1 day ago
ITC Infotech, Happiest Minds Plan Merger After Stake Sale
ITC Infotech plans to buy part of Happiest Minds from its founder Ashok Soota and a related company.
The stake is worth about Rs 1,330 crore.
After that purchase, the two technology companies plan to merge.
Happiest Minds shareholders would receive ITC Infotech shares in exchange for their shares.
The exchange rate would be 25 ITC Infotech shares for every 81 Happiest Minds shares.
The merger still needs approval from shareholders, regulators, stock exchanges and the National Company Law Tribunal.
Until those approvals arrive, the companies will continue operating separately.
The combined company could employ more than 19,000 people and serve over 800 customers in 30 countries.
It wants to become an AI-focused technology company with $1 billion in yearly revenue by FY28.
ITC Infotech will acquire a 22.1% Happiest Minds stake from Ashok Soota and Ashok Soota Medical Research LLP for approximately Rs 1,330 crore.
The purchase covers 3,36,61,700 Happiest Minds shares in two tranches priced at Rs 390 and Rs 400 per share.
Happiest Minds is proposed to merge into ITC Infotech through a share swap, subject to shareholder and regulatory approvals.
Happiest Minds shareholders will receive 25 ITC Infotech shares for every 81 Happiest Minds shares they hold.
The combined company is expected to have more than 19,000 employees, about Rs 7,000 crore in revenue, and a target of $1 billion in annual revenue by FY28.
- Who
- ITC Infotech India Ltd, a wholly owned subsidiary of ITC Ltd, and Happiest Minds Technologies Ltd are involved; Ashok Soota and Ashok Soota Medical Research LLP are selling the stake.
- What
- ITC Infotech will acquire 22.1% of Happiest Minds, followed by a proposed merger through a share swap.
- Where
- The companies operate in India; the proposed merged entity would be listed on the BSE and NSE. Happiest Minds also proposed shifting its registered office from Bengaluru to Kolkata.
- When
- The transaction was announced on Monday and is expected to take about 15 months, subject to required approvals.
- Why
- The companies say the combination will provide greater scale, complementary capabilities and stronger AI-led technology-services offerings.
Company Rationale
Analyst Reservations
Scale and growth
Company Rationale
ITC and Happiest Minds say the merger will create a larger, AI-first global technology-services enterprise with more than 19,000 employees and a $1 billion annual-revenue target by FY28.
Analyst Reservations
Analysts noted that the combined company would initially remain smaller than major Indian technology-services firms and would need to achieve the stated growth target.
Shareholder value
Company Rationale
The companies describe the transaction as a combination of complementary businesses that can create synergies and expand technology offerings across geographies.
Analyst Reservations
An HDFC Securities analyst said Happiest Minds shareholders might have preferred a 15-20% premium and questioned the margin benefits because the two companies have similar margins.
Strategic fit
Company Rationale
Happiest Minds brings digital engineering, data, AI and cybersecurity capabilities, while ITC Infotech contributes enterprise transformation, SAP, cloud, manufacturing and retail expertise.
Analyst Reservations
The financial and strategic benefits will depend on whether these overlapping and complementary capabilities generate the expected synergies after integration.
Market reaction
Company Rationale
The companies presented the deal as a step toward a stronger AI-led technology-services business and proposed listing ITC Infotech after the merger.
Analyst Reservations
Reports differed on the immediate market response: one said Happiest Minds shares fell about 9% while ITC rose 5%, while another reported Happiest Minds closed 0.2% lower on Monday.
Key facts
- Acquisition value
- Approximately Rs 1,329.72 crore, commonly described as about Rs 1,330 crore
- Stake acquired
- 22.1% of Happiest Minds
- Shares purchased
- 3,36,61,700 equity shares
- Purchase structure
- 16.75 million shares at Rs 390 each and 16.91 million shares at Rs 400 each
- Share-swap ratio
- 25 ITC Infotech shares for every 81 Happiest Minds shares
- Post-merger ownership
- ITC Ltd: 73.4%; Happiest Minds shareholders: 26.6%
- Expected scale
- More than 19,000 employees, over 800 customers and operations across 30 countries
- Revenue target
- $1 billion in annual revenue by FY28
Quotes
Sushovon Nayak
Lead IT analyst at Anand Rathi Institutional Equities
“Happiest Minds shareholders would’ve been happier if they got a 15-20% premium to the existing share prices. This deal is not all that happening from a margins perspective because they are similar for both companies. The good part is that both companies have expertise in different business lines.”
livemint.com
“In the AI era, large IT services firms are getting bolt-on acquisitions, to address capability white spaces, while midcapIT is focussing on scale and geo/vertical diversification. The proposed merger is a step in that direction.”
livemint.com
Manas Chakraborty
Managing director and chief executive of ITC Infotech
“Integrating Happiest Minds’ digital engineering, data, AI, and cybersecurity capabilities with our deep domain expertise, cloud and engineering capabilities will enable us to serve as a full stack AI-led transformation partner.”
financialexpress.com
Sources
Happiest Minds shares tank 9% on swap ratio, ITC up 5%; ITC Infotech to list after merger
ITC sets stage for its third listed firm, larger IT play with Happiest Minds merger
ITC Infotech to buy 22% stake in Happiest Minds
ITC Infotech to acquire 22.1% stake in Happiest Minds for Rs 1,330 crore; firms to merge
Happiest Minds to merge with ITC Infotech; promoters to sell 22.1% stake for Rs 1,330 crore
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