shares managed to close in the green on Monday, recovering from a sharp fall after the IT services firm announced its largest acquisition – the $2.35 billion purchase of US-based Encora in an all-stock deal.
The stock opened at ₹1,711 on the NSE, hitting a high of ₹1,714.70 before slipping to an intraday low of ₹1,637.10. The stock closed at ₹1,683.30, up 0.60 per cent over the previous day’s close, as analysts are largely positive despite near-term concerns. Nuvama maintained its Buy rating with a target price of ₹2,250, calling Encora Coforge’s “biggest and boldest bet yet” that would create an “AI-native engineering powerhouse.”
Kotak Securities and Jefferies also retained Buy ratings with targets of ₹2,250 and ₹2,180, respectively, though Kotak cautioned the asset is “pricey” and execution risks remain significant.
Long-term opportunities
Morgan Stanley kept its Overweight rating with a ₹2,030 target, viewing the acquisition as a “selective, niche and bold move” that will likely dilute near-term earnings but offers long-term opportunities.
The management expects the transaction to turn EPS-accretive in FY27, driven by anticipated margin improvement at Encora, synergy benefits, and an expected equity raise. “While we acknowledge the strategic rationale, we view the acquisition valuation as demanding, given Encora’s high single-digit organic revenue growth over the past two years,” said Emkay Global Research. That said, it represents a strategically positive albeit execution-intensive step, with potential to enhance Coforge’s AI-led engineering, cloud, and data capabilities over the medium term, the domestic brokerage said
According to Motilal Oswal Financial, the scale of the transaction is large, therefore, execution remains critical. “Integration, leadership retention, margin management post-integration, and amortisation will be the key monitorables.,” it said while maintaining Buy stance with a target price of ₹2,500.
DAM Capital, however, struck a more cautious note with the lowest target of ₹1,800, highlighting multiple concerns including Encora’s 7-8 per cent organic growth versus Coforge’s mid-teens growth, integration risks and potential supply pressure from incoming PE shareholders Advent International and Warburg Pincus who lack meaningful lock-ins.
The deal
The transaction includes a share swap valued at ₹1,815.91 per share—an 8.5 per cent premium to current levels—along with debt retirement. Encora’s $600 million revenue base will add roughly 26 per cent to Coforge’s FY26 revenue, with management claiming day-one EPS accretion based on amortising intangibles over 12-14 years. Coforge also approved raising capital through a qualified institutional placement of up to ₹17,030 crore.
Elara Capital downgraded the stock to Reduce from Accumulate citing expensive valuation. Historically (in FY21-25), Coforge had reported high teen revenue CAGR on account of stable management, strong order book and specialisation in select verticals of BFS, Insurance and Travel, it said adding “Encora’s organic revenue growth, on the other hand, was lower at 7-10 per cent. Despite lower growth, Coforge is acquiring Encora at 3.9X EV/sales and about 21x EV/EBITDA, in line with Coforge’s multiples, which appears expensive.”