Debasis Mohapatra
Bengaluru, 2 May
Indian mid-tier IT services company Coforge took a huge bet on Thursday when the company announced that it would acquire up to 54% stake in Cigniti Technologies at Rs 1,415 per share.
At this valuation, Coforge is likely to spend around Rs 1,957 crore (for a 50.7% stake) to acquire a majority stake in the company.
In an exchange filing, the company said the acquisition is expected to be completed by the second quarter of FY25 subject to meeting the conditions, regulatory approvals, and closing action items under the share purchase agreements.
As per extant SEBI rule, the acquisition will also trigger a mandatory open offer, which will allow Coforge to further consolidate its position in Cigniti.
Cigniti Technologies, which is a listed entity on both BSE and the National Stock Exchange of India, provides digital engineering services across the US, UK, Australia, Canada, Czech Republic, South Africa, and Singapore and has a huge presence in India as its delivery centre.
Giving the rationale behind such a big-ticket acquisition, Coforge said that post this acquisition, its revenue is likely to grow to $2 billion by FY27 along with improvement of margin by 150-200 basis points by this period.
“The acquisition will create three new scaled-up verticals – Retail, Technology and Healthcare. It will help Coforge realize its objective of scaling up its presence across South-West, Mid-West, and Western US markets. It will also help Coforge address the significant opportunities that the proliferation of AI is creating for specialized Assurance Services,” the company in a release.
Earlier, Coforge’s board approved raising funds to the tune of Rs 3,200 crore on March 16. It has said that the company would raise these funds through a Qualified Institutional Placement (QIP), which means it would issue shares to eligible institutional shareholders.
Meanwhile, the company on Thursday in the exchange filing said that its board has approved issuance of corporate guarantee for Coforge Pte. Ltd., a wholly owned subsidiary of Coforge Ltd, based in Singapore. The corporate guarantee for an amount up to $250 million has been provided by Coforge Ltd to secure the facility to be availed by Coforge Pte. Ltd. Though the utilisation of funds from such corporate guarantee is not provided, it is believed that the funds may be spent for Cigniti acquisition.
Analysts said this acquisition will help Coforge to deepen its presence in many verticals.
“(It is an) interesting acquisition. It helps Coforge to deepen its presence in travel, airlines, and also in digital engineering and digital assurance (space),” wrote Pareekh Jain, an IT outsourcing advisor & Founder of Pareekh Consulting in social media platform ‘X’. He also opined that Coforge should merge Cigniti to get synergies, upsell, and cross-sell to clients.
Coforge has been posting industry-leading revenue growth rates in recent years among mid-tier IT services firms.
