Coforge Ltd’s public shareholders rejected the firm’s decision to give private equity giant Advent International the right to nominate members on the board’s audit, nomination, and remuneration panels, forcing the Noida-headquartered IT services firm to remove these privileges, in an effort to woo shareholder approval to its proposed $2.4 billion buyout of a US analytics firm.
Late on Tuesday night, Coforge informed the exchanges that 31% of shareholders had opposed the resolution granting special rights to Advent. Eventually, upon completion of the Encora deal, Advent will own 20% of Coforge.
This special resolution was defeated because it fell short of the required three-fourths approval.
About 14 hours later, on Wednesday afternoon, Coforge informed the exchanges that it had removed those privileges as it sought shareholders’ votes again on the resolution, starting 29 January until 27 February.
“Special right to appoint such Investor Directors to the Board committees of the Company has been removed,” said Coforge, in a stock exchange filing dated 28 January.
The contentious issue that prompted investor revolt was that Advent could appoint members to Coforge’s oversight committees, including the audit, nomination, and remuneration panels. This is because the audit committee oversees financial reporting, among other things, and the nomination and remuneration panel oversees the appointment and removal, as well as the remuneration, of key managerial personnel, including the chief executive officer.
Key Takeaways
- The 31% dissent vote shows that ‘promoter-less’ companies face intense scrutiny of their governance structures.
- Investors drew a hard line at Advent, influencing the audit, nomination, and remuneration committees, which oversee CEO pay and financial integrity.
- Coforge’s 14-hour turnaround to strip these rights shows the company’s urgency to close the Encora deal.
- While global funds supported the resolution, domestic heavyweights like Motilal Oswal and HDFC MF likely used their 51% combined bloc to force the change.
- Despite the governance fix, analysts remain wary of the deal’s valuation and the complexity of integrating Encora’s M&A-heavy history.
The rare shareholder revolt in the country’s information technology services sector followed Coforge’s announcement on 26 December that it would buy Encora from Advent and Warburg Pincus.
As part of this transaction, Coforge agreed to issue shares worth $1.89 billion to Encora’s owners and subsequently raise $550 million through a qualified institutional placement to retire Encora’s debt.
Proxy firm advice
At least one proxy advisory firm had opposed one of the clauses of this transaction.
“[W]e do not support committee nomination rights, irrespective of an embedded minimum shareholding threshold, since the determination of committee composition is the board’s prerogative and must be decided independently by the board,” said Institutional Investor Advisory Services, in a voting advisory dated 14 January.
“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,” said Shriram Subramanian, founder of InGovern Research, a Bengaluru-based proxy-advisory firm.
Coforge, formerly NIIT Technologies Ltd, does not have a promoter. Employees owned 2.2% of the company through an employee provident fund, while directors owned 0.9% at the end of December 2025. Foreign portfolio investors owned a third of Coforge, while domestic mutual funds and insurance companies owned 37.73% and 13.40%, respectively, at the end of December last year. Retail shareholders owned the remaining 11%.
A Mint review of voting disclosures by foreign investors suggests that most supported the resolution.
Norway’s Norges Bank Investment Management, the world’s biggest sovereign wealth fund, Legal & General Investment Management (LGIM), the UK’s largest fund manager, managing $1.5 trillion of assets, and The California Public Employees’ Retirement System (CalPERS), which has about $500 billion in assets under management (AUM), supported the earlier resolution.
This suggests that much of the opposition came from domestic mutual funds and insurance companies, which together owned about 51.1% of Coforge.
Motilal Oswal owned 9.25%, making it the largest shareholder, followed by HDFC Mutual Fund with 5.58%. Life Insurance Corp. of India was the third-largest owner, with a 4.54% stake at the end of December.
Expensive buy?
Coforge, which ended last year with $1.47 billion in revenue, making it the country’s seventh-largest IT services firm, has made an impressive pitch to investors for the transaction.
“This is a defining moment for the organisation,” Coforge chief executive officer Sudhir Singh told investors and shareholders in an investor call on 26 December. “This acquisition will ensure the next eight years are as exciting, if not more exciting, than the last eight years.”
Still, a few analysts have questioned the rationale of the acquisition.
“Encora at 4x Sales, 21x Ebitda on FY26E is at a premium to Coforge for weaker organic revenue growth of 7-8% (FY24-FY26E). The supposed AI native player has not delivered better growth or margins,” Bank of Baroda Capital Markets analysts Girish Pai and Lopa Notaria, in a note dated 24 January.
“While Coforge has digested smaller acquisitions, this is the largest one done by any Indian player and, more importantly, Encora itself, in its current form, has come about through multiple M&A transactions, and hence value extraction could be a challenge,” the Bank of Baroda Capital Markets analysts said.
