ITC Shares Jump 4% As ITC Infotech To Acquire 22% Stake In Happiest Minds

Shares of ITC jumped over 4% on Tuesday, emerging among the top gainers on the Nifty 50 after its subsidiary ITC Infotech announced a deal to acquire a promoter stake in Happiest Minds Technologies, followed by a merger of the two IT services companies.

ITC shares were trading 4.15% higher at Rs 266.10 at 12:20 pm, after rising as much as 4.7% earlier in the session. The stock has fallen 27.8% year-to-date, compared with an 8.1% decline in the Nifty 50. ITC's market capitalisation stood at more than Rs 3.29 lakh crore.

Meanwhile, Happiest Minds shares fell around 8%.

ITC Infotech To Acquire 22.1% Stake

Under the transaction announced on August 31, ITC Infotech will acquire a 22.1% promoter stake in Happiest Minds from founder and executive chairman Ashok Soota and Ashok Soota Medical Research LLP for Rs 1,329.72 crore.

The acquisition will take place in two tranches.

In the first tranche, ITC Infotech will acquire 1.675 crore shares, representing an 11% stake in Happiest Minds, at Rs 390 per share for Rs 653.26 crore.

It will subsequently acquire another 1.691 crore shares, representing an 11.106% stake, at Rs 400 per share for Rs 676.46 crore.

Happiest Minds Merger To Follow

The stake purchase will be followed by the merger of Happiest Minds into ITC Infotech, subject to statutory and regulatory approvals. The boards of both companies have approved the draft scheme of amalgamation.

Under the proposed share-swap arrangement, Happiest Minds shareholders will receive 25 fully paid-up shares of ITC Infotech for every 81 Happiest Minds shares held on the record date, which is yet to be determined.

ITC Infotech's shares will subsequently be listed on the BSE and NSE, while Happiest Minds will be dissolved without being wound up once the scheme takes effect.

Combined Entity Targets $1 Bn Revenue

According to ITC's presentation, the transaction implies a valuation of Rs 6,167 crore for Happiest Minds and Rs 11,920 crore for ITC Infotech.

ITC will own a 73.4% stake in the combined and subsequently listed entity.

The combination is aimed at creating a larger IT services platform, with the merged entity targeting revenue of more than $1 billion by FY28.

The companies also expect nearly 10% revenue synergies and around 100 basis points of margin expansion.

The transaction marks a significant expansion of ITC's information technology business, bringing Happiest Minds together with ITC Infotech while providing a route to stock-market listing for the enlarged IT services entity.