Coforge Bought Encora for $2.35B With Zero Cash

Coforge bought Silicon Valley's Encora at a $2.35 billion enterprise value and did not pay a rupee of cash for it. It printed 93.8 million new shares instead. The private-equity sellers, Advent International and Warburg Pincus, took every one of them, and two seats on the board.

A private-equity fund exists to turn holdings back into money. Advent and Warburg Pincus did the opposite. Having built Encora from a Warburg asset worth around $1.5B in 2021 into a business guided to ~$600M of revenue, they sold it and took the entire price in the buyer's stock. Coforge issued 9,37,96,508 shares at ₹1,815.91, worth ₹17,032.60 Cr ($1.89B), for 100% of Encora at a $2.35B enterprise value — the largest ER&D takeover ever by an Indian IT company. The sellers walked out owning about 21.8% of Coforge. Coforge got an AI-native engineering business overnight; the sponsors swapped a private holding for a liquid one without leaving the trade; and a cross-border deal guided to take six months was done in under four.

The Setup, the Move, and the Point

• The setup. Announced after market close on December 26, 2025, with the definitive agreement and board approval landing the same day. The consideration was fixed in rupees, ₹17,032.60 Cr, and settled entirely in new Coforge shares issued at ₹1,815.91, a 14.5% premium to the pre-announcement close on Business Standard's framing. In plain terms, a preferential allotment: instead of buying shares on the market, the seller receives newly created ones straight from the company at an agreed price. The buyer pays with ownership rather than money, and every existing shareholder's slice gets smaller.
• The move. Under four months from signature to settlement. Clearances from the RBI, Australian antitrust, Romanian and Spanish FDI regimes, other European authorities and Coforge's own shareholders were all secured by April 13, 2026; the deal completed on April 23; Encora's accounts consolidated from May 1. At closing Coforge cancelled the equity raise it had planned and took a $550M three-year loan at 4.6% instead.
• The point. Two lessons in one deal. For strategy: when the capability you need is being created by the same wave that threatens you, buying it at scale beats building it slowly, and Coforge's stock had already fallen ~13% in 2025 on exactly that threat. For deal-making: the currency you pay in decides who is still in the room afterwards. Cash ends a relationship. Shares begin one.

What Actually Happened. Noida and Santa Clara, 2021 to 2026

• Two sponsors built the asset they eventually sold to each other's successor. Advent bought control of Encora from Warburg Pincus at a valuation around $1.5B in 2021, with Warburg keeping exposure. Together they scaled it through organic growth and bolt-ons to $516M of CY2024 revenue, guided to roughly $600M, run by Anand Birje out of Santa Clara with more than 9,000 engineers across four regions.
• A mid-cap decided the disruption was cheaper to own than to survive. Coforge's shares had fallen about 13% during 2025 as the market priced AI as a threat to services revenue. It had already bought Cigniti for roughly ₹4,343 Cr in 2024. Encora is the second and far larger bet, and the thesis is blunt: own the thing doing the disrupting. A mid-cap outbid the tier-one firms for the largest engineering-services asset the Indian IT sector has seen change hands — consolidation is no longer something only the biggest players do.
• The sellers took paper, and seats. Every rupee of the ₹17,032.60 Cr was settled in Coforge stock, and on completion day Advent's Shweta Jalan and Atin Hirachand Jain joined the board as non-executive directors. In plain terms, a rollover: a seller who reinvests the sale proceeds into the buyer rather than banking them. It signals confidence, and it means the seller's return now depends on how well the acquirer runs the thing it just bought.

Why it matters. If you advise a company paying in stock: the issue price is not a detail, it is the deal, because a fixed rupee consideration means the price alone decides how much of the company you hand over. If you advise a sponsor nearing the end of a hold: a rollover into listed paper is a third option between cash and holding on, and it is spreading as private and public valuations drift apart. And if you hold a serial acquirer: watch what management does with its own currency, because cancelling a planned share sale in favour of debt tells you what it thinks its stock is worth.

The Exit That Wasn't: Why Advent and Warburg Took Shares, Not $1.89 Billion

Private-equity funds have finite lives. They raise money, buy companies, improve them and sell, and their investors expect it back as cash within roughly a decade. A sale is normally the moment that happens, which is why sponsors run auctions, favour buyers with committed funding, and treat an all-stock offer as the least attractive kind. Here two of the world's largest sponsors did the opposite: they accepted 100% of a $1.89B price in the shares of a mid-cap listed in Mumbai.

• Listed stock is liquid; a private holding is not. A stake in Encora could only be sold through another negotiated process, on someone else's timetable. Coforge shares can be sold on any trading day. The rollover converted an illiquid asset into a tradable one at a price struck above the market.
• They kept the thesis they had been proved right about. Encora's value rests on enterprises shifting spend toward AI-led engineering. Selling for cash monetises the part of that shift which has already happened; taking stock keeps exposure to the part that has not, now attached to a larger distribution network.
• A stake with board seats is not a passive position. Two non-executive directors and committee rights turn a shareholding into influence over the integration that decides whether the shares are worth what they were issued at.

The signal most briefs miss. At announcement, Coforge said it would raise up to $550M through a bridge loan or a share sale to institutions. Dilution was already the bear case, with a fifth of the company going to the sellers. By closing, Coforge had cancelled the share sale entirely and taken a $550M three-year bank loan at 4.6% instead, saying explicitly that there would be no further dilution. That swap costs roughly $25M a year in interest, and it was made in the four months while the stock was recovering. When a company converts planned equity into debt between signing and closing, read it as a statement about how cheap it thinks its own shares are.

Three Things This Deal Confirms About Indian IT and AI

• The mid-caps are doing the consolidating now. This is the largest ER&D takeover ever by an Indian IT company and the fourth-largest such deal anywhere, and it was done by a firm outside the top tier.
• Capability is being bought rather than built. Encora brought AIVA, a composable agentic platform with a library of pre-built agents; Coforge already had Quasar and its governed APIs. The emerging differentiator in engineering services is a proprietary agentic layer plus enough scale to sell it, which is what separates this combination from GlobalLogic, EPAM and Globant.
• Sponsor rollovers are becoming the bridge between private and public valuations. When sponsors cannot get the price they want in cash, taking listed stock lets them realise a valuation on paper and defer the argument about what it is worth.

Was 3.9x Revenue Too Much for an AI-Services Business?

About 3.9x FY26 estimated revenue is full for a services business, and it sets a bar: Encora must keep delivering $600M-plus at around 19% EBITDA. But the shares went out at a 14.5% premium to the pre-announcement close — in an all-stock deal your own valuation is half the price, so issuing above market is cheaper than issuing below it. And nine thousand engineers across four regions, an agentic platform already in production, and Fortune 1000 relationships cannot be hired inside the window in which enterprise AI budgets are being decided.

In an all-stock deal there are two prices, and only one is in the press release. Coforge paid roughly 3.9x revenue, but paid in a currency the market had marked down about 13% during 2025 and then marked up about 10% after the first merged quarter. If the shares hold, the deal was cheaper than it looked; if they fall back, Coforge overpaid in real terms and the sellers gave up value. Judge a paper deal on both sides of the exchange rate.

The All-Stock Preferential Allotment, and Why the Issue Price Is the Whole Negotiation

In plain terms, a preferential allotment: the company creates new shares and issues them directly to a chosen party at a price fixed in the agreement. No money is raised from the public and no shares change hands on the market. The recipient becomes a shareholder; everyone else owns a slightly smaller share of the same company.

The consideration here was a fixed rupee amount, ₹17,032.60 Cr. When the total is fixed, the issue price is the only variable, and it alone decides how many shares get created and therefore how much of the company the seller ends up with. At ₹1,815.91 the sellers received 9.38 crore shares and about 21.8% of Coforge. Ten per cent lower and they would have taken roughly 23.7%; ten per cent higher, about 20.2%. The headline price never moves, and the ownership does.

Paying in stock also imports the seller onto your register, permanently. Cash consideration ends the relationship at settlement. Shares mean the counterparty stays, votes and, here, sits on the board — alignment while the thesis is working, and an overhang the moment it is not, both true at the same time. And the funding plan is not fixed until closing: Coforge announced a bridge-or-equity-raise option and finished with neither, replacing it with a syndicated bank loan and cancelling the equity leg. Anything described as a plan at announcement is a range of outcomes; check what actually got signed.

Paying With Your Own Shares: A Three-Step Playbook

An all-stock deal is one where the buyer creates new shares and hands them to the seller instead of money. It preserves cash and borrowing capacity, but pays with something the market prices rather than the buyer, and permanently changes who owns the company.

• Step 1: Decide what your own paper is worth before you decide what theirs is. An all-stock offer swaps two valuations, and the one you control least is your own. Coforge struck its issue price 14.5% above market, which meant fewer shares for the same rupee consideration.
• Step 2: Price the dilution as a cost, not a footnote. Handing over 21.8% of a company is a real payment competing directly with cash and debt as a funding choice. Coforge guided to accretion in FY27 and beat its margin guidance in the first merged quarter.
• Step 3: Design what happens to the stake afterwards. A seller paid in shares becomes a permanent feature of your register, so settle upfront what they can do with it and what they get in return. Here that meant two board seats and committee rights, bought with alignment through the integration.

Three numbers decide what a seller paid in shares actually received: the issue price, which sets how much of the company you get; the lock-in, which sets when you can act on it; and the buyer's own growth rate, which sets what it is worth by then. Advent and Warburg secured the first, accepted the second and bought exposure to the third. One quarter of results is nowhere near enough to know how that ends. Not investment advice.