The country’s seventh largest software service provider announced a 13-year contract with Saber late Tuesday, worth $1.56 billion. This is $120 million in revenue per year for Coferger. This is the largest deal signed by any mid-sized software service provider in the country.
While investor enthusiasm has led to 8% closing in on Wednesday ₹7,811, Questions about the ability of Saber to serve contracts are largely due to its poor financial condition, which has been damaged by the Covid-19 pandemic and has not recovered.
“Saber has not yet fully recovered from the blows suffered during the pandemic,” said Kawaljeet Saluja, Sathishkumar S., equity analysts at Kotak, in a March 5 report.
The second analyst responded to the question.
“The financial situation of the Saber is obviously the reason we are concerned about. Saber’s idea is to save costs, but there is no definite certainty about the way they offer transactions.
A company spokesperson said in response to a Mint email inquiry: “Saber will not discuss business agreements publicly on this detail. As you can see in recent 2024 financial results, the company has made significant progress in our financial position, strengthened our openness in our public positions, and also won the 2000 campaign in mid-202200, and we can also achieve a 202200 communications spokesperson added: “Downs our 2025 debt maturity.” ”
Coforge, who responded to Mint’s email seeking comment, said: “All other details are inherently confidential and cannot be shared due to the confidentiality between the parties.”
Saber’s financial difficulties, poor performance
Saber has been reporting net losses since 2020. However, its net loss dropped sharply to $279 million in 2024, from $542 million in 2023.
Founded in 1960, Saber was founded in a collaboration between American Airlines Group Inc. (AAL) and International Commercial Machinery Corporation (IBM) to create the world’s first computerized airline booking system. It went public in April 2014 when its shares were listed on Nasdaq stock.
In 2024, Saber’s revenue grew 4% to $3 billion. It has two departments – travel solutions and hotel solutions.
Travel Solutions provides software products to hotels, airlines and travel agencies to book travel and accounts for 91% of the company’s overall business, or $2.74 billion. Hotel solutions provide software products to hotels that manage their pricing and bookings, which constitute the remaining 9% or $327 million in business.
For Saber, it is worrying that its share has not met expectations. Saber priced its IPO at $16 per share. Currently, it trades at 76% lower, at $3.89, respectively.
Travel tech companies are more concerned about their debt. At the end of last year, Saber’s total debt was $5.1 billion, a 55% increase from 2019. Even the company has been bleeding since 2020, with cash costing about $1.7 billion, so its operations have been hit.
The company relies heavily on global distribution systems, which provides data for travel agencies and travel service providers such as airlines and hotels. This kind of software is difficult to scale and modify, which leads to Saber’s high debt pile.
Saber’s staff has also steadily declined. Last year, 6,253 employees ended, down from 9,250 four years ago. The company attributes it to a cost reduction program launched in 2023.
Cost reduction measures
This cost reduction program occurs with leadership changes. Kurt Ekert joined Saber’s president in January 2022, taking on the role of CEO a year later, replacing Sean Menke, who worked at the company for nearly nine years.
Ekert’s first business was to introduce a cost reduction program that would help the company save $200 million a year, part of which is a reduction in the workforce.
“As a new CEO, it’s very difficult for me to take these steps, especially in the early days of my position. I won’t make this decision easily, especially given my great respect for all my fellow Sabre colleagues around the world.
“However, I believe these actions will position us better in the future and take us toward a direct way to achieve our financial and strategic goals,” Ekert said.
A third analyst said such a deal would help Saber get rid of his tough financial situation.
“The deal is the result of Saber trying to optimize costs. “Many deals are built out of pressure to reduce costs,” said Pramod Gubbi, co-founder of Marcellus Investment Managers, a Mumbai investment management firm. ”
“If a company with poor financial conditions can outsource non-core businesses, software service providers will provide solutions at a much lower cost than the parent company,” Gubbi added.
Still, the fourth analyst raised concerns about Saber’s financial situation.
IIFL Capital Analysts Rishi Jhunjhunwala, Ankur Pant, Kenil doshi and Vishesh note note note nofe On May 5, 5, Saber formed part of a cost-free program on Saber, which is some concerns about Saber’s financial health and ability to pay for new collaborations.
“Despite high net debt, there are no significant repayments in two years, they guided in 2025 at a cost of $100 million and $200 million in FCF (free cash flow).”
The prospect of Coford
As part of the deal with Saber, Coforge ended last year with $1.12 billion in revenue and is expected to handle Saber’s software product delivery and will also perform AI-led tasks for the travel technology company.
Kovge earns nearly one-fifth or $200 million from customers in the travel, transportation and hospitality industries. With the latest deals, revenue in the sector is expected to increase by 60%.
The deal comes at a time when the country’s largest software service companies (including Infosys Ltd, HCL Technologies Ltd, Wipro Ltd and Tech Mahindra Ltd) are all working to secure large deals.
Mumbai-based Tata Consultancy Services Ltd is the last of the country’s top five software service providers last year, when it signed a 15-year deal with the UK insurer, a British insurer, worth $2.5 billion.
Kotak analysts insist that Coforge needs to ensure Saber pays in a timely manner.
“Coforge will need to ensure that collections are valid and that stricter payment schedules can isolate potential cash flow risks,” Kotak analysts said.
