Coforge's $2.35B Encora Deal Clears Major RBI Hurdle

Introduction

IT services company Coforge Ltd. has secured a crucial approval from the Reserve Bank of India (RBI) for an overseas direct investment (ODI) exceeding $1 billion. The company announced this significant development in a stock exchange filing on Monday, March 30, 2026. This clearance is a pivotal step toward finalizing its proposed $1.35 billion acquisition of Encora, a US-based AI solutions provider. The approval removes a major regulatory hurdle and moves Coforge closer to creating a technology services powerhouse with ambitious growth targets.

A Critical Regulatory Milestone

The RBI's approval for an ODI of this magnitude is essential for funding the large-scale international transaction. This clearance was one of the most anticipated regulatory steps in the acquisition process. It follows approvals already received from antitrust authorities in the United States and Australia, placing the deal in its final stages. Coforge stated that a few other regulatory approvals required in various jurisdictions are currently in their advanced stages of processing. The company is actively monitoring these processes and will provide updates as they are granted.

The Path to Acquisition

Coforge first announced its definitive agreement to acquire Encora from private equity firms Advent International and Warburg Pincus on December 26, 2025. The journey to completion has involved navigating a complex web of international regulations. The company received antitrust clearance under the Hart-Scott-Rodino (HSR) Act in the United States on January 28, 2026, followed by competition approval in Australia on February 28, 2026. The latest nod from India's central bank marks the most significant domestic clearance required for the deal to proceed, paving the way for the creation of a combined entity.

Understanding the Transaction Structure

The acquisition is structured with an enterprise value of $1.35 billion. Coforge plans to fund the equity portion, valued at approximately $1.89 billion, through the issue of preference shares at a price of Rs 1,815.91 each. This arrangement means Encora's existing shareholders will receive a stake of around 20% in the expanded share capital of Coforge. Additionally, Coforge will clear the debt owed by California-based Encora by raising up to $150 million. This will be financed either through a bridge loan or a Qualified Institutional Placement (QIP) of Coforge shares, ensuring a clean financial slate for the merged company.

Strategic Rationale: Building an AI-Led Powerhouse

The primary driver behind this acquisition is Coforge's ambition to establish itself as a global leader in AI-led digital engineering. Encora brings deep expertise in product engineering, cloud, data analytics, and AI, which complements Coforge's existing service portfolio. The combined entity aims to generate $1 billion in annual revenue by March 2027. This strategic move accelerates Coforge's shift toward higher-value services and creates a formidable competitor in the global IT landscape, particularly in the high-growth areas of AI and data engineering.

Projected Financial and Market Impact

The acquisition is expected to be financially beneficial for Coforge. In fiscal year 2025, Coforge reported revenues of $1.34 billion, while Encora recorded a turnover of $116 million, highlighting the scale of the combined business. The deal is projected to be earnings-per-share (EPS) accretive for Coforge in FY27. Furthermore, the transaction will immediately provide scale to Coforge's Hi-Tech and Healthcare verticals. Both are expected to operate at an annualized revenue run-rate of over $170 million each post-acquisition, transforming them into significant business lines for the company.

Expanding Global and US Footprint

Geographically, the acquisition is transformational. It provides Coforge with a scaled near-shore delivery capability in Latin America, adding a talent base of over 3,100 engineers and AI specialists serving US clients. This move also significantly expands Coforge's presence in the Western and Midwestern United States, regions that previously contributed a smaller portion of its US revenues. Post-acquisition, Coforge's North America business is projected to grow substantially, solidifying its position in its largest market.

Deal Significance in the Indian IT Sector

This transaction is a landmark deal for the Indian technology industry. It represents the largest takeover by an Indian IT firm in the engineering research and development (ER&D) space and one of the largest acquisitions ever by an Indian IT services company. It signals a clear trend of Indian firms making aggressive, large-scale global acquisitions to build specialized capabilities and achieve global scale, moving beyond purely organic growth strategies to compete more effectively on the world stage.

What Lies Ahead

With the RBI's approval secured, Coforge is now in the final stages of closing the transaction. The deal remains subject to customary closing conditions and final shareholder approvals. The company anticipates the acquisition will be formally completed within the next few months, in line with the initial four-to-six-month timeline announced in December 2025. The successful integration of Encora will be the next critical phase, determining Coforge's ability to realize the powerful synergies promised by this landmark deal and cement its position as a leader in AI-driven digital transformation.