Coforge Revises Landmark IT Deal Terms Following Shareholder Opposition
The Noida-headquartered IT services firm Coforge Ltd has been compelled to make significant changes to its proposed $2.4 billion acquisition of US analytics firm Encora after facing substantial pushback from domestic institutional shareholders. The company's initial plan to grant private equity giant Advent International special rights to nominate members to key board committees was decisively rejected by public shareholders, forcing a rapid revision of terms.
Shareholder Revolt Forces Governance Changes
In a dramatic turn of events, 31% of Coforge shareholders voted against the resolution that would have given Advent International the authority to appoint directors to the company's audit, nomination, and remuneration committees. This opposition fell just short of the required three-fourths approval needed for such special resolutions, effectively blocking the original arrangement.
The contentious issue centered around Advent's potential influence over critical oversight functions. The audit committee oversees financial reporting integrity, while the nomination and remuneration panels control the appointment, removal, and compensation of key managerial personnel, including the chief executive officer. Domestic institutional investors drew a firm line against allowing a private equity firm such direct governance control.
Swift Corporate Response
Demonstrating remarkable urgency, Coforge responded within just 14 hours by removing these privileges from the deal terms. The company informed stock exchanges that it had eliminated "special right to appoint such Investor Directors to the Board committees" and would seek shareholder approval again with revised terms between January 29 and February 27.
This rapid turnaround underscores the company's determination to proceed with what would be India's largest IT services acquisition. Upon completion of the Encora transaction, Advent International will own approximately 20% of Coforge, but without the originally proposed committee nomination privileges.
Institutional Dynamics at Play
A closer examination of voting patterns reveals a clear divide between global and domestic investors. While international heavyweights like Norway's Norges Bank Investment Management, Legal & General Investment Management, and California's CalPERS supported the original resolution, domestic institutions formed a powerful opposing bloc.
Together, domestic mutual funds and insurance companies controlled about 51.1% of Coforge at the end of December 2025, with Motilal Oswal (9.25%), HDFC Mutual Fund (5.58%), and Life Insurance Corporation of India (4.54%) leading the opposition. This collective strength proved decisive in forcing the governance changes.
Proxy Advisory Influence
The shareholder revolt received significant backing from proxy advisory firms. Institutional Investor Advisory Services explicitly opposed the committee nomination rights in a January 14 voting advisory, stating that "the determination of committee composition is the board's prerogative and must be decided independently by the board."
Shriram Subramanian, founder of Bengaluru-based InGovern Research, commented that "the acquisition will go through as planned. Only that one resolution granting special rights to the acquiree got defeated, which is why Coforge came out with revised terms. We expect no further hurdles to the acquisition."
Deal Structure and Valuation Concerns
The Encora acquisition represents a transformational move for Coforge, which ended 2025 with $1.47 billion in revenue, making it India's seventh-largest IT services firm. As part of the transaction, Coforge agreed to issue shares worth $1.89 billion to Encora's owners and raise an additional $550 million through a qualified institutional placement to retire Encora's debt.
However, some analysts have raised questions about the deal's valuation and integration challenges. Bank of Baroda Capital Markets analysts noted that "Encora at 4x Sales, 21x Ebitda on FY26E is at a premium to Coforge for weaker organic revenue growth of 7-8%." They further cautioned that "Encora itself, in its current form, has come about through multiple M&A transactions, and hence value extraction could be a challenge."
Governance Implications for Promoter-less Companies
This episode highlights the intense scrutiny facing promoter-less companies in India's corporate landscape. Coforge, formerly NIIT Technologies Ltd, operates without a traditional promoter group. At the end of December 2025, employees owned 2.2% through an employee provident fund, while directors held 0.9%. Foreign portfolio investors controlled one-third of the company, with domestic institutions and retail shareholders owning the remainder.
The 31% dissent vote serves as a powerful reminder that institutional investors are increasingly vigilant about governance standards, particularly in companies without dominant promoter groups. This shareholder activism in the IT services sector marks a significant development in India's corporate governance evolution.
As Coforge moves forward with revised terms, the company's leadership remains optimistic about the strategic benefits. CEO Sudhir Singh told investors that "this acquisition will ensure the next eight years are as exciting, if not more exciting, than the last eight years." The coming weeks will determine whether the revised structure satisfies all stakeholders and allows this landmark deal to proceed as envisioned.
