Shares of Coforge Ltd. will be in focus heading into Monday's trade after the company announced the acquisition of US-based Encora, in a deal worth $2.35 billion.
Brokerages are viewing the Encora deal quite favourably heading into trade, with some calling it the most significant step for the company, as it strengthens its presence in AI-led digital engineering.
The acquisition values Encora at an enterprise value of $2.35 billion, including $1.89 billion of equity to be issued via preferential shares at Rs 1,815 per share (about 21% dilution) and $550 million of debt, which Coforge plans to retire through bridge financing or a QIP.
Here's how brokerages are viewing Coforge after its landmark deal with Encora.
Dolat Capital on Coforge
Dolat Capital maintains an Accumulate rating with a target price of Rs 1,990.
The Encora acquisition is expected to scale Coforge into a US$2.5 billion IT services platform.
The deal strengthens Coforge's AI-led engineering, cloud, and data capabilities.
Encora brings a strong presence in the HiTech and Healthcare verticals.
The acquisition significantly enhances Coforge's US West/Midwest footprint and LATAM nearshore delivery.
The number of US$10 million-plus clients is expected to rise to 45 post-acquisition.
The deal is expected to be EPS accretive over the medium term.
FY27 and FY28 earnings have been tweaked down due to dilution and interest costs.
The brokerage views the acquisition as strategically accretive despite near-term challenges.
DAM Capital on Coforge
DAM Capital maintains a Buy rating with a target price of Rs 1,880.
Coforge has acquired Encora for an enterprise value of US$2.35 billion in an all-stock deal.
The acquisition enhances AI-led engineering, cloud, and data capabilities.
The transaction implies equity dilution of around 21% at a swap price of Rs 1,815.
FY27–28 EPS is likely to be diluted by 5–6% post-integration.
Near-term risks include integration challenges, dilution, and funding structure.
Valuation comfort is emerging at 26.7x FY28E earnings.
Kotak Securities on Coforge
Kotak Securities maintains a Buy rating with a target price of Rs 2,250.
The brokerage describes the Encora deal as a “big bang” acquisition.
While the asset quality is strong, the acquisition price is viewed as expensive.
There are strong revenue synergies and some cost synergies available.
Execution risks remain high given the current demand environment.
Sharp and immediate execution will be critical to achieving EPS accretion in FY27.
Morgan Stanley on Coforge
Morgan Stanley maintains an Overweight rating with a target price of Rs 2,030.
The brokerage views the Encora acquisition as a significant step compared to Coforge's recent M&A activity.
It is seen as a selective, niche, and bold move to expand the addressable market.
The deal is expected to help establish more sustainable growth drivers.
Near-term earnings are likely to be diluted on an as-is basis.
Any material weakness in the stock could offer a long-term accumulation opportunity.
Jefferies on Coforge
Jefferies maintains a Buy rating with a target price of Rs 2,180.
The Encora acquisition is expected to bolster Coforge's strategic positioning.
The stock's recent 10% correction reflects concerns around EPS dilution.
Jefferies believes successful execution could lead to a valuation re-rating.
EPS accretion remains contingent on revenue and cost synergies being realised.
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