Coforge Launches Rs 2,240 Crore QIP for Cigniti Acquisition

Coforge Ltd. announced a Qualified Institutional Placement (QIP) on Tuesday evening, aiming to raise up to ₹2,240 crore. Sources reported to CNBC-TV18 that the company intends to raise this amount through the QIP. Earlier this year, in March, the company's board had authorized the issuance of shares to institutional investors, with a maximum limit of ₹3,200 crore.

Coforge has set the floor price for its Qualified Institutional Placement (QIP) at ₹4,531 per share, representing a 5.4% discount to Tuesday's closing price. The indicative issue price for the QIP is expected to range from ₹4,531.4 to ₹4,600 per share. This range implies a potential premium of up to 1.5% above the floor price at the upper end.

Coforge's Qualified Institutional Placement (QIP) will dilute existing shareholders' equity by approximately 7.9% to 8%. Unlike typical institutional share sales where promoter holdings decrease, this QIP involves a fresh issuance of equity shares, thus increasing the company's total outstanding equity. This is due to Coforge's unique structure, which has no promoter holding.

Coforge has announced that a meeting will be held on Monday, May 27th to finalize the issue price for its Qualified Institutional Placement (QIP). The company plans to issue between 48.69 lakh and 49.43 lakh fresh equity shares through the QIP, according to sources. IIFL Securities Ltd. and HSBC Securities and Capital Markets (India) Pvt. Ltd. are serving as the Book Running Lead Managers for this offering. Coforge intends to utilize the proceeds from the QIP to finance its recent acquisition of Cigniti Technologies.

On May 2, Coforge announced an agreement to acquire a controlling stake of up to 54% in Cigniti Technologies, based in Hyderabad, from promoters and certain public shareholders at a price of ₹1,415 per share. This acquisition triggered an Open Offer, launched on May 3, to acquire an additional 26% stake in Cigniti at the same price of ₹1,415 per share.

The full acceptance of the open offer will require a total consideration of ₹1,013.5 crores. Coforge plans to utilize this acquisition to achieve its objective of becoming a $2 billion company by fiscal year 2027. Through this transaction, Coforge also intends to increase its margins by 150-200 basis points during the stipulated period.

Coforge's shares, while being the second best performers on the Nifty IT index in 2023, have underperformed in 2024, declining 23% so far. Despite this, the stock closed 1.2% higher on Tuesday, reaching ₹4,787.2.

Coforge aims to achieve a majority stake of at least 51% in the target company by August. This will be a key step in the acquisition process, paving the way for subsequent stages. Coforge CEO Sudhir Singh has confirmed to Moneycontrol that the acquisition will significantly strengthen the company's European presence, which is currently heavily concentrated in the UK.