Cognizant shifts to asset-light model; to sell Hyderabad, Bengaluru office

Cognizant Technologies is set to sell its office assets in Hyderabad and Bengaluru, marking a strategic move to become asset-light and capitalise on non-core real estate, according to a report by The Economic Times (ET). The decision is part of the company’s broader cost-cutting restructuring plan aimed at saving $400 million over two years, which includes vacating 11 million square feet of office space.

The software services firm intends to divest its 10-acre campus in Gachibowli, Hyderabad, and a 14-acre campus in Siruseri, Chennai. This real estate portfolio reassessment follows Cognizant’s efforts to optimise its workspace globally, simplify business operations, and re-align the workforce of hybrid work. The company is achieving this by redistributing real estate and expanding to tier-2 cities.

In addition to selling assets, Cognizant has renegotiated leases and downsized assets in some locations, the ET report adds. The company has already vacated 1.15 million square feet of office space in Chennai, including 500,000 square feet in the DLF Cybercity SEZ and 650,000 square feet in the Ramanujan IT SEZ. It is also renegotiating a lease in Hyderabad from 1.5 million sq ft to 1 million sq ft for an upcoming property.

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As earlier reported by Business Standard, despite the tech sector’s share of Indian office space, it still holds a dominant position, with demand shifting to global capability centres, financial services, and engineering companies expanding their portfolios. With hybrid working models becoming the norm, corporations look for more flexible office spaces.  According to the 2023 Real Estate Overview and Outlook released by CBRE Group, the tech sector makes up around 35 per cent of the demand and even crosses the 40 per cent mark in cities like Bangalore and Hyderabad. Sectors such as banking, financial services and insurance (BSFI), and engineering & manufacturing have been thriving, driven by government infrastructure spending.

At the end of the July-September quarter, Cognizant reported its net profit has declined 16.5 per cent to $525 million year-on-year from $629 million. The revenue for the fourth quarter is expected to be in the range of $4.69-$4.82 billion, a decline of four per cent to 1.2 per cent in constant currency. This is due to furloughs and lower number of working days in the December quarter, as earlier reported by Business Standard.