Coforge has announced its acquisition of US engineering services firm Encora in a $2.35 billion all-stock deal, making it one of the largest transactions in India’s IT services sector. The acquisition will involve a share swap, with Coforge issuing 93.8 million equity shares priced at Rs 1,815.91 each, valuing the non-cash transaction at around Rs 17,032 crore.
This strategic move will result in Encora’s shareholders owning approximately 21.25% of Coforge’s expanded equity capital post the acquisition. Following a board meeting, Coforge stated that the merger will establish a technology services company with a combined revenue base of about $2.5 billion.
The merged entity will focus on AI-led engineering, cloud, and data services, aiming to generate nearly $2 billion in revenue by FY27. Coforge anticipates that AI-led product engineering could contribute over $1.25 billion in revenue, with cloud services adding around $500 million and data engineering over $250 million. The company projects an EBIT margin of about 14% post-amortisation of intangibles.
Encora, founded in Silicon Valley, reported consolidated revenue of $516 million in FY25 and is projected to reach $600 million in FY26, operating with an adjusted EBITDA margin of 19%. The acquisition will be primarily funded through equity amounting to $1.89 billion, with the remainder potentially sourced from a bridge loan or a qualified institutional placement to settle Encora’s existing term loan.
Coforge’s board has greenlit raising up to $550 million through a QIP or other permitted channels, with the possibility of not requiring a QIP if alternative funding avenues are finalized. The deal is expected to bolster Coforge’s presence across key verticals, particularly enhancing its HiTech and Healthcare segments, which are expected to reach a run-rate of about $170 million each post-acquisition.
Encora’s AI-led healthcare solutions across pharma, medtech, and healthtech, along with its 11 large clients generating over $10 million in annual revenue each, will increase the combined total of such large accounts to 45. The acquisition will also expand Coforge’s delivery footprint, especially in nearshore locations, adding over 3,100 professionals across Latin America and reinforcing its presence in the US West and Midwest. Consequently, Coforge’s North America business is projected to grow by approximately 50% to over $1.4 billion.
