Mid-tier IT services firm Coforge is in advanced discussions to acquire a global digital engineering company in a transaction valued at over $1 billion, which could rank among the largest deals in India’s
IT services sector, according to a Moneycontrol report citing people familiar with the matter.
The proposed acquisition is expected to bolster Coforge’s capabilities in cloud, data, and product engineering, while also strengthening its presence in key overseas markets.
The transaction is expected to be funded through a combination of debt and equity. In an exchange filing earlier this week, Coforge said it would hold a board meeting on December 26 to consider a fundraising proposal. The company has also scheduled an analyst meeting later the same day.
According to the Moneycontrol report, Encora, a California-based digital engineering firm backed by Advent International, is among the companies with which Coforge has held discussions. Neither Coforge nor Encora has publicly commented on the talks.
Encora was founded by Venu Raghavan and is currently led by Anand Birje, a former HCLTech executive. Advent International acquired a majority stake in Encora from Warburg Pincus in a deal valued at $1.5 billion. As of 2023, Encora had over 9,000 employees across more than 40 offices and innovation labs spread across the US, Canada, Latin America, India, and the Asia-Pacific region.
Coforge is targeting a $2 billion revenue run-rate over the coming quarters. This would be the company’s second capital raise in the past 18 months. Earlier, it raised Rs 2,240 crore via a qualified institutional placement (QIP) to fund the acquisition of Cigniti Technologies.
Why Coforge shares have been under pressure
Shares of Coforge on Friday were trading down by 0.7% to trade at Rs 1,725.7 apiece on the NSE in the morning trade, compared with Rs 1,737.7 yesterday. The stock has declined over 7 per cent over the past five trading sessions. On a year-to-date basis, the stock is down close to 10 per cent, broadly in line with declines seen across large-cap IT peers.
On December 23, the stock fell about 5 percent after the company announced that its board would meet on December 26 to consider a fundraising proposal. While there is no direct linkage, investors appear to be drawing parallels with the previous instance when a board meeting to consider a QIP was followed by the announcement of the Cigniti acquisition.
At that time, Coforge had issued shares to qualified institutional buyers at Rs 4,600 per share. Following a stock split over the past 18 months — where each Rs 10 share was split into five Rs 2 shares — the effective QIP price stands adjusted to Rs 920 per share.
Financial performance remains strong
Despite industry-wide growth challenges, Coforge reported a strong FY25 on a relatively smaller base. Revenue rose 32 percent year-on-year to over Rs 12,050 crore, or approximately $1.45 billion, driven by 14 large deal wins and broad-based growth across verticals and geographies.
The company’s profit also rose sharply, with margins increasing nearly 32 percent to Rs 1,998 crore in FY25. Headcount expanded more than 35 percent year-to-date to 33,497 employees.
Cigniti acquisition and strategy clarity
Coforge completed the acquisition and subsequent merger of Cigniti Technologies in 2024, a transaction aimed at transforming the company into a $2 billion revenue firm by FY27. Management has said the deal would also help lift operating margins by 150–200 basis points to around 20 percent by FY27.
The Cigniti acquisition added three new industry verticals—retail, healthcare, and hi-tech. However, brokerages note that the potential Encora deal is not expected to create additional verticals.
According to brokerage reports citing management interactions between November and December, Coforge has ruled out entering new verticals, geographies, or service lines over the next three to five years. Instead, the focus will be on scaling healthcare and public sector businesses that the company has already invested in.
Coforge chief executive officer Sudhir Singh has previously said the Indian IT industry is seeing a widening gap between firms adapting to new technology models and those sticking to legacy approaches.
