Coforge to Acquire Encora, Forging a $2.5 Billion AI-Led Tech Giant

Coforge Announces Major Acquisition of Encora

Coforge Ltd, a global digital services and solutions provider, has signed a definitive agreement to acquire Encora, a Silicon Valley-based firm specializing in AI-native product engineering. This strategic move is set to create a technology services powerhouse with a combined revenue of approximately $1.5 billion, significantly scaling Coforge's capabilities in high-demand areas like artificial intelligence, data, and cloud services. The transaction, which is subject to customary regulatory approvals, marks one of the largest deals in the digital engineering space and repositions Coforge as a formidable player in the global IT landscape.

Details of the Transaction

The acquisition will be executed through a share swap arrangement. Coforge's board has approved the issuance of 9,379,508 fully paid-up equity shares to Encora's investors at an issue price of ₹1,815.91 per share. This aggregates to a total consideration of ₹17,032.60 crore. To facilitate this large-scale transaction, the board has also approved an increase in the company's authorized share capital from ₹77 crore to ₹102 crore. Furthermore, the board has greenlit an increase in limits under the Companies Act, 2013, to accommodate the share acquisition and to provide guarantees for a potential bridge loan of up to $150 million for an overseas subsidiary if required.

Strategic Rationale and Synergies

The primary driver for this acquisition is to establish a scaled and specialized AI-led engineering capability. Coforge aims to leverage Encora's deep expertise in AI, data, and cloud to help clients build enterprise data cores purpose-built for artificial intelligence. Management has highlighted that the combined entity will have a $1 billion enterprise core focused on these high-growth services, with the AI-led product engineering business alone projected to be a $1.25 billion-plus segment.

This deal also provides significant geographical and vertical expansion. It establishes a scaled near-shore delivery capability for Coforge in Latin America, tapping into Encora's talent base of over 3,100 subject matter experts servicing US clients. Additionally, the acquisition will immediately bring Coforge's Hi-Tech and Healthcare industry verticals to a material scale, with each expected to operate at an annualized revenue run rate of over $170 million.

Financial Implications and Projections

Coforge's management expects the combined business to operate at an EBIT margin of 14%. While some analysts have noted the deal could be earnings dilutive in the short term, the company projects that the acquisition will become EPS accretive by the fiscal year 2027. The move is part of a long-term strategy to accelerate growth and move the company into a higher orbit, building on its track record of successful integrations and industry-leading performance over the past eight years.

Market Reaction and Stock Performance

Following the announcement, Coforge's shares experienced volatility. On December 29, 2025, the stock was trading around ₹1,686, having slipped from previous highs. The stock's 52-week range stands between ₹1,194.01 and ₹2,005.36. The initial decline reflects typical market apprehension towards large-scale acquisitions and potential near-term earnings dilution. The company's market capitalization stood at approximately ₹55,932 crore. Despite the short-term dip, the deal's long-term strategic value is a key focus for investors and analysts.

Analyst Commentary and Outlook

Brokerage views on Coforge remain mixed but generally positive on the long-term outlook. Motilal Oswal maintained a bullish 'Buy' rating with a target price of ₹3,000, citing strong deal wins and a robust order pipeline. CLSA also holds a positive view, with a price target of ₹2,346, implying significant upside. Morgan Stanley has maintained an 'Overweight' rating, highlighting the company's focus on large deals.

However, some brokerages like ICICI Direct and ICICI Securities have recommended a 'Hold' rating with target prices of ₹1,880 and ₹1,760, respectively, suggesting a more cautious stance as the integration process unfolds. Overall, a consensus of 32 analysts suggests a 'Buy' recommendation, indicating confidence in the company's strategic direction and execution capabilities.

Coforge's Growth Trajectory

The acquisition comes at a time when Coforge has been demonstrating strong financial performance. For the second quarter of FY26, the company reported an 8% growth in revenue in constant currency terms and a consolidated net profit of ₹375.8 crore, an 18.4% sequential increase. The company's executable order book for the next 12 months stands at $1.63 billion, up 26.7% year-on-year, providing strong revenue visibility. This solid foundation is expected to support the successful integration of Encora and help the combined entity achieve its ambitious growth targets.

Conclusion

Coforge's acquisition of Encora is a transformative step that significantly enhances its scale, capabilities, and market position. By creating a $1.5 billion entity with a deep focus on AI-led engineering, Coforge is positioning itself to capture a larger share of the digital transformation market. While the market's initial reaction has been cautious, the strategic benefits—including expanded service offerings, a stronger presence in key markets, and a clear path to accelerated growth—lay a strong foundation for long-term value creation. The successful integration of Encora will be critical in realizing the full potential of this landmark deal.