Payback overdue

Majesco’s stock price has been on a roll hitting an all-time high of Rs.909 after having hit a 52-week low of Rs.185 during the pandemic meltdown. Almost everyone seems to be using the opportunity to lighten up, right from senior vice presidents in the company to the promoter Sudhakar Ram to heavyweight investors like Amansa Capital and Ashish Kacholia.

This mid-tier IT company owes its parentage to Mastek, one of the earliest software companies in India and was listed separately in 2015 after Mastek demerged its insurance products and services business. Unlike Coforge (NIIT Technologies) which has seen a steady run-up, Majesco is now enjoying its moment in the sun.

Its stock price has moved into a higher orbit ever since it sold its US subsidiary for $594 million to private equity firm Thoma Bravo and announced a buyback with the proceeds. An ICICI Direct update post the announcement mentioned, “Post the completion of sales of Majesco US, Majesco India has cash of Rs.30.72 billion, implying a value of Rs.1,028/share. The company plans to distribute the same via buyback (7.47 million shares at Rs.6.31 billion) and dividend ( Rs.22.95 billion).”  

Analysts at HDFC Securities Institutional Research have also retained their ‘buy’ rating with a target price of Rs.1,050. They cite, “Majesco’s growth will be led by traction in the Products segment (48% of revenue, cloud subscription + licence + AMC). Majesco has positioned itself as a pure-play Products company and is focusing on driving growth through system integration partnerships.”

While the above is comforting, longstanding investors are taking money off the table. Total insider selling through 12th October to 20th October amounted to Rs.121 million. Post the sale, Sudhakar Ram’s direct holding stands at 5.37%. Overall promoter holding stands at 36.99%, of which Ram controls 7.95%.

The bigger action is on the institutional side where Akash Prakash founded Amansa Capital has reduced its holding from 9.25% in June 2020 to 8.9% in September 2020. Lucky Investment Managers’ Ashish Kacholia, too, has sold down from 3.1% to 2.32% during the same period. So have Aditya Birla Sunlife Mutual Fund from 4.13% to 3.33% and its insurance arm from 3.45% to <1%.

However, IDFC MF has bought into the uptrend and has increased its holding from 4.31% to 5.04%. The other prominent buyer has been Sarath Reddy’s private wealth firm Unifi, with 1.89%. While Ashish Kacholia and Madhulika Agarwal continue to hold 2.32% & 2.1%, respectively, as per the September 2020 holding, further trimming cannot be ruled out in October given the sharp run-up.