Coforge clinches $2.39-billion Encora deal in Indian IT’s biggest acquisition

Bengaluru: Coforge Ltd on Friday announced the largest acquisition by an Indian IT services company, agreeing to acquire US data analytics and digital engineering company Encora for $2.39 billion; According to analysts, this deal is a very high price but could significantly expand the company’s growth runway.

The transaction surpasses the previous record set in 2018, when HCL Technologies acquired seven software products from IBM for $1.8 billion.

California-based Encora, which generated $516 million in revenue last year, is owned by private equity giants Advent International and Warburg Pincus. The deal will add approximately 9,200 employees to Coforge’s workforce, which ended last year with approximately 34,000 employees.

In the application made to the stock exchanges, Noida based Coforge said it would finance the acquisition largely through equity and issue $1.89 billion worth of shares to Encora shareholders Advent, Warburg Pincus and several minority shareholders. According to the agreement, Coforge will issue 93.8 million shares ₹1,815.91 each.

It will then raise $550 million through a qualified institutional placement (QIP) to pay off Encora’s debt.

Together, PE investors will own 20% of Coforge, which closed this week with a market value of $6.2 billion. They will also reserve the right to appoint two directors to the board. Coforge, which has no backers and is wholly owned by public investors.

“This is a defining moment for the organization,” Coforge CEO Sudhir Singh told investors and shareholders Friday evening. “This acquisition will ensure that the next eight years will be just as exciting as the last eight, if not more exciting.”

“When we add that asset and look at what the firm becomes, we become a $2.5 billion technology services company, $2 billion of which comes from AI-led engineering data and cloud services alone,” Singh said.

expensive purchase

Encora’s adjusted EBITDA of 19% translates into approximately $114 million, according to the filing. Analysts call it an expensive buy at more than 21 times EBITDA, or earnings before interest, taxes, depreciation and amortization.

“Actually, paying over 21 times Ebitda is a very expensive acquisition, but the company is using its shares to finance it, so investors shouldn’t complain,” said one executive on condition of anonymity. “But the possibility of a QIP could explain why the stock is falling.”

The company’s shares fell 3.67 percent on the National Stock Exchange (NSE). ₹It fell to 1,674 points and Nifty IT fell by 1.03% to 38,572.3 points.

Typically, minority investors experience some dilution when a company raises capital by issuing shares through QIP.

“QIP is one of many financing options being considered solely to settle debt. If we decide to do a QIP, it will only occur around closing in approximately six months. We will also explore other financing options outside of QIP, so there is a possibility that a QIP may never be triggered,” Coforge said in a statement.

Ashutosh Sharma, Forrester’s vice president and research director, also said the acquisition came at a relatively high price. “Coforge is paying a price that is almost four times (Encora’s) annual revenue,” he said. “This clearly offers Encora’s current owners a very good exit, otherwise they might not have agreed to this deal.”

Sharma added that success is as follows: The acquisition depends on how well Coforge can integrate Encora’s capabilities into its broader organization and “how well it can exploit the synergies between the two organizations.”

Another expert said Encora’s engineering talent will fuel Coforge’s growth, but execution will be key.

“Encora brings deep engineering capability and strong customer relationships that complement Coforge’s vertical strengths, particularly in BFSI, travel and insurance,” said Phil Fersht, CEO of HFS Research. “Together, this creates a more reliable end-to-end transformation partner.”

Fersht added: “The opportunity is significant, but execution will be critical. Coforge must quickly integrate capabilities, delivery models, and go-to-market moves without disrupting Encora’s engineering culture. Success will depend on how effectively leadership translates combined scale into repeatable, AI-powered delivery results.”

In acquisition mode

Coforge, which closed last year with $1.47 billion in revenue and became the country’s seventh largest IT services company, has been planning acquisitions for a while. Spent in December 2024 ₹2,000 crore to acquire Cigniti Technologies, a Hyderabad-based engineering services firm.

Coforge’s other major competitors also explored acquisitions. Tata Consultancy Services Ltd (TCS), the country’s largest IT services company, spent $774 million this year to acquire two firms, even as it agreed to spend $6.5 billion over six years to build a 1GW data center business.

The Encora acquisition feels like a major coup for Coforge CEO Singh, who has taken the company ahead of its peers over the last few years. Growing Coforge revenues 31% It was India’s fastest growing IT company last year and this acquisition is expected to further boost the company’s growth.

Singh said one of the key reasons for acquiring the company was to leverage its customer base and grow its business.

“In our conversations with leaders of Encora’s top customers, it’s very clear that they are losing a lot of business or moving away from business because they don’t have scale when it comes to BPS (business process services), when it comes to AI-led QE (quality engineering), in some cases when it comes to enterprise platforms, especially cloud-based ERP (enterprise resource platforms), and in some cases when it comes to data and cloud-based operations,” Singh said.