Coforge sweetens India’s largest IT deal after shareholder pushback

Late Tuesday night, Coforge notified exchanges that 31% of shareholders opposed the decision granting Advent special rights. Ultimately, upon completion of the Encora deal, Advent will own 20% of Coforge.

This particular resolution was rejected for falling short of the required three-quarters approval.

About 14 hours later, on Wednesday afternoon, Coforge notified the exchanges that it was revoking those privileges as it again sought shareholder votes on the decision from January 29 to February 27.

“The exclusive right to appoint such Investor Directors to committees of the Company’s Board of Directors has been eliminated,” Coforge said in a Jan. 28 stock exchange filing.

The controversial issue that sparked the investor revolt was Advent’s ability to appoint members to Coforge’s oversight committees, including audit, nominating and compensation panels. This is because the audit committee oversees financial reporting, among other things, and the nomination and remuneration panel oversees the appointment and dismissal, as well as remuneration, of key management personnel, including the chief executive.

The rare shareholder revolt in the country’s information technology services sector followed Coforge’s Dec. 26 announcement that it would acquire Encora from Advent and Warburg Pincus.

As part of this transaction, Coforge agreed to issue $1.89 billion worth of shares to Encora’s owners and then raise $550 million through a qualified institutional placement to pay off Encora’s debt.

Attorney firm recommendation

At least one proxy advisory firm opposed one of the provisions of this transaction.

“[W]“Because determining committee composition is the prerogative of the board and must be determined independently by the board, we do not support committee nomination rights regardless of the established minimum shareholding threshold,” Institutional Investor Advisory Services said in a Jan. 14 voting recommendation.

“The acquisition will proceed as planned. An order granting exclusive rights only to the acquired party failed, hence Coforge has emerged with revised terms. We do not expect any further hurdles to the acquisition,” said Shriram Subramanian, founder of InGovern Research, a Bengaluru-based proxy advisory firm.

Coforge, formerly NIIT Technologies Ltd, does not have a promoter. Employees owned 2.2% of the company through an employee relief fund, while directors owned 0.9% as of the end of December 2025. Foreign portfolio investors owned one-third of Coforge, while domestic investment funds and insurance companies owned 37.73% and 13.40%, respectively, at the end of December last year. Retail shareholders owned the remaining 11%.

A. Mint When the voting statements of foreign investors are examined, it is seen that the majority supports the decision.

Norway’s Norges Bank Investment Management, the world’s largest sovereign wealth fund, Legal & General Investment Management (LGIM), the UK’s largest fund manager, which manages $1.5 trillion in assets, and the California Public Employees Retirement System (CalPERS), which has nearly $500 billion in assets under management (AUM), supported the earlier decision.

This suggests that most of the opposition comes from local investment funds and insurance companies, which own about 51.1% of Coforge.

Motilal Oswal is the largest shareholder with 9.25% stake, followed by HDFC Mutual Fund with 5.58%. Life Insurance Corp. of India became the third largest owner of the company, with a 4.54% stake as of the end of December.

Expensive purchase?

Coforge, which closed last year with a revenue of $1.47 billion and became the seventh largest IT services company in the country, made an impressive move to investors for the acquisition.

“This is a defining moment for the organization,” Coforge CEO Sudhir Singh told investors and shareholders on a Dec. 26 investor call. “This acquisition will ensure that the next eight years will be just as exciting as the last eight, if not more exciting.”

Still, several analysts questioned the wisdom of the acquisition.

“Encora has the edge over Coforge due to weaker organic revenue growth of 7-8% (FY24-FY26E) at 4x Sales, 21x EBITDA in FY26E. The AI ​​native player has not delivered better growth or margins,” Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria said in a note dated January 24.

“While Coforge has gutted smaller acquisitions, this is the largest acquisition by any Indian player and, more importantly, Encora itself, in its current form, has emerged through multiple mergers and acquisitions and hence value may be difficult to capture,” analysts at Bank of Baroda Capital Markets said. he said.