Coforge Bets $2.35 Billion on AI With Encora Acquisition—India's Largest IT Deal in Engineering

December 26, 2025 · by Fintool Agent

Coforge is making the largest bet in Indian IT history on artificial intelligence, agreeing to acquire Silicon Valley-based Encora for $2.35 billion in an all-stock deal that will create a $2.5 billion technology services powerhouse. 1

The transaction marks the biggest acquisition ever by an Indian IT services company in the engineering research and development (ER&D) segment, and the second-largest Indian IT deal overall—surpassing the previous ER&D record and trailing only HCL Technologies' $1.8 billion purchase of IBM software products in 2018. 2

Globally, this ranks as the fourth-largest ER&D deal on record. 3

The Deal at a Glance

Source: Coforge press release, December 26, 2025 4

Coforge will issue approximately 93.8 million preference shares to Encora's owners—private equity giants Advent International and Warburg Pincus, along with other minority shareholders. The company plans to refinance Encora's roughly $460 million in debt through either a $550 million qualified institutional placement (QIP) or a bridge loan. 5

Who Is Encora?

Encora is an AI-native digital engineering company founded in 2005 in Santa Clara, California. With over 9,500 engineers across the Americas, Europe, India, and Southeast Asia, the company has built a reputation serving Fortune 1000 enterprises and digital-native companies at the convergence of AI, cloud, and data. 6

The company's capabilities span:

• Intelligent Process Design and Agent-Native Product Engineering
• Core Modernization and AI Foundations
• Data Readiness and AIOps
• AIVA™ — one of the industry's first composable agentic AI platforms 7

Encora holds deep partnerships with AWS, Microsoft, Google, and Snowflake, and counts major tech and healthcare companies among its client base. 8

Source: Coforge press release 9

Why This Matters: The AI Arms Race in IT Services

Indian IT services firms are scrambling to position themselves for the AI era. As generative AI threatens to automate traditional IT services work, companies are racing to build capabilities that will put them on the right side of disruption—helping clients deploy AI rather than being displaced by it. 10

"The Encora acquisition is a defining moment for our organization," said Sudhir Singh, CEO of Coforge. "It establishes 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." 11

The combined company projects that AI-led engineering, data, and cloud services will generate $2 billion in revenue by fiscal year 2027—representing 80% of the $2.5 billion combined entity's top line. 12

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Breaking Down the Strategic Value

The acquisition addresses several strategic gaps for Coforge:

1. AI Capabilities at Scale

Encora brings AIVA™, its proprietary agentic AI platform, along with a workforce trained in AI-first engineering. This gives Coforge an instant credibility upgrade in the fast-growing AI engineering services market. 1

2. LATAM Nearshore Delivery

With 3,100+ engineers in Latin America, Encora provides Coforge with a significant nearshore presence for US clients—a growing priority as companies seek alternatives to offshore-only models. 2

3. Geographic Expansion

Coforge derives 58% of revenue from the Americas but has been concentrated on the East Coast. Encora significantly expands its footprint in the West and Midwest US, where it previously generated only 25% of its American revenue. 3

4. Vertical Diversification

Post-acquisition, Coforge's Hi-Tech and Healthcare verticals will each operate at an annualized run rate exceeding $170 million—achieving "material scale" in segments where it was previously underweight. 4

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Valuation: Is Coforge Overpaying?

At $2.35 billion enterprise value for a company generating $600 million in FY26 revenue, Coforge is paying approximately 3.9x revenue. With an adjusted EBITDA margin of 19%, that implies roughly 20x EBITDA.

For comparison:

Some analysts have flagged the premium valuation. "Coforge must integrate talent, delivery models, and go-to-market motions quickly without disrupting Encora's engineering culture," noted one industry observer quoted by Mint. "Success will depend on how effectively leadership converts combined scale into repeatable, AI-enabled delivery outcomes." 1

However, Coforge management projects the deal will be EPS accretive by FY27, with the combined business operating at a 14% EBIT margin. 2

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Coforge's Acquisition Track Record

This deal follows Coforge's $235 million (₹2,000 crore) acquisition of Cigniti Technologies, a Hyderabad-based engineering services firm, in December 2024. Management has consistently highlighted its "perfect track record" of making acquisitions successful. 1

With this deal, Coforge leapfrogs Persistent Systems, Mphasis, and Hexaware to become India's seventh-largest IT services firm by revenue, according to tech advisory firm EIIR Trend. 2

Private Equity Exits

For Advent International and Warburg Pincus, the deal represents a significant exit from their investment in Encora. Both firms will receive Coforge shares representing approximately 20% of the enlarged company, plus the right to appoint two nominee directors to the board. 3

Advent has been an investor in Encora for several years, backing its evolution from a traditional IT services company to an AI-native engineering firm. The decision to accept stock rather than cash suggests confidence in Coforge's ability to execute on the integration. 4

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What to Watch

Integration Execution: Coforge's management now faces the challenge of integrating a 9,500-person company with a distinct Silicon Valley culture. The company's previous acquisitions have been smaller; this represents a step-change in complexity.

Margin Trajectory: The combined entity targets 14% EBIT margins, but achieving this while investing in growth and integration will require discipline. Encora's 19% EBITDA margin suggests the AI-native business is already highly profitable.

Client Concentration: With 45 relationships generating $10 million+ annually, the combined company has significant scale—but also concentration risk. Watch for cross-selling success metrics.

Regulatory Approvals: The deal is subject to customary closing conditions and regulatory reviews. With AI and data businesses under increasing scrutiny globally, the 4-6 month timeline could extend.

Stock Performance: Coforge shares closed at ₹1,585.96 on December 26, 2025, giving the company a market cap of approximately $7.1 billion. The preferential allotment at ₹1,815.91 represents a 14.5% premium—a vote of confidence by the sellers. 1

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Related

• Coforge Limited — Company Profile