The transaction aims to reinforce the firm’s in-house AI capabilities and broaden its footprint in the US and Latin America.
Indian IT firms are vigorously seeking opportunities to fund initiatives related to artificial intelligence technologies, which, given the increasing interest in the sector, could unlock a substantial novel income stream.
Encora, supported by Advent International and Warburg Pincus, provides AI solutions in product creation, cloud solutions, and data management. Coforge anticipates the merged entity to achieve $2 billion in yearly earnings by March 2027.
The integrated firm is projected to function at a 14% margin before interest and taxes, and the agreement will bolster earnings per share (EPS) throughout fiscal year 2027.
The added income resulting from the merger will enable Coforge to surpass Persistent, Mphasis, and Hexaware, thereby becoming India’s seventh-largest IT enterprise, according to Parikh Jain, founder of the consultancy EIIR Trend.
Coforge will finance the equity portion of the $1.89 billion agreement by issuing preferred shares at Rs 1,815.91 per share, an 8.5% increase over Friday’s closing value. Encora shareholders will be granted a 20% ownership stake in the combined business. The California-based entity intends to pay off its debt by securing up to $550 million, either through a short-term loan or by placing Coforge shares with accredited institutional investors.
The Indian organization, which derives 58% of its earnings from the Americas, will solidify its presence in the western and central US states through this transaction, and will also secure access to Encora’s workforce of roughly 3,100 individuals in Latin America.
Coforge’s earnings for the fiscal year 2025 totaled 120.51 billion rupees ($1.34 billion), marking a 32% rise year-on-year, while Encora’s revenue reached $516 million.
Coforge stated that the deal is anticipated to finalize within a span of four to six months. BDA Partners served as the investment banker for this transaction.
Source: Reuters