Coforge shares traded higher even as analysts flagged concerns over the company’s $2.35-billion all-stock acquisition of US-based digital engineering firm Encora, calling the deal strategically bold but near-term earnings dilutive.
Brokerages said the valuation appears expensive, noting that Encora has delivered only 7–10 percent organic revenue growth over the past two years, raising questions over the pace of returns from the acquisition.
Coforge’s board has approved the transaction along with a $550-million fundraise, which analysts believe will stretch balance-sheet metrics in the short term. Several brokerages warned that EPS dilution is likely over the next few quarters, driven by integration costs, amortisation, and higher interest expenses.
However, analysts also acknowledged the long-term strategic rationale, citing Encora’s strong presence in AI-led digital engineering, product development, and platform modernization, which could strengthen Coforge’s positioning in high-growth segments and expand its client base in North America.
Market participants appeared to focus on the scale and strategic fit of the acquisition, betting that the combined entity could unlock cross-selling opportunities and improve revenue mix over time, even as near-term financial metrics remain under pressure.
While opinions remain divided, analysts broadly agree that execution and integration will be critical, with sustained improvement in Encora’s growth trajectory needed to justify the premium valuation paid by Coforge.
