Coforge to Acquire Encora for $2.35B in All-Stock Deal

Coforge Announces Landmark Acquisition of Encora

Indian IT services firm Coforge has announced a definitive agreement to acquire Encora, a US-based AI and digital engineering firm, for an enterprise value of $1.35 billion. This all-stock transaction is one of the largest overseas acquisitions by a mid-tier Indian IT company and signals a significant strategic pivot towards AI-led engineering, data, and cloud services. The move is set to create a combined entity with projected annual revenues of approximately $1.5 billion, positioning Coforge as a major player in the high-growth digital transformation space.

Understanding the Deal Structure

The acquisition will be executed entirely through a share swap, with no cash consideration paid to Encora's selling shareholders. Coforge will issue approximately 93.8 million new equity shares at an issue price of ₹1,815.91 per share. This price represents an 8.5% premium to Coforge's closing share price on the day of the announcement. The equity value of the transaction is pegged at about $1.89 billion. Upon completion, Encora's current shareholders, including private equity giants Advent International and Warburg Pincus, will collectively hold about a 20-21% stake in the expanded share capital of Coforge. This all-stock structure indicates strong confidence from the sellers in the long-term growth prospects of the merged entity.

Fundraising for Debt Retirement

In conjunction with the acquisition, Coforge's board has approved a fundraising plan of up to $150 million. This amount, which represents the difference between the enterprise value and the equity value, is earmarked to retire Encora's existing term loan. The funds may be raised through a bridge loan or a Qualified Institutional Placement (QIP). However, the company has indicated that a QIP may not be necessary if alternative funding arrangements are finalized, providing flexibility in managing its capital structure post-transaction.

Strategic Vision: Building an AI Powerhouse

The acquisition is a defining moment for Coforge, aimed at establishing a scaled, AI-led engineering capability. Sudhir Singh, CEO and Executive Director of Coforge, stated that the new $1.5 billion firm will have a $1 billion core focused on AI-led engineering, data, and cloud services. This strategic move is designed to help clients build enterprise data cores and cloud foundations purpose-built for AI applications. Encora, an AI-native firm founded in Silicon Valley, brings deep expertise in software engineering, intelligent process design, and core modernization, along with its proprietary AI platform, AIVA™.

Financial Projections for the Combined Entity

The combined entity is projected to reach approximately $1.5 billion in revenue. By FY27, the company expects its AI-led engineering, data, and cloud services to contribute nearly $1 billion to this total. The breakdown of this digital core includes over $1.25 billion from AI-led product engineering, around $100 million from cloud services, and over $150 million from data engineering. Encora is projected to report revenue of $100 million for FY26 with an adjusted EBITDA margin of approximately 19%. The combined business is expected to operate at an EBIT margin of about 14% after the amortisation of intangibles, and the transaction is not expected to be dilutive to earnings per share.

Expanding Geographic and Industry Footprint

This acquisition significantly strengthens Coforge's presence in North America, its largest market. The company's North America business is projected to grow by about 50% to over $1.4 billion. Encora's strong footprint in the US West and Midwest, coupled with a near-shore delivery base of over 3,100 professionals in Latin America, provides a crucial geographic rebalancing. Furthermore, the deal will immediately scale Coforge's Hi-Tech and Healthcare industry verticals, with each expected to operate at an annualized revenue run-rate of over $170 million post-acquisition.

Enhancing Client Relationships and Scale

The deal also enhances Coforge's client portfolio. Encora brings 11 client relationships that each generate more than $10 million in annual revenue. This will increase the combined entity's total number of such large-scale accounts to 45. Coforge plans to leverage its experience from past successful acquisitions to cross-sell services and deepen engagement with these new clients, many of whom have an average relationship tenure of over a decade with Encora.

The Path Forward

The transaction is subject to customary closing conditions, including approvals from shareholders and regulatory bodies like the Reserve Bank of India and overseas antitrust authorities. Coforge anticipates securing shareholder approval within 30 days and aims to close the transaction within four to six months. The integration of Encora is a critical step for Coforge as it navigates a challenging global IT services market, positioning itself as a leader in the next wave of technology driven by artificial intelligence.