Debasis Mohapatra
Bengaluru, 22 May
Speculation of activist investors taking position in Nasdaq-listed IT major Cognizant has surfaced after Japanese financial services group, Nomura bought stake in the company.
In a recent regulatory filing, Japanese financial services group Nomura Holdings has said that it has acquired a significant stake in Cognizant, purchasing 13.3 million shares, equivalent to 2.7% of Cognizant’s shares in March quarter of this year. This acquisition made Nomura as the seventh largest shareholder in the Nasdaq-listed firm.
Nomura is widely viewed as a counterparty for activist swap positions as the prime broker is well known for putting activists into stocks.
Experts said though the intention of Nomura remains unknown, it may put the company’s management under pressure if Nomura pushes activist investor’s agenda in the coming days.
“We have not heard what the Nomura agenda is yet. However, it’s likely to revolve around improving earnings,” Peter Bendor Samuel, CEO of global consultancy firm, Everest Group said.
Cognizant had seen activist investor funds taking position earlier, compelling the management to change its business strategies. Way back in 2016, Elliott Management had bought 4% stake in Cognizant and tried to influence its business strategy.
After Elliott Management bought a stake in the company, it presented Cognizant with a three-part value enhancement plan. It had suggested for operational improvement, efficient capital allocation, and incentive alignment.
It forced the US-headquartered firm to increase its operating margin from 19-20% to 23% by 2018. During this period, Cognizant agreed to appoint three independent directors and return $3.4 billion to shareholders in 2017. Elliott sold all its stake in the company in 2018.
Though Nomura is yet to disclose its intention, sources in the know said it may come up with suggestions for accelerating revenue growth of Cognizant.
According to research firm- Gordon Haskett, Cognizant (CTSH) looks like it could be ripe for activism, especially relative to the performance of its peer Accenture (ACN) in recent years.
Cognizant has underperformed with respect to its larger peers like Accenture, and TCS in recent years. The company under its new CEO Ravi Kumar, however, has taken many initiatives to accelerate revenue growth since last year.
