If you’ve been reading news about Indian IT companies lately, you’ve probably heard the same gloomy story: global enterprise spending is slow, clients are cutting budgets, and legacy giants are struggling to post growth.

And then, there’s Coforge Ltd. The stock gained nearly 10% after reporting its April-June quarter results.

In its Q1 FY27 results, Coforge reported a massive 49% jump in revenue from operations to ₹5,528 crore compared to the same period last year. Operating profit (EBIT) more than doubled to ₹882 crore, while net profit attributable to shareholders surged 63.4% to ₹519 crore. To celebrate, the company declared a ₹4.00 per share interim dividend and bagged a massive $230+ million AI deal with a European client.

Naturally, this raises a question: how is a mid-tier IT company running laps while IT majors are stuck in traffic?

The Secret Engine: A $1.5 Billion Shopping Spree

Here’s the plot twist: Coforge didn’t achieve this growth solely by winning new client contracts organically. It went on an aggressive shopping spree.

The crown jewel of this expansion is Encora, a software engineering firm with a strong footprint in North America and Latin America. Coforge bought 100% of Encora in a deal valued at nearly $1.5 billion (~₹14,000 crore).

Because Encora joined the consolidated entity starting May 1, 2026, it brought over ₹950 crore ($100 million) in fresh revenue in just two months! On top of that, Coforge finalized its merger with Cigniti Technologies, issuing over 1.26 crore new shares to complete the deal.

Think of it like opening a chain of popular restaurants. If you own 10 diners and suddenly buy 5 more, your total weekend sales will shoot up. But if you strip away those newly bought diners and look only at Coforge’s original business, organic sequential growth stood at 5.2% (constant currency) for the quarter. That is still a decent performance in today’s tough market, but nowhere near the 49% headline figure.

The AI Transformation Narrative

Acquiring new companies often leads to messy integrations and squeezed profit margins. Surprisingly, Coforge managed to expand its operational profit margin (EBIT) to 16.0%.

How did they pull that off? Management points to their aggressive push into AI engineering.

Coforge claims that 86% of its business now comes from AI-led engineering, data, and cloud services. Instead of simply renting out software developers by the hour, they are deploying automated AI platforms like Nuuron (an AI operating framework) and NEXA (an agentic AI platform for insurance companies).

By using AI internally to speed up delivery, Coforge can complete more work with higher efficiency, boosting profitability.

The Fine Print: Debt, Goodwill, and Hidden Bumps

This brings us to the part every retail investor needs to look at carefully. To buy a company as large as Encora, Coforge had to pull two financial levers:

  • Equity Dilution: They issued equity shares, diluting existing ownership by trading stock for Encora’s value.
  • Debt Obligations: They took on debt, borrowing $550 million (~₹5,160 crore) in US dollars at a 4.60% fixed interest rate to pay off Encora’s existing loans.

Because of this move, Coforge’s total borrowings shot up from under ₹400 crore in March to ₹5,380 crore in June. While a 4.60% interest rate is relatively low, that loan must be repaid over the next three years. If global tech spending hits an unexpected downturn, debt servicing can put pressure on cash flows.

Furthermore, Goodwill, the extra price a company pays above the tangible value of the assets it buys, quadrupled on Coforge’s balance sheet to ₹16,373 crore ($1.73 billion). If Encora fails to generate the projected profits in the coming years, Coforge may have to write down the value of that goodwill, which could impact future profits.

Finally, Coforge logged ₹55 crore in net exceptional expenses this quarter. This included:

  • ₹61.3 crore in deal integration costs,
  • ₹5.0 crore in legal fees for an ongoing cybersecurity lawsuit, and
  • ₹10.8 crore provision for a client that recently filed for bankruptcy,
    (partially offset by a ₹22.1 crore foreign exchange gain from Bolivian currency devaluation).

What Should Retail Investors Watch?

Coforge has built a formidable growth engine. By combining M&A with AI engineering, Coforge has outpaced many of its mid-tier competitors. Their 12-month order book sits at a record $2.23 billion, providing strong future revenue visibility.

However, as a retail investor, the main variable to watch moving forward isn’t just revenue growth, it’s execution. Can Coforge smoothly integrate thousands of new employees across continents, maintain its low attrition rate of 10.4%, and comfortably service its $550 million debt repayments over the next 3 years?

If they succeed, this inorganic strategy could define a new template for mid-tier IT growth. If integration trips up, those heavy debt and goodwill numbers could test the balance sheet.