How Coforge’s $2.35 billion Encora deal affects investors
On 26-29 December 2025 Coforge announced it will acquire US-based engineering firm Encora for *$2.35 billion*, which is roughly *₹17,032 crore*, via a share-swap and financing package. The deal is one of the largest in India’s IT services space, and it materially changes Coforge’s scale, margins and geographic mix.
*What the deal looks like financially*
Coforge will pay $2.35 billion in enterprise value to acquire Encora, funding the transaction with an *equity issue worth about $1.89 billion* and arrangements to retire roughly *$550 million of Encora debt*, according to company disclosures and market reports. Encora shareholders will hold about *20%* of the merged business post-deal. Management expects the transaction to close within *four to six months* and to be earnings-per-share accretive by fiscal 2027.
*What this does to size and revenue forecasts*
Before the deal Coforge reported FY25 revenue of *₹12,050.7 crore* (about $1.45 billion), growing 31-32% year on year on a continuing operations basis. Encora’s revenue is guided at roughly *$600 million* for FY26, with an adjusted EBITDA margin near *19%*. Post-merger the combined company is expected to operate at about *14% EBIT margin*, and management projects combined annual revenues could reach about *$2 billion by March 2027*. These numbers mean Coforge moves from a mid-cap India IT firm into a much larger player in digital engineering and AI services.
*Margins, synergies and EPS impact*
Encora operates at a higher adjusted EBITDA margin, near *19%*, while Coforge’s historical EBITDA margin was lower. Coforge’s investor presentation models a roughly 90 basis-point combined EBITDA improvement from synergies and cost saving assumptions, and the company conservatively assumes only *US$20 million of cost synergies* in initial modelling. Amortisation of goodwill and intangible assets is expected, because about 20% of the purchase price may be allocated to customer relationships amortised over about 12 years, per the company note. Given these assumptions, management says the deal should be EPS-accretive by FY27, but investors should account for one-time integration costs and potential dilution from issuance.
*Interpreting the deal valuation*
The headline price of ₹17,032 crore has generated debate, because it implies a premium to Encora’s standalone trading or private valuations. Encora’s $600 million revenue guidance for FY26 and an adjusted EBITDA margin of *~19%* imply an adjusted EBITDA near *$114 million*. If the deal values Encora’s enterprise at $2.35 billion, that equates to roughly *~20.6x EV/EBITDA* on FY26 guided numbers, before synergies. That multiple is high for pure services companies, but may be justifiable if Encora’s IP, client list and AI engineering capability drive sustained revenue growth and margin expansion.
*Capital structure and funding risks*
Coforge plans an equity issuance for the bulk of the consideration and will retire Encora debt of about $550 million through bridge loans or placements. This means near-term equity dilution and higher gross debt at the group level until integration is complete. Coforge’s balance sheet pre-deal showed healthy operating cash flows and net cash generation in FY25, but investors should monitor updated leverage metrics after the deal, especially Net Debt / EBITDA and interest coverage, because leverage could rise temporarily. The company’s plan to issue preference shares at an 8.5% premium and to use a share swap spreads the immediate cash strain, but dilution and higher amortisation will matter to earnings per share in the near term.
*Operational risks and integration challenges*
Large cross-border acquisitions often face three practical problems:
1. Talent retention because Encora’s value is people and losing engineers would hurt delivery and margins
2. Client overlap and churn which can erode projected revenue synergies
3. Integration cost overruns where planned US$20 million synergies could take longer to realise.
Any of these would delay EPS accretion and pressure stock performance.
*Areas investors should follow*
* Deal close timeline expected in four to six months, and any regulator filings.
* Updated pro-forma financials especially combined revenue, EBITDA margin and management’s EPS accretion schedule issued in the next investor update.
* Leverage metrics notably Net Debt / EBITDA and interest coverage once Encora’s debt is consolidated.
* Customer retention rates and order book details which show whether revenue synergies are real.
* Brokerage target revisions because analysts will re-rate Coforge based on the new scale, and price targets will indicate market sentiment.
*Conclusion*
Coforge’s acquisition of Encora for $2.35 billion ( ₹17,032 crore) is transformative, it scales the company into a global engineering and AI player, and it promises synergies and higher revenue visibility, but it also raises valuation, dilution and integration risks. For long-term investors, the important questions are whether Coforge can keep Encora’s talent, turn high purchase multiples into sustained growth, and manage leverage during integration. Short-term traders will watch EPS guidance and leverage metrics closely, while long-term holders should focus on execution and customer retention.
The image added is for representation purposes only
