAI and higher revenue contribution per employee are expected to enhance productivity and offset cost pressures.

Recent acquisition; Earnings Outlook:

Indegene recently acquired Biopharm at a valuation of 9.7x on trailing EV/EBITDA, as of CY24. We believe this acquisition will start showing synergies from FY27E, with full earnings impact seen from FY28E. The co. remains well-positioned to benefit from the increasing digital spend from Pharma and life science companies. Its strong client relationships (top 20 pharma companies), expanding service portfolio, and increasing focus on AI-driven solutions provide long-term visibility. With a healthy deal pipeline and a broadening geographic presence, we expect steady earnings growth over FY26–28E.

Valuation, view & risks:

We are factoring in 16.6%/17.4%/14.2% Revenue/EBITDA/PAT over FY25-FY28E, and value the company at 25x Sept’27 PE, to arrive at a TP of Rs 635. BUY. We believe the company can continue growing at mid-teens (without acquisitions) over the next 2 years, along with 19-20% margins and a strong balance sheet. Key risks: Increased competition, slower new client contribution, and a delayed industry recovery.

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

Click to download the full Indegene Ltd. 2QFY26 Company Update

Analyst: 

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

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