Coforge to acquire AI-native firm Encora for $2.35 billion in largest Indian IT services deal

Coforge Acquisition Sets New Record in Indian IT Services Sector

Indian IT services provider Coforge has signed definitive agreements to acquire Encora, an AI-native firm from Silicon Valley, in a $2.35 billion deal that marks the largest technology services deal in India's IT sector by value 1

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. The acquisition surpasses previous major transactions including HCL Technologies' $1.8 billion purchase of select IBM products in December 2018 and Wipro's $1.45 billion acquisition of Capco in March 2021 3

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. Coforge is acquiring Encora from private equity groups Advent International and Warburg Pincus, along with other minority shareholders 5

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Strategic Move to Strengthen AI-Led Services Sector Position

The Coforge acquisition of Encora will create a $2.5 billion tech services company with enhanced capabilities in AI services, positioning the combined entity as a major player in the AI-led services sector 1

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. New Jersey-based Encora provides AI-driven engineering services to Fortune 1000 enterprises and digital-native companies, operating at the intersection of AI, cloud, and data 2

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. The company has developed one of the industry's first composable agentic AI platforms called AIVA, which automates manual work involved in managing AI agents and ships with a library of pre-packaged agents that can automate tasks such as debugging code 2

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Deal Structure and Financial Implications

Coforge will fund the equity value of the deal, worth $1.89 billion, through the issue of preference shares, which will give Encora shareholders approximately 20% stake in the Indian firm 1

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. The enterprise value of $2.35 billion implies Encora is valued at four times its FY26 estimated revenue of $600 million, representing a premium to the typical EV/sales ratio of 1.5-3 in the sector 3

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. Additionally, Coforge will take out a bridge loan worth up to $550 million to refinance the debt on Encora's balance sheet 2

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Revenue Projections and Market Positioning

The combined business is likely to deliver $2 billion in revenue for the fiscal year to March 2027, with Encora's projected revenue for FY26 at $600 million and an adjusted EBITDA margin of about 19% 1

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. Coforge reported revenue of ₹7,674 crore in the first half of FY26, implying an annualized top line of ₹15,348 crore, which combined with Encora's estimated revenue of ₹5,340 crore for FY26, will likely allow it to replace Mphasis to become India's seventh largest software exporter 3

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. Coforge expects the acquisition to boost its North America business' annual revenue by 50% to about $1.4 billion 2

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Complementary Platforms and Enhanced Capabilities

Both companies bring robust AI platforms to the table, with Encora's AIVA complementing Coforge's existing Quasar platform, which provides more than 100 application programming interfaces that developers can mix and match to build AI tools 2

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. The acquisition will significantly strengthen Coforge's position across multiple domains, with AI-led engineering projected to reach $1.25 billion, while cloud services and data engineering are expected to grow to approximately $500 million and $250 million respectively 5

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. Encora maintains partnerships with AWS, Microsoft, Google, and Snowflake, further enhancing the combined entity's ecosystem 5

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Vertical Expansion in Healthcare and Hi-Tech

The Encora acquisition will cement Coforge's position in healthcare and hi-tech verticals, with both industry segments immediately reaching material scale post-acquisition, each operating at an annualized revenue run rate exceeding $170 million 5

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. This strategic move enables Coforge to deliver AI-driven IT, data, and cloud solutions, which are expected to be the next growth drivers for software service providers 3

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. The deal will also expand Coforge's near-shore delivery capability in Latin America, adding 3,100+ engineering and AI specialists serving US clients 5

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Integration Challenges and Future Outlook

While the acquisition positions Coforge for long-term growth, the medium-term merger of the two entities will present challenges, with focus needed on talent retention and identifying synergies 3

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. Coforge CEO Sudhir Singh described the deal as "a defining moment for our organization," stating it "regestablishes a scaled AI-led engineering capability moat for the firm underpinned by capabilities to help create enterprise data cores and cloud foundations purpose built for AI" 2

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. The combined company will operate with an EBIT margin of 19%, with the acquisition expected to become EPS accretive in FY27 2

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. Additionally, the deal will bring 11 large customers who spend more than $10 million per year on Encora services, further strengthening Coforge's client base 2

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. Shweta Jalan, Managing Partner at Advent, expressed satisfaction with the outcome, noting that "Encora has found the right home and is joining forces with Coforge" 5

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. The transaction is subject to customary closing conditions and regulatory approvals 5

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