Indian IT services firm Coforge announced on Friday that it will acquire AI company Encora for an enterprise value of $2.35 billion to strengthen its AI capabilities and expand in the U.S. and Latin America. Encora, backed by Advent International and Warburg Pincus, provides AI solutions in product, cloud, and data engineering, with Coforge projecting $2 billion in annual revenue by March 2027.

The combined entity is expected to achieve a pre-tax margin of 14%, with the acquisition projected to be EPS accretive by fiscal 2027. Analysts say the merger could help Coforge surpass Persistent, Mphasis, and Hexaware to become India’s seventh-largest IT firm. Coforge will fund the $1.89 billion equity portion by issuing preference shares at ₹1,815.91 each, representing an 8.5% premium to Friday’s close, while Encora shareholders will get a 20% stake in the merged company. Up to $550 million may be raised to pay off Encora’s debt via a bridge loan or qualified institutional placement.

The deal will bolster Coforge’s presence in the West and Midwest U.S. and provide access to Encora’s 3,100-strong Latin American workforce. Coforge reported FY25 revenues of ₹120.51 billion ($1.34 billion), up 32% from the previous year, while Encora had revenues of $516 million. The acquisition is expected to close within four to six months, with BDA Partners acting as the investment banker.