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HDFC Securities Institutional Equities
Brokerage firm HDFC Securities Institutional Equities has downgraded Happiest Minds Ltd. to Add from Buy and cuts its target price to Rs 400 from Rs 440, as the brokeage believes that the ITC Infotech deal price implies no takeover premium, the 15-month integration timeline brings uncertainty, plus there is no clarity on the retention plans of the existing management team.
Deal construct — built to avoid an open offer:
ITC Infotech is acquiring 22.1% of Happiest Minds — just under the 25% threshold that would trigger a mandatory open offer to public shareholders — structured in two tranches under a single agreement.
At this stage, ITC Infotech takes no board or management control; Ashok Soota retains the residual ~22.1% promoter stake until the scheme becomes effective, meaning control formally changes hands only upon merger completion. Because court sanctioned mergers do not require an open offer, none is triggered at that point either.
For minority shareholders, the practical outcome is straightforward: there is no cash exit at any stage. Funding sits at the subsidiary level: ITC injects Rs 13.30 billion into ITC Infotech via a rights issue, so ITC itself issues no equity, and the only cash leaving the group goes to the selling promoters.
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The merger also delivers a listing for ITC Infotech without an IPO. Approvals are required from the CCI, the exchanges, the NCLT, shareholders and creditors, with a guided timeline of ~15 months. Until then, the two companies will run separately as independent entities.
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