Coforge Acquires Encora for $2.35B to Boost AI Capabilities

Coforge Announces Landmark Acquisition of Encora

IT services major Coforge Ltd has announced a definitive agreement to acquire Encora, a U.S.-based artificial intelligence firm, in a landmark deal valued at $1.35 billion. This strategic acquisition is set to significantly enhance Coforge's capabilities in AI-led digital engineering, cloud services, and data solutions, positioning the combined entity as a major player in the global tech services landscape. The move aims to accelerate Coforge's growth and expand its footprint across North and South America.

Following the announcement, Coforge's stock experienced volatility. While it initially opened lower, it regained momentum during intraday trading. The deal, one of the largest in the digital engineering space, is expected to propel Coforge into the elite $1.5 billion revenue club, with a strong focus on high-demand technology sectors.

Details of the Transaction

The acquisition is structured primarily as an all-stock transaction. Coforge will acquire Encora from its current shareholders, including private equity firms Advent International and Warburg Pincus. The deal's enterprise value of $1.35 billion includes an equity component of approximately $1.89 billion, which will be funded through a preferential allotment of Coforge shares at a price of ₹1,815 per share. Upon completion, Encora's shareholders will hold about a 20% stake in the expanded share capital of Coforge.

Additionally, the transaction involves retiring Encora's existing debt of around $150 million. Coforge plans to fund this through a bridge loan or a Qualified Institutional Placement (QIP). The all-stock nature of the equity portion indicates that Encora's investors are confident in the long-term growth potential of the merged entity.

Strategic Rationale and Market Positioning

The acquisition is a pivotal moment for Coforge, aimed at creating what CEO Sudhir Singh calls a "scaled AI-led engineering capability moat." The combined firm is projected to generate approximately $1 billion in annual revenue by March 2027 from AI-led engineering, data, and cloud services alone. Encora, an AI-native firm, is expected to report revenue of $100 million for FY26 with an adjusted EBITDA margin of around 19%.

This deal significantly strengthens Coforge's presence in key verticals. The Hi-Tech and Healthcare sectors are expected to reach a material scale, each operating at an annualized revenue run rate of over $170 million post-acquisition. Furthermore, the acquisition expands Coforge's delivery capabilities with a scaled nearshore presence in Latin America and a larger footprint in the western and midwestern United States. According to tech advisory specialist Pareekh Jain, this merger could help Coforge surpass competitors like Persistent Systems, Mphasis, and Hexaware to become India's seventh-largest IT firm.

Brokerage Views on the Deal

Brokerages have largely viewed the acquisition favorably, though with some caveats regarding execution and valuation. Most analysts see the deal as strategically sound, bolstering Coforge's long-term growth prospects.

Analysts agree that while the acquisition is strategically significant, the key to unlocking value lies in successful integration. Leadership retention, margin management, and amortization of costs will be critical areas for investors to monitor.

Financial Performance and Stock Metrics

Coforge's stock has faced selling pressure recently, declining over 9% in the past week and over 11% in the last month. Over the past year, the stock has delivered a return of -11.47%. However, its long-term performance remains strong, with a 5-year CAGR of 25.48%. The acquisition is expected to be EPS accretive in FY27, though some brokerages have slightly lowered FY27-28 earnings estimates due to the equity dilution and interest costs associated with the deal.

Coforge Key Financials (as of Dec 26, 2025)

Conclusion and Future Outlook

Coforge's acquisition of Encora is a transformative step that repositions the company as a formidable force in AI-driven engineering. The deal provides scale, expands capabilities, and deepens its presence in key markets and verticals. While the market's initial reaction has been mixed, reflecting concerns about execution risk and near-term financial impact, the long-term strategic benefits appear compelling. The successful integration of Encora will be the primary determinant of whether this bold move translates into sustained value creation for shareholders. Investors will be closely watching the company's ability to realize the projected revenue and cost synergies in the coming years.