COFORGE

Bets Big on AI-Led Growth with Encora Buyouy

Tier-II IT services firm

has announced India’s largest-ever IT services acquisition, buying US-based Encora for $2.35 billion in an all-stock deal. The transaction brings private equity giants Advent International and Warburg Pincus onto Coforge’s board, potentially strengthening fundraising prospects. While analysts highlight strategic benefits in North America and emerging verticals, concerns around valuation and EPS dilution have weighed on investor sentiment, with the stock falling 10% in recent days. - Coforge will issue shares worth $1.89 billion at ₹1,815 apiece to Encora shareholders. - Plans to raise $550 million via QIP or bridge loan to retire Encora’s debt. - Advent and Warburg Pincus will join Coforge’s board post-deal. - Encora plugs service gaps in North America and strengthens presence in healthcare and hi-tech verticals. - The acquisition is capability and leadership-led, focusing on specialized expertise rather than pure client expansion. - Expected to close in 4–6 months. - Encora FY25 revenue: $514 million, projected to reach $600 million in FY26. - Adjusted EBITDA margin: 19%, higher than Coforge’s profile. - Combined entity margin expected at 14% EBIT, with potential upside from Encora’s efficiency. - Jefferies estimates 28% revenue uplift by FY27, with EPS accretion from FY27 onwards. - Integration and senior talent retention are critical, given Encora’s leadership-driven model. - Coforge’s past acquisitions (SLK Global, Cigniti) were integrated smoothly, but Encora’s scale and structure are larger and more complex. - Encora acquired at 3.9x EV/sales and 21x EV/EBITDA, in line with Coforge’s multiples but seen as expensive given Encora’s 7–10% organic growth versus Coforge’s high-teen CAGR. - Stock fell 10% in three days, reflecting EPS dilution concerns. - Jefferies warns that if growth or margins disappoint, FY28 EPS could be cut by 7%.