Coforge in talks for $1 bn-plus acquisition; board to weigh fundraise

Coforge is expected to fund the acquisition through a mix of debt and equity.

• Coforge in talks to acquire a global digital firm for over $1 billion
• Deal aims to boost Coforge's cloud, data, and product engineering capabilities
• Coforge targets $2 billion revenue run-rate by FY26, focusing on AI and cloud

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IT services firm Coforge is in advanced discussions to acquire a global digital engineering company in a deal valued at over $1 billion, potentially marking one of the largest transactions in the sector, according to sources familiar with the development.

The proposed acquisition is expected to strengthen Coforge’s cloud, data, and product engineering capabilities while expanding its footprint in key overseas markets.

Coforge is expected to fund the acquisition through a mix of debt and equity. The company announced in an exchange filing earlier this week that it will hold a board meeting on December 26, Friday, to consider a fundraising proposal. The company will also be holding an analyst meeting the same evening.

Moneycontrol has learned that Encora, a California-based company backed by Advent International, is reportedly among the firms with which Coforge is said to have held discussions, according to people familiar with the matter. Neither Coforge nor Encora has publicly commented on the discussions.

Encora, founded by Venu Raghavan, appointed former HCLTech executive Anand Birje as CEO, two years after private equity firm Advent International acquired a majority stake in the company from Warburg Pincus for $1.5 billion. The firm provides digital and software engineering services to clients across technology-driven industries. As of 2023, Encora had more than 9,000 employees across 40+ offices and innovation labs in the U.S., Canada, Mexico, Costa Rica, Colombia, Bolivia, Peru, Brazil, India, and the Asia-Pacific region.

Coforge is focused on achieving a $2-billion revenue run-rate over the coming quarters. This marks the second fundraiser the company has planned in the past 18 months. Earlier, Coforge had raised Rs 2,240 crore through a qualified institutional placement (QIP) to fund its acquisition of Cigniti Technologies.

Coforge and Encora did not respond to queries sent by Moneycontrol at the time of publishing. The story will be updated once they respond.

Also, read: Winners and losers: Coforge CEO says AI transition is separating the pack in Indian IT

Why are Coforge shares falling?

Coforge shares are down by almost 7 percent in the last 5 trading sessions, currently trading at Rs 1,737. Year-to-date (YTD), the share prices have fallen by almost 10 percent. To be sure, most of its large-cap peers’ shares are trading around 10 percent lower YTD.

On December 23, share prices fell by around 5 percent after the company declared a board meeting on December 26 to consider a fundraising proposal. Although there is no direct correlation between the two, the last time the company called in a board meeting for a QIP, it announced the acquisition of Cigniti.

At the time, Coforge had issued shares to qualified institutional buyers at Rs 4,600 per share. Since then, the company has carried out a stock split over the past 18 months, where each Rs 10 share was split into five shares of Rs 2, effectively bringing the QIP price down to Rs 920 per share.

Also, read: 'AI is infra now': Coforge builds full-stack capability for real-world deployments

Financial Performance: Coforge

Meanwhile, at a time when most of the large IT companies are struggling to reach even 5 percent annual growth, Coforge had a stellar FY25, though on a smaller base.

Its revenue rose 32 percent to over 12,050 crore or $1.45 billion, driven by 14 large deals and broad-based growth in all of our verticals and geo-based businesses.

Also, read: Not waiting for discretionary spend to return, overall tech spend has surged: Coforge CEO

Even the margin of the company increased by almost 32 percent to Rs 1,998 in FY25. YTD, its headcount increased by over 35 percent to 33,497 employees.

Also, read: Coforge leans on proprietary AI platforms as automation reaches 8% of revenue

Coforge’s Cignity Acquisition

Coforge’s most recent acquisition, followed by a merger, took place in 2024 with Cigniti Technologies Limited. The multi-stage transaction aimed to make Coforge into a $2 billion revenue firm by FY27.

Additionally, the acquisition would help it improve operating margins by 150-200 basis points to around 20 percent by FY27.

However, the acquisition created three new industry verticals for Coforge: Retail, Healthcare, and Hi-Tech. This is something the Encora deal is not expected to do.

According to brokerage houses, citing management’s interactions with investors from November to December, management has ruled out entering any new verticals, geographies, or service lines for the next three to five years. Instead, management plans to scale the healthcare and public sector businesses it has invested in over recent years.

Also, read: Coforge banks on AI, cloud to hit $2 bn milestone by FY26

Coforge’s AI Push

As major IT firms negotiate a phase of low single-digit revenue growth for the second fiscal year in a row, Coforge chief executive officer Sudhir Singh earlier told Moneycontrol that the industry is beginning to see a clear divide: those moving to the new tech landscape and those still holding on to legacy models.

“For the last three years, we've seen some of the legacy players talk about discretionary spend not being good. We obviously operate in the same market, under the same conditions. We've continued to grow, and we feel that in FY26, we will again see significant growth going forward,” Singh told Moneycontrol in May.

In October, Singh said that Coforge’s positioning of its proprietary AI platforms and delivery execution is the key differentiator, which led to its automation-led services contributing around 8 percent of the revenue.

Coforge has been sharpening its focus on AI and cloud-led transformation as it races toward a $2 billion quarterly revenue run-rate by the fourth quarter of FY26.

The company has committed to maintaining at least a 14 percent EBIT margin every quarter and will stop issuing revenue and margin guidance from FY27, according to brokerage houses, citing the management’s November-December investor interactions.

Also, read: In the making: 7 more billion-dollar IT companies after 15 in the past 10 years