Shares of Coforge Ltd. will be in focus heading into Monday’s trade after the company announced the acquisition of US-based Encora, in a deal worth $2.35 billion.
Brokerages are viewing the Encora deal quite favourably heading into trade, with some calling it the most significant step for the company, as it strengthens its presence in AI-led digital engineering.
The acquisition values Encora at an enterprise value of $2.35 billion, including $1.89 billion of equity to be issued via preferential shares at Rs 1,815 per share (about 21% dilution) and $550 million of debt, which Coforge plans to retire through bridge financing or a QIP.
Here’s how brokerages are viewing Coforge after its landmark deal with Encora.
Dolat Capital on Coforge
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Dolat Capital maintains an Accumulate rating with a target price of Rs 1,990.
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The Encora acquisition is expected to scale Coforge into a US$2.5 billion IT services platform.
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The deal strengthens Coforge’s AI-led engineering, cloud, and data capabilities.
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Encora brings a strong presence in the HiTech and Healthcare verticals.
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The acquisition significantly enhances Coforge’s US West/Midwest footprint and LATAM nearshore delivery.
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The number of US$10 million-plus clients is expected to rise to 45 post-acquisition.
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The deal is expected to be EPS accretive over the medium term.
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FY27 and FY28 earnings have been tweaked down due to dilution and interest costs.
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The brokerage views the acquisition as strategically accretive despite near-term challenges.
DAM Capital on Coforge
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DAM Capital maintains a Buy rating with a target price of Rs 1,880.
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Coforge has acquired Encora for an enterprise value of US$2.35 billion in an all-stock deal.
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The acquisition enhances AI-led engineering, cloud, and data capabilities.
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The transaction implies equity dilution of around 21% at a swap price of Rs 1,815.
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FY27–28 EPS is likely to be diluted by 5–6% post-integration.
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Near-term risks include integration challenges, dilution, and funding structure.
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Valuation comfort is emerging at 26.7x FY28E earnings.
Kotak Securities on Coforge
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Kotak Securities maintains a Buy rating with a target price of Rs 2,250.
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The brokerage describes the Encora deal as a “big bang” acquisition.
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While the asset quality is strong, the acquisition price is viewed as expensive.
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There are strong revenue synergies and some cost synergies available.
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Execution risks remain high given the current demand environment.
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Sharp and immediate execution will be critical to achieving EPS accretion in FY27.
Morgan Stanley on Coforge
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Morgan Stanley maintains an Overweight rating with a target price of Rs 2,030.
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The brokerage views the Encora acquisition as a significant step compared to Coforge’s recent M&A activity.
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It is seen as a selective, niche, and bold move to expand the addressable market.
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The deal is expected to help establish more sustainable growth drivers.
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Near-term earnings are likely to be diluted on an as-is basis.
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Any material weakness in the stock could offer a long-term accumulation opportunity.
Jefferies on Coforge
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Jefferies maintains a Buy rating with a target price of Rs 2,180.
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The Encora acquisition is expected to bolster Coforge’s strategic positioning.
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The stock’s recent 10% correction reflects concerns around EPS dilution.
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Jefferies believes successful execution could lead to a valuation re-rating.
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EPS accretion remains contingent on revenue and cost synergies being realised.
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