Indian IT services firm Sagility India has received a bullish endorsement from IIFL Capital, which maintains a “BUY” rating on the stock with a 12-month target price of INR 64, implying a potential upside of nearly 44% from the current market price of INR 44.8 per share.
The rating comes despite recent concerns over significant cuts to Medicaid spending in the U.S., stemming from the “One Big Beautiful Bill Act” passed by Congress on 4 July 2025. The legislation aims to slash federal healthcare expenditure, including Medicaid, a key government-funded insurance program covering nearly 79 million low-income and disabled individuals in the U.S.
Why Medicaid Cuts Won’t Dent Sagility’s Growth
According to the U.S. Congressional Budget Office (CBO), the cuts could reduce Medicaid coverage by up to 7.8 million people (~10%) by 2034. However, IIFL’s deep-dive analysis concludes that the impact on Sagility will be immaterial, potentially less than 1% of its annual revenues.
Sagility, a pure-play healthcare outsourcing provider, operates entirely within the U.S. healthcare payer and provider segment. However, IIFL notes that Medicaid-related services account for only 5-7% of Sagility’s revenue, based on its exposure to top American insurers like UnitedHealth Group, Aetna (CVS), Cigna, Humana, and Elevance Health, who themselves derive only about 10% of their insured lives from Medicaid.
Adding to the insulation, offshoring of Medicaid operations remains very limited due to stringent regulatory restrictions at the state level. States such as Texas and Florida explicitly prohibit or heavily restrict outsourcing Medicaid services to offshore locations, meaning this business line has never been a large revenue contributor for Sagility.
A Case for Outsourcing Upside
In fact, IIFL sees a potential counter-cyclical benefit: with healthcare payers under mounting cost pressure, increased outsourcing of non-core operations could follow, especially in commercial and Medicare lines. This dynamic, analysts argue, could even lead to outsourcing tailwinds for players like Sagility.
“Concerns over Medicaid cuts are overblown. We believe any correction should be viewed as a buying opportunity,” says Rishi Jhunjhunwala, lead analyst at IIFL Capital.
Solid Financials Underscore Resilience
Sagility’s financial performance reflects a strong and improving growth trajectory:
| Metric | FY24 | FY25E | FY26E | FY27E |
|---|---|---|---|---|
| Revenues | 4,753.6 | 5,569.9 | 6,938.9 | 7,835.4 |
| EBITDA Margin (%) | 22.9 | 23.3 | 26.0 | 23.9 |
| Pre-exceptional PAT | 580.8 | 810.6 | 830.6 | 1,023.6 |
| EPS (INR) | 14 | 17 | 19 | 22 |
| ROE (%) | 9.3 | 11.2 | 10.6 | 11.3 |
| EV/EBITDA (X) | 18.5 | 16.5 | 12.7 | 10.6 |
| Net Debt/Equity | 0.3 | 0.2 | 0.1 | 0.0 |
The company has demonstrated margin expansion, improving cash flows, and a steady reduction in leverage, positioning it well for sustained profitability.
Valuation and Outlook
Sagility currently trades at a P/E multiple of ~19.5x FY27 EPS, which IIFL views as attractive relative to its earnings growth prospects and sector peers. The brokerage also expects earnings CAGR of 26% over FY24–27, bolstered by stable U.S. healthcare demand and increased outsourcing potential.
At a free float of 17.6% and a relatively modest market cap, Sagility offers a focused exposure to the U.S. healthcare services outsourcing market — a niche expected to grow steadily amid rising cost containment initiatives in American healthcare.
Sagility India Post-IPO Performance
Sagility India launched its Initial Public Offering (IPO) on 5 November 2024, with an issue size of INR 2,106.6 crore. The offering was structured entirely as an Offer for Sale (OFS). The IPO received a favourable response from investors, achieving an overall subscription of 3.2 times.
On its listing day, the stock debuted with a gain of 3.53% over the IPO price. Following the listing, Sagility India’s shares gained strong upward momentum, reaching an all-time high of INR 53.86, representing an approximate 80% increase from the IPO allotment price of INR 30 per share.
As of now, the stock is trading at INR 44.80, reflecting a correction of ~17% from its peak.
Conclusion
While headline risks around U.S. policy changes often spark investor concerns, the actual impact on Sagility appears negligible. Instead, the company may stand to gain market share as healthcare payers look to optimise costs through digital and operational outsourcing.
With limited Medicaid exposure, strong financials, and a compelling valuation, IIFL’s BUY recommendation underscores Sagility as a resilient long-term healthcare outsourcing play, one poised for double-digit upside, despite the political noise.
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