Stock Market Highlights Dec 29: Sensex sheds 346 pts, declines for 4th day on foreign fund outflows, thin year-end trading

MS on Coforge

OW, TP Rs 2030

View acquisition of Encora as a significant step for Coforge compared with its recent M&A deals

This is a selective, niche, and bold move to expand the addressable market and establish sustainable growth drivers – though it will likely dilute near-term earnings on an as-is basis.

Kotak Inst Eqt on Coforge

Buy, TP Rs 2250

Announced acquisition of Encora for a consideration of US$2.35 bn at 3.9X EV/sales.

Encora has a strong product engineering heritage with nearshore delivery and provides differentiated capabilities, a launchpad for the hi-tech vertical and plenty of new clients to mine

Asset is good in our view, but pricey

Strong revenue synergies and some cost synergies are available, but they require good execution given demand environment and considerable risks involved

Sharp & immediate execution of synergies will be key to driving the acquisition toward stated outlook of EPS accretion in FY2027—a challenging task

Jefferies on Coforge

Maintain Buy with TP of Rs 2180

Acquisition of Encora to Bolster Coforge’s Positioning

Stock’s recent 10% fall reflects EPS dilution risks

Believe that, if executed well, this mega deal could drive a re-rating

EPS accretion contingent on revenue/cost synergies

MOSL on Coforge

Buy, TP Rs 2500

Encora to add capability and depth, but integration will be a key monitorable n Coforge anno

vertical mix, primarily Hi Tech and Healthcare, is a positive, especially given Coforge’s strategic intent to scale these segments.

Management has indicated that transaction could be EPS accretive from day one.

While there is limited clarity at this stage on integration approach, past evidence is supportive: SLK Global was 9-11% of Coforge revenue at time of acquisition, while Cigniti was 16%

That said, earlier acquisitions were largely client-led, whereas this transaction is more capability- & leadership-driven, making talent retention and execution discipline more critical given larger scale of deal.

Nuvama on Coforge

Buy TP Rs 2250

Announced acquisition of Encora—a product design and engineering firm—for a consideration of USD2.35bn

Deal includes a share swap for USD1.89bn (93.7mn shares of Coforge to be issued) along with QIP/bridge loan to retire its USD550mn term loan

Acquisition would create an AI-native engineering, cloud and data services powerhouse and expand geographic presence

Transaction is likely to close in four–six months subject to approvals

With USD600mn revenue (30% of Coforge), Encora is Coforge’s biggest & boldest bet yet

Like acquisition & transaction structure & see Encora further accelerating Coforge’s growth.

Dam Cap on Coforge

Buy, TP Rs 1800

Coforge has taken a bold step by acquiring Encora for USD 2.35 billion (USD 1.89 billion equity value and USD 450 million of debt retirement)

See multiple concerns with the transaction

Co is paying a P/S multiple of 4.6x—broadly in line with Coforge’s trading multiple (FY25)—for a business delivering only 7–8% organic growth versus Coforge’s mid-teens growth.

Management’s assumption of EPS accretion hinges on a swap at INR 1,815 (an 8.5% premium to CMP), along with amortisation of intangibles (20% of Encora’s equity value) over 12–14 years, which is longer than the usual industry norm

Absence of any meaningful lock-in for incoming PE shareholders (Advent and Warburg Pincus) could lead to incremental supply pressure on stock, while integration risks remain as with any large acquisition

Considering fund raise and acquisition anticipation, stock has corrected 10% over last 3 days & now trades at 26.7x FY28E, offering some valuation comfort