Sabre's weak finances cloud mega tech deal with Coforge

Analysts are concerned about the US firm's high debt and financial struggles

- Jas Bardia

Coforge Ltd's recent announcement of its largest-ever contract with Sabre Corp. brought cheers to shareholders, but at least three analysts have raised concerns about the Texas-based travel technology company's ability to see through the deal and make timely payments due to its weak financial health.

The country's seventh-largest software services provider announced a 13-year contract with Sabre late last Tuesday, valued at $1.56 billion. This translates into $120 million revenue a year for Coforge. This is the largest deal signed by any mid-cap software services provider in the country.

While investors' enthusiasm resulted in Coforge's stock jumping 8% on Wednesday to close at ₹7,811, doubts persist on Sabre's ability to service the contract, primarily due to its poor financial health, which was ravaged by the covid-19 pandemic and has yet to recover.

"Sabre is yet to recover fully from the hit it suffered during the pandemic," said Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S. and Vamshi Krishna, in a note dated 5 March. "The deal has an additional risk arising from Sabre's financial positioning," said the analysts.

A second analyst echoed this concern.