Tech Explained: Sagility Defies Tech Slump with Niche Healthcare AI Edge in Simple Terms

Institutional Surge Defies Sectoral Gloom

Sagility Limited has emerged as a distinct outlier within the struggling Information Technology sector, capturing substantial interest from both domestic and foreign institutional investors. This robust inflow is particularly noteworthy given the broader trend of FIIs divesting from technology stocks throughout 2025. In the October-December quarter alone, Sagility saw FIIs increase their stake by 4.7 percentage points, while DIIs expanded theirs by 6.5 percentage points, collectively raising their holdings by over 11 percentage points within a single quarter. This significant accumulation signals a strong conviction in Sagility’s unique operational trajectory, irrespective of prevailing sector-wide headwinds.

Financials Mirroring Strategic Growth

This institutional confidence is underpinned by Sagility’s robust financial performance. For the third quarter of fiscal year 2026, the company announced a 36% year-on-year revenue increase, reaching ₹1,971 crore from ₹1,453 crore in the prior year period. This top-line expansion translated directly into profitability, with net profits climbing 35% year-on-year to ₹268 crore from ₹217 crore. This performance is largely fueled by the escalating demand for healthcare outsourcing services in the United States, a market Sagility strategically serves by bridging the gap between payers and providers. The company also reported a healthy 20% year-on-year organic revenue growth, driven by both existing client expansion and the acquisition of new business. Sagility onboarded three new clients in the quarter, contributing to a total of 12 new client acquisitions in FY26 up to December.

Navigating the US Healthcare Landscape

Sagility operates at the critical intersection of healthcare and technology, offering specialized business process management (BPM) and technology-enabled services tailored for US healthcare insurers (payers) and providers. Its service portfolio includes claims management, payment audit services, provider onboarding assistance for insurers, and comprehensive revenue cycle management and patient engagement services for healthcare providers. The company is benefiting from a growing US healthcare market, where spending increased by an estimated 7.2% in 2024. Furthermore, the US healthcare insurance industry is undergoing a significant shift, with payers prioritizing margin repair and operational efficiency over pure membership growth. This strategic pivot towards digital and AI-led operating models, coupled with an increased emphasis on outsourcing to improve margins without compromising plan benefits, directly favors Sagility’s business model.

AI Integration and Operational Enhancements

Bolstering its appeal, Sagility is actively integrating Artificial Intelligence (AI) into its operations, deploying 32 distinct AI-driven use cases across 10 clients to enhance efficiency and reduce costs. The recent acquisition of BroadPath is expected to further unlock opportunities, particularly in specialized payer services, with management anticipating continued growth over the next two to three years.

The Valuation Gap

Sagility’s valuation metrics present an interesting dichotomy. The company trades at a Price-to-Earnings (P/E) ratio of 26.3x, which aligns with the industry median. However, its Price Earnings to Growth (PEG) ratio stands at a notably low 0.09, significantly below the industry median of 0.59. This suggests that, adjusted for its growth rate, the stock may be undervalued compared to its peers. Yet, its current return on equity (ROE) stands at 7.38% and return on capital employed (ROCE) at 9.58%, both trailing their respective industry medians of 12.68% and 16.12%. This disparity highlights potential for operational efficiency improvements.

Competitor Benchmarking and Sector Context

Compared to global peers like EXL Service (NASDAQ: EXLS) and WNS Global Services (NYSE: WNS), Sagility’s P/E ratio is competitive, while its PEG ratio indicates superior growth-adjusted value. The US healthcare outsourcing market is projected for robust growth, estimated at a 10-12% CAGR, driven by technology adoption, regulatory demands, and the pursuit of operational excellence by payers and providers. Over the past year, Sagility’s stock has appreciated approximately 30%, outperforming the broader Nifty IT index which experienced flatter performance, indicating a sector-agnostic appeal driven by company-specific fundamentals.

The Bear Case: Margin and Efficiency Concerns

Despite impressive revenue and profit growth, Sagility faces scrutiny regarding its return ratios. Its ROE and ROCE are considerably lower than industry medians, suggesting that current profitability is not as efficient as some competitors. While management expects these ratios to improve as the business matures and post-acquisition synergies materialize, there is a risk that operational efficiencies may lag behind growth. The company’s reliance on the US healthcare sector, while a strength, also exposes it to potential regulatory shifts or changes in payer spending patterns. Furthermore, competitors like EXL Service and WNS Global Services have established broader service portfolios and, in some cases, stronger global footprints, potentially offering greater resilience. The lower PEG ratio could also signal market skepticism regarding the sustainability of its high growth rate relative to its current profitability efficiency.

Future Outlook

Analysts generally hold a cautiously optimistic view on Sagility, with recent reports from late 2025 indicating ‘Buy’ or ‘Hold’ recommendations and price targets suggesting potential upside of 10-15%. The focus remains on the successful integration of the BroadPath acquisition and the continued execution of its strategy to capitalize on the US healthcare industry’s shift towards digital transformation and outsourcing. Management guidance suggests continued expansion of AI use cases and benefits from the favorable OEP season, which contributed significantly to FY26 revenue. The company is expected to leverage its niche positioning to maintain its growth trajectory, provided it can improve its operational efficiency and return metrics.