Coforge announced its acquisition of Encora, highlighting an EPS accretive transaction. The deal, expected to close around Q1 FY27, projects a combined revenue of US$2.826 billion. The analysis includes pro forma financials reflecting a 15% year-on-year revenue growth and cost synergies of US$20 million. Encora, an AI-native firm, brings expertise in digital services and a distributed delivery footprint, enhancing Coforge’s capabilities.
Transaction Overview
Coforge is set to acquire Encora, with the transaction expected to close around Q1 FY27. The financials presented are pro forma in nature.
Financial Highlights
The pro forma financials for FY27E (assuming 15% year-on-year revenue growth and US$20 million in cost synergies) show:
- Revenue: US$2,826 million (Coforge: US$2,136 million, Encora: US$690 million)
- EBITDA: US$533 million (EBITDA Margin: 18.9%)
- EBIT: US$399 million (EBIT Margin: 14.1%)
- PAT: US$283 million (PAT Margin: 10.0%)
- EPS: US$53.7
Key Assumptions
- A ~90 bps increase in combined EBITDA margin due to cost synergies.
- Amortization assumption based on an EV of US$2.35 billion.
- Tax benefits on account of amortisation in Encora Group in the US, assuming a tax benefit of US$4 million in FY27E Proforma Financials.
Indicative Share Capital Post-Close
Assuming a QIP (Qualified Institutional Placement) for Encora’s term loan retirement:
- Encora Enterprise Value: US$2,350 million
- Prefential issuance price to sellers of Encora is at INR 1,815.91 per share, a premium of 8.5% to closing price of INR 1,674 as on date of signing.
- The outstanding shares of Coforge post-closing of Encora transaction and QIP is approximately 468.7 million.
Encora Overview
Encora is an AI-native firm providing services to digital natives and Fortune 1000 enterprises.
- FY26E Revenue: US$600 million
- FY26E EBITDA Margin: 19%
- Global workforce of approximately 9,100 employees.
- 49% headcount in India and 33% in LATAM.
Delivery Model
Encora operates with a delivery model emphasizing client proximity, with approximately 50% of its workforce located close to clients.
Source: BSE
