Coforge Acquires Encora for $2.35 Billion in All-Stock Deal

Coforge Announces Landmark Acquisition of Encora

Indian IT services firm Coforge announced on Friday its agreement to acquire US-based digital engineering firm Encora in an all-stock transaction. The deal carries an enterprise value of $1.35 billion (approximately Rs 21,140 crore), marking one of the most significant overseas acquisitions by a mid-tier Indian IT company. This strategic move signals Coforge's decisive shift towards high-growth areas like AI-led engineering, data analytics, and cloud services, positioning the combined entity as a formidable player in the global technology landscape.

The acquisition aims to create a technology services powerhouse with projected annual revenues of around $1.5 billion. For Coforge, this transaction is a pivotal moment, designed to build a substantial competitive advantage in the rapidly evolving digital transformation space, where demand for specialized AI and data expertise is surging while traditional outsourcing services face slower growth.

Understanding the Transaction Structure

The acquisition is structured as an all-stock deal, meaning no cash consideration will be paid to Encora's selling shareholders. Instead, Coforge will issue approximately 93.8 million new equity shares at an issue price of Rs 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 total equity value of the transaction is pegged at about $1.89 billion (around Rs 17,000 crore).

Upon completion, Encora's current shareholders, which include private equity giants Advent International and Warburg Pincus, will collectively hold a 20-21% stake in the expanded equity capital of Coforge. The remaining $150 million of the enterprise value will be used to retire Encora's existing term loan. To fund this debt repayment, Coforge's board has approved raising up to $150 million through a bridge facility or a Qualified Institutional Placement (QIP), although the company noted a QIP might not be necessary if other funding options are secured.

Building a $1 Billion Digital Services Core

The primary driver for this acquisition is the creation of a scaled, AI-focused digital engineering business. Encora, headquartered in Silicon Valley, is an AI-native firm with strong capabilities in software engineering, cloud, and data services. The company reported revenues of $116 million in FY25 and is projected to reach approximately $100 million in FY26, operating at a healthy adjusted EBITDA margin of around 19%.

Coforge projects that the combined entity's AI-led engineering, data, and cloud services will generate close to $1 billion in revenue by FY27. This portfolio will be diversified, with AI-led product engineering expected to become a $1.25 billion business, cloud services contributing around $100 million, and data engineering adding over $150 million. This strategic alignment is expected to make the combined firm a leader in enterprise-grade AI solutions.

Financial Outlook and Synergies

Despite the scale of the acquisition, Coforge has stated that the transaction is not expected to be dilutive to its earnings per share (EPS). This is supported by Encora's strong margin profile and anticipated synergies between the two companies. The combined entity is projected to operate at an EBIT margin of approximately 14% after accounting for the amortization of intangibles.

Coforge's own revenue for FY25 stood at about $1.4 billion. The integration of Encora will not only boost the top line but also enhance its capability to deliver higher-value digital engineering work. Encora's expertise in high-growth verticals such as software, healthcare, and fintech is seen as a key asset that will complement Coforge's existing strengths.

Geographic and Client Portfolio Expansion

The acquisition significantly rebalances Coforge's geographic footprint and strengthens its client base. Encora brings a strong presence in the US West and Midwest, along with a robust near-shore delivery model supported by over 3,100 professionals in Latin America. As a result, Coforge’s North America business is projected to expand by about 50%, reaching over $1.4 billion in annual revenue.

Furthermore, the deal enhances client scale. Encora will add 11 large client relationships that each generate more than $10 million in annual revenue, bringing the combined entity's total of such accounts to 45. Coforge plans to leverage its experience from past successful acquisitions, like that of Cigniti, to cross-sell services and deepen engagement with these new clients.

Governance and Regulatory Path Forward

As part of the agreement, Encora's investors will roll over their holdings into Coforge equity and will have the right to nominate two directors to Coforge's board. However, Coforge has clarified that there will be no change in control of the company.

The transaction is now subject to customary shareholder and regulatory approvals. This includes clearances from the Reserve Bank of India (RBI) and various overseas antitrust authorities. Coforge anticipates receiving shareholder approval within 30 days and aims to close the transaction within the next four to six months.

Market Analysis and Conclusion

This acquisition is a bold and transformative step for Coforge, catapulting it into a higher league within the IT services industry. By acquiring Encora, Coforge not only gains significant scale but also deepens its expertise in the most critical technology domains of the future: AI, data, and cloud. The all-stock nature of the deal reflects the confidence of Encora's investors in the long-term growth prospects of the combined firm. While the integration of a large entity presents challenges, Coforge's track record with previous acquisitions provides a strong foundation for success. The deal solidifies Coforge's position as a leading digital engineering powerhouse poised for accelerated growth.