Coforge Shares In Focus On Mega $2.35 Billion Encora Acquisition Plan

Coforge Ltd. shares are set to be in focus on Monday after the mid-tier IT services company announced its largest-ever acquisition — the purchase of US-based artificial intelligence and digital engineering firm Encora for an enterprise value of $2.35 billion, or around Rs 21,138 crore.

The deal will be funded entirely through a combination of a share swap and an equity raise, marking a bold strategic bet by Coforge to reposition itself as an AI-led technology services player rather than a traditional outsourcing firm.

Under the terms of the transaction, Coforge will issue equity shares worth $1.89 billion (around Rs 17,032 crore) to Encora’s shareholders through a preferential allotment. The shares will be issued at Rs 1,815 apiece, representing a premium of 8.5% to Coforge’s previous closing price.

As a result, Encora’s shareholders — including private equity majors Advent International and Warburg Pincus — will collectively hold about 20% of Coforge’s expanded equity base. Notably, the sellers will not receive any cash consideration, effectively making this a pure all-stock deal.

To clean up Encora’s balance sheet, Coforge also plans to raise up to $550 million (around Rs 5,000 crore) through a Qualified Institutional Placement (QIP) or bridge loan. The proceeds will be used to retire an existing term loan at Encora.

The transaction is expected to close within four to six months, subject to shareholder and regulatory approvals, including clearances from the Reserve Bank of India and US authorities.

At $2.35 billion, the Coforge–Encora transaction ranks among the largest acquisitions ever by an Indian IT services company, and is significantly bigger than any of Coforge’s previous deals.

More importantly, it signals a sharp strategic pivot. Post-acquisition, the combined entity will be positioned as a roughly $2.5 billion AI-led technology services player, accelerating Coforge’s shift away from legacy IT services towards AI-native engineering, digital product development, and cloud-first solutions.

The deal also meaningfully expands Coforge’s footprint in the US West Coast and Mid-West, strengthening its near-shore delivery capabilities — an area where it has historically lagged peers that are heavily offshore-centric.

In a sector still dominated by traditional outsourcing-heavy models, the Encora acquisition helps Coforge differentiate itself as an AI-enabled services company at a time when clients are increasingly demanding outcome-driven, platform-led solutions.

According to Coforge management, with Encora’s current margin profile and the anticipated synergies in the business, the combined business is expected to operate at an EBIT margin of 14% post-amortisation of intangibles that will be created as part of the purchase price allocation for this acquisition.

"Despite the primary infusion, the deal is not expected to be EPS dilutive on a consolidated basis because of the strong margin profile of Encora and expected synergies from the two businesses i.e. Coforge and Encora coming together," the statement said.

The new entity will set the benchmark for making the promise of AI real for enterprises. "In turn, this AI-infused core led growth, is likely to move Coforge’s already exceptional growth numbers to the next higher orbit," the statement said.

The AI-led engineering, data and cloud services alone are likely to deliver $2 billion revenue in FY27, as per company estimates. Coforge's North America business is expected to jump by 50% to $1.4 billion post-acquisition.

Encora will add 11 tenured client relationships of more than $10 million each with its top 10 client relationship tenures averaging more than 10 years.