Hulst BV, Coforge promoter to sell 26% stake via block deal stock surges by 5%

In a major market development today, Promoter Hulst BV, an arm of Baring Private Equity Asia, executed a significant stake divestment in Coforge Ltd (formerly NIIT Technologies). This eagerly awaited block deal, which materialized on August 24, has not only reshaped the ownership dynamics of the IT solutions company but has also triggered a remarkable 5% surge in the company's stock price.

Strategic Stake Divestment

Hulst BV's meticulously planned stake management strategy culminated in the sale of its complete 26% stake in Coforge. The deal, valued at $893 million, unfolded through a block deal transaction. This move followed earlier strategic offloads, including a 9.8% stake sale in February and a 3.5% stake divestment in May. The successful execution of this latest deal is a testament to Hulst BV's calculated approach.

Block Deal Dynamics

The block deal was executed at a floor price of ₹4,550 per unit, a 7.4% discount from the prevailing market price (CMP). A total of 1.62 crore shares were traded in this transaction, resulting in an estimated deal value of around ₹7,400 crore. The strong partnership between Hulst BV and Baring Private Equity Asia underscores the strategic depth of the deal.

Positive Market Reaction

Post-transaction, the market responded with enthusiasm as Coforge's stock price surged by an impressive 5%. This surge underscores investor confidence in the company's trajectory and prospects, despite the significant change in ownership. This positive market reaction reflects the market's acknowledgment of Coforge's consistent performance and its strategic positioning in the IT solutions sector.

Ownership Realignment

Hulst BV's stake sale marks a culmination of a steady decline in the promoter's ownership since Q3 2019 when it held 70.04% stake. By the June quarter of this year, the promoter's stake had reduced to 26.63%, indicating a strategic shift in ownership dynamics. The stake now primarily lies with public shareholders, mutual funds (27%), foreign investors (24%), and Life Insurance Corporation of India (LIC) with a 6.5% stake.

Coforge's Financial Performance

Despite the ownership realignment, Coforge has demonstrated resilience and growth. In the recent Q1, the company reported a 10% rise in consolidated net profit, reaching Rs 165 crore ($20.1 million), with revenue surging nearly 21% to ₹2,221 crore. Notably, the company's order intake also witnessed a substantial rise to $531 million, compared to $315 million in the previous year.

Core Business

It's noteworthy that Coforge Ltd., headquartered in Noida, specializes in IT solutions across key verticals including Banking and Financial Services, Insurance, Travel, and Transportation. The company's competencies encompass Data & Analytics, Automation, Cloud, and Digital solutions. 

Conclusion

The successful block deal involving Hulst BV's stake divestment in Coforge has set a significant market precedent. The subsequent 5% increase in the company's stock price post-deal reflects investors' confidence in Coforge's continued growth and innovation-driven strategies. As the company continues to navigate changing ownership dynamics, its impressive financial performance and strategic direction position it as a notable player in the dynamic IT solutions sector.