Coforge Acquires Encora for $2.35B in Landmark AI Deal

Coforge Announces Transformative Acquisition

Coforge Ltd., a prominent Indian IT services company, announced on Friday its definitive agreement to acquire Encora Inc., a US-based digital engineering firm. The all-stock transaction is valued at an enterprise value of $1.35 billion (approximately ₹21,140 crore), marking one of the most significant overseas acquisitions by a mid-tier Indian IT firm. This strategic move is designed to pivot Coforge into a leading position in the high-growth sectors of AI-led engineering, data, and cloud services.

Understanding the Transaction Structure

The deal pegs Encora's equity value at approximately $1.89 billion (around ₹17,000 crore). The acquisition will be executed entirely through a share swap, with no cash consideration paid to Encora's selling shareholders, which include private equity firms Advent International and Warburg Pincus. Instead, Coforge will issue about 93.8 million equity shares at a price of ₹1,815.91 per share. This issue price represents an 8.5% premium to Coforge's closing share price on the day of the announcement. Upon completion, Encora's former shareholders will collectively own between 20% and 21% of Coforge's expanded equity capital. The remaining $150 million of the enterprise value will be used to retire Encora's existing term loan. Coforge's board has approved raising this amount through a bridge facility or a Qualified Institutional Placement (QIP), if necessary.

Building a $1.5 Billion Technology Powerhouse

The acquisition is set to create a combined entity with projected annual revenues of approximately $1.5 billion. This scale positions Coforge to compete more effectively in the global market. Encora, headquartered in the US with significant delivery centers in Latin America, reported a consolidated revenue of $116 million in FY25 and is projected to reach about $100 million in FY26, operating at a healthy adjusted EBITDA margin of around 19%. Coforge stated that the acquisition is not expected to be dilutive to its earnings per share, supported by Encora's strong margin profile and anticipated synergies. The combined business is expected to operate at an EBIT margin of about 14% after accounting for the amortization of intangibles.

A Strategic Push into AI and Digital Engineering

Coforge has framed this deal as a fundamental step-change in its capabilities, moving towards higher-value digital engineering services as demand for traditional IT outsourcing slows. The company aims to build a formidable enterprise core focused on next-generation technologies. By FY27, the combined entity projects that AI-led engineering, data, and cloud services will contribute nearly $1 billion in revenue. This includes an ambitious target of over $1.25 billion from AI-led product engineering, approximately $100 million from cloud services, and over $150 million from data engineering.

Geographic and Client Portfolio Expansion

The acquisition significantly rebalances Coforge's geographic and industry mix. Coforge's North America business is projected to expand by about 50% to over $1.4 billion, bolstered by Encora's strong presence in the US West and Midwest. Furthermore, Encora brings a robust near-shore delivery capability with more than 3,100 professionals across Latin America, offering clients greater flexibility and proximity. The deal also strengthens Coforge's client base. The combined firm will have 45 client relationships generating over $10 million in annual revenue each, with Encora contributing 11 of these accounts. This provides substantial opportunities for cross-selling and deeper client engagement, a strategy Coforge has successfully employed in past acquisitions.

Governance, Approvals, and Timeline

While Encora's investors will roll over their holdings into Coforge equity, the company has clarified that there will be no change in control. The investors will have the right to nominate two directors to Coforge's board, reflecting their significant stake and confidence in the merged entity's future. The transaction is subject to customary closing conditions, including shareholder and regulatory approvals. Key approvals are required from the Reserve Bank of India and overseas antitrust authorities. Coforge anticipates securing shareholder approval within 30 days and expects the transaction to close within four to six months.

Conclusion: A Defining Moment for Coforge

This acquisition represents a defining moment for Coforge, fundamentally reshaping its service portfolio and market position. By integrating Encora's AI-native capabilities and strong engineering talent, Coforge is not just scaling its operations but also building a specialized moat in the most critical areas of enterprise technology. The all-stock nature of the deal underscores a shared belief in the long-term value creation potential of the combined firm, positioning it to capture significant growth from the global enterprise shift towards AI-driven transformation.