01 — At a Glance
The IT Services Company That Announced a Mega Deal and Watched the Stock Die
- 52-Week High / Low₹1,994 / ₹1,119
- TTM Revenue₹15,272 Cr
- TTM PAT₹1,257 Cr
- Full-Year TTM EPS₹36.2
- Q3 FY26 EPS₹9.92
- Book Value₹206
- Price to Book5.66x
- Dividend Yield1.34%
- Debt / Equity0.11x
- 3-Month Return-37.9%
The Setup (Dec 2025): Coforge announced it would acquire Encora—a $516 million AI-engineering firm owned by Advent and Warburg Pincus—for $2.35 billion in all-stock deal. Enterprise value: $2.35B. Equity consideration: ~₹17,033 crore. Share swap: 93.8 million shares at ₹1,815.91 per share. EPS: not expected to be dilutive (management said). Stock price then: ₹1,875. Stock price now: ₹1,160. Congratulations to everyone who cheered on the acquisition. Your equity is worth 38% less than it was on announcement day.
02 — Introduction
An IT Services Company Trying to Look Like It Understands AI (And the Market Is Not Convinced)
Coforge Ltd is a mid-tier Indian IT services company that was formerly known as NIIT Technologies. It provides digital transformation consulting, cloud services, business process automation, product engineering, and data analytics to banking, insurance, travel, and government sectors worldwide. Nothing revolutionary. Thousands of companies do exactly the same thing. Market Cap: ₹38,948 crore. P/E: 31x. Dividend yield: 1.34%. It’s basically a professional services business with a technology veneer.
Then, in December 2025, management woke up and decided that the future of IT services is “AI-native engineering, cloud, and data” and that the way to dominate this future is to buy a $516 million US-based engineering firm called Encora at $2.35 billion valuation. Not organic. Not patient. Not the Coforge way historically.
The company has been trading and growing at 23–39% annually for the last three years. Decent. Profitable. Order book at $3.5 billion. Client concentration improving. Top 5 clients at 18.6% of revenue, down from 23.5% in FY24. Solid fundamentals. But somewhere between December 26 (announcement day) and today, the stock forgot how to go up.
This is a case study in how a legitimate $2.5 billion acquisition can still manage to spook the market. Let’s dig into the numbers, the deal thesis, and the inevitable question: Did Coforge overpay? And did the market overreact? Or both?
Rumour Mill: Management positioned this deal as Coforge finally playing at scale. Previous PE owner (Hulst B.V.) exited by Sept 2023. Coforge went from 0% promoter to 0% promoter (no promoter to speak of — institutional + retail mixed). The Encora deal is a statement that Coforge wants to be a $2.5B global tier-2 player, not a specialist scrappy midcap. The market said: cool story, bro. Stock down 37%.
03 — Business Model: Who Buys What From Coforge?
They Fix Your IT Problems. And Now They Want to Fix Them with AI.
Coforge’s business model is straightforward to a fault. Banks, insurers, travel companies, and governments need their legacy software modernized, their cloud migrations executed, their business processes automated, and their data analytics upgraded. Coforge does exactly that. They employ 35,341 people globally (including Cigniti, which they acquired in FY25). ~59% of revenue from Americas, ~30% from EMEA, balance from rest of world. Utilization rate: 81.7%. Attrition rate: 10.9%. Pretty standard IT services shop benchmarks.
Revenue is split: 26% BFS (Banking Financial Services), 19.5% Insurance, 23% Travel/Transport/Logistics, 10.5% Healthcare & HiTech, 6.3% Government Overseas, rest scattered. Service mix: 44.4% Engineering, 22.2% Data & Integration, 17.7% Cloud & Infrastructure Management, 7.8% Intelligent Automation, 7.9% BPM. Encora’s arrival promises to skew this towards AI-led engineering (management target: $1.25B+ AI product engineering by FY27, out of a combined $2.5B revenue base).
The company makes money by billing hourly rates (~₹69k-74k revenue per employee annually, across onshore/nearshore model). Margins sit at 16.8% OPM on TTM basis. Debt is only ₹972 crore, net debt close to nil post-Cigniti integration. ROCE: 20.3%. ROE: 16%. Not exceptional. Not terrible. It’s a professional services commodity play with a moat made of client relationships and delivery quality.
Revenue₹15,272 CrTTM basis
Order Book$3.5B12-month visible
Utilization81.7%Excl. trainees
Encora Angle: Advent and Warburg Pincus own Encora. They’re rolling $1.89B equity at ₹1,815.91/share into Coforge, taking ~20–21% ownership post-deal. They’re not cashing out. That’s a signal they believe in Coforge’s ability to execute. Or they’re hedging a bet. Or both.
💬 Real talk: Do you think Coforge overpaid for Encora at $2.35B? Or is the “AI-native engineering moat” real? Drop your take!
04 — Financials Overview
Q3 FY26: The Numbers That Should Have Made The Stock Fly
Result type: Quarterly Results | Q3 FY26 EPS: ₹9.92 | TTM EPS: ₹36.2 | 3-Month Price Return: -37.9%
| Metric (₹ Cr) |
Q3 FY26
Dec 2025 |
Q3 FY25
Dec 2024 |
Q2 FY26
Sep 2025 |
YoY % |
QoQ % |
| Revenue | 4,188 | 3,258 | 3,986 | +28.5% | +5.1% |
| Operating Profit | 730 | 435 | 732 | +67.8% | -0.3% |
| OPM % | 17.4% | 13.4% | 18.4% | +400 bps | -100 bps |
| PAT | 297 | 191 | 297 | +55.5% | +0.0% |
| EPS (₹) | 9.92 | 6.41 | 9.49 | +54.8% | +4.5% |
The Disconnect Explained: Q3 FY26 saw revenue up 28.5% YoY, PAT up 55.5%, EPS up 54.8%. These are exceptional numbers for an IT services company. OPM improved to 17.4% from 13.4% YoY (driven by Cigniti integration and leverage from higher volume). But on the same day as the mega Encora announcement (Dec 26), the stock fell 6% and has not recovered. The market is essentially pricing in the Encora acquisition as a dilutive event, all EPS accretion guidance notwithstanding. TTM EPS at ₹36.2. TTM P/E at 31x. The implied message: “We don’t believe the accretion thesis yet.”
05 — Valuation: Fair Value Range
Is ₹1,160 Cheap? Or Is This the Fair Price for Uncertainty?
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