BPEA sells Coforge stake for ₹7,684 cr

The block deals in the software services firm boosted its stock by around 10% to ₹5,391 on Thursday, with the transactions drawing marquee investors such as SBI Mutual Fund, Aditya Birla Mutual Fund, Capital Group and Kotak Mahindra Group.

Coforge is a professionally managed company, and hence, no identifiable promoter is a good thing, said an analyst. “That’s how a lot of matured companies in the US are. They are all 100% publicly owned. Besides, now the large mutual funds and other shareholders will sit on the board, which is a positive,” the analyst said on condition of anonymity.

BPEA sold its 16.27 million shares at ₹4,722.15 each in a series of bulk deals. The shares were sold at a 4% discount to Coforge’s Wednesday closing price of ₹4,913.1.

SBI Mutual Fund, the country’s largest asset management company, bought 4.2% of Coforge for ₹1,213.84 crore in Thursday’s transaction.

Kotak Mahindra Asset Management Co., through one of its schemes, acquired a 1.42% stake for ₹406.96 crore, while US-based investment manager Capital Group-owned Smallcap World Fund Inc. acquired 1.1% in Coforge for ₹311.25 crore.

Private insurer ICICI Prudential Life Insurance Co. Ltd bought shares worth ₹201 crore in the deal from BPEA.

Other major investors such as HDFC Mutual Fund, Societe Generale (through an offshore derivative instrument) and Aditya Birla Sun Life MF acquired shares worth ₹306.82 crore, ₹216.2 crore and ₹149.65 crore, respectively.

“The split (between domestic and global investors) stands at 70:30,” said Vasudev Jagannath, the head of institutional equities at IIFL Securities, which was the sole manager of the deal.

An existing investor named Gravitational Research Capital Llp also sold a 0.78% stake in Coforge for ₹246.94 crore at ₹5,163.9 per share.

Coforge is primarily engaged in the business of digital services, specializing in industries such as banking and financial services, insurance, travel and transportation.

The firm has offices in 21 countries with 26 delivery centres across nine countries.

By selling its shares at ₹4,722 apiece, BPEA has earned a return of almost 240% since the private equity major acquired a stake in Coforge in 2019 at ₹1,394 per share.

In April 2019, BPEA first acquired 30% of Coforge from various promoters for ₹1,394 per share. The aggregate consideration for purchasing shares from these promoters was ₹2,627 crore. Later, the private equity firm launched an open offer to increase its stake to 40%. In February, BPEA divested 6 million shares or a 9.8% stake in Coforge, totalling ₹2,430 crore at ₹4,050 per share.

People familiar with Thursday’s deal said at least 50 investors participated in the transaction, and the order book was subscribed over three times.

According to the transaction terms, the floor price for the block deal was fixed at ₹4,550 per share, a 7.4% discount from Wednesday’s closing price.

A report by TV news channel CNBC-TV18 cited Jean Salata, the head of BPEA, saying the company’s objective for investing in Coforge has been achieved and it is a good time to exit the business.

“Our business model is one where we invest in companies. We help them to grow, reposition and transform…The future for the business is extremely bright,” Salata said, according to CNBC-TV18.

On Thursday, Coforge launched a generative AI platform designed to build enterprise AI capabilities. Termed as Coforge Quasar, the platform comes pre-loaded with over 100 APIs, readily available for integration.

For the year ended March 2023, the company reported a revenue of ₹4,230 crore and a net profit of ₹732 crore. On a consolidated basis, the company has reported a revenue of $1 billion.

Mayur Bhalerao in Mumbai contributed to this story.

Updated: 24 Aug 2023, 11:40 PM IST