Coforge's AI-native bet: All you need to know about Encora's acquisition and its impact

Coforge Ltd, one of India’s leading mid-tier IT companies, announced the acquisition of Encora, which it has been working on since December 2025. The company announced the final details of the acquisition through an exchange filing on Thursday. The company also got approval from the board of directors to raise $550 million for the restructuring and funding of the subsidiary. Following the announcement, Coforge's share price opened flat amid weak market sentiment. The development comes at a stage when Indian IT companies are struggling to find growth in the aftermath of AI. Meanwhile, Coforge’s decision to position itself as AI-native through acquisition warrants attention. Here is how Coforge will benefit from this acquisition.

What is Encora?

Encora is a Silicon Valley-based AI-engineering digital company, founded in 2005. The company expanded its core to cloud computing, mobile, data and design from 2010 to 2016. The company does not just maintain IT systems, it builds, designs and operates products. If Coforge is a domain expert in the back-end IT support system, Encora is a front-end designer and developer in AI, cloud and product engineering. The company operates in Latin America (Mexico, Costa Rica, Bolivia, etc) and in Central Europe, which helps them in serving all customers in different time zones.

The Encora group’s consolidated revenue stood at $516 million with an EBITDA margin of 19% for FY25. Reports suggest, the company has been growing at a staggering CAGR of over 30%.

What benefits Coforge from acquisition?

The acquisition comes at a time when demand for AI platform is on the parabolic rise. Ac Industry reports suggest to service the demand for these AI platforms, AI engineering services will require spending above $400 billion within next five years. Management argues that acquisition will create a moat of being an AI-native product engineering. Encora brings eleven clients with over $10 million in annual billings, which will boost the overall revenue of Coforge post acquisition to $2.5 billion by FY27.

In addition, Encora’s latin American base of 3,100 employees shortens the delivery cycle for US time-zones improving client satisfaction levels. The acquisition will place Coforge in the league of large-cap IT names like Persistent, Mphasis. It also makes Cofore+Encora eligible for big value ($500 million) contracts from global banks and government’s which it was earlier not fitting in the criteria due to missing balance sheet strength. With the $550 million infusion, the company holds dry powder to fund bigger and specialised bench strength of experts, who can help in signing big deal wins.

Key risks to watchout

The acquisition is funded by $550 million fundraise to restructure and fund the subsidiary. Mismanagement in debt servicing and discrepancy could impact the bottom line. Coforge management expects the deal to be EPS accretive in 18-months, which makes the acquisition compelling. However, any headwinds on deal wins, bargains in value could impact the topline as well. Sector analysts suggest, execution remains the focus after acquisition.

How does it impact shareholders?

The acquisition agreement includes a preferential issue of 9.38 crore shares to Advent and Warburg Pincus who are selling shareholders of Encora. Coforge will issue shares to selling shareholders at ₹1,815 per share. That makes them owner of nearly 21.5% in Coforge. The preferential allotment increases the number shares which in the near term may impact the EPS. However, the acquisition is expected to EPS positive in 18-months, which will beneficial in boosting the profitability of the company in coming few quarters.