In a significant development for the IT sector, Coforge Limited has announced its decision to amalgamate with Cigniti Technologies Limited. The merger, aimed at creating a unified entity with enhanced capabilities and a stronger global footprint, has been approved by the Boards of both companies.
Financials of the Entities
As per the audited financial statements for the period ending September 30, 2024:
- Cigniti Technologies Limited (Transferor Company):
- Total Assets: ₹685.12 crore
- Net Worth: ₹545.89 crore
- Turnover: ₹464.95 crore
- Coforge Limited (Transferee Company):
- Total Assets: ₹6,787.58 crore
- Net Worth: ₹5,622.30 crore
- Turnover: ₹2,535.32 crore
Nature of the Transaction
The transaction involves the amalgamation of Cigniti Technologies Limited, a wholly-owned subsidiary of Coforge Limited, with its parent company. As the transaction falls under the scope of mergers and amalgamations as per the Companies Act, 2013, it is exempt from the related party transaction requirements of Section 188 of the Act.
The consideration for the amalgamation is based on a share exchange ratio determined by independent valuers PwC Business Consulting Services LLP and KPMG Valuation Services LLP. The ratio has been validated by fairness opinions from SEBI-registered merchant bankers JM Financial Limited and Axis Capital Limited.
Business Overview
- Cigniti Technologies Limited specializes in digital assurance and engineering services, offering AI-driven continuous testing and test automation solutions across industries.
- Coforge Limited provides IT services, including application development, cloud computing, and business process outsourcing, serving sectors such as financial services, insurance, travel, and manufacturing.
Rationale for the Amalgamation
The merger is expected to bring several strategic benefits, including:
- Enhanced Digital Transformation Capabilities: Leveraging AI and assurance services to provide cutting-edge solutions globally, particularly in the US market.
- Accelerated Growth: Expansion into three new verticals—Retail, Technology, and Healthcare—and strengthened presence in the US.
- Operational Efficiencies: Reduction in operational costs, shared best practices, and improved cash flow management.
- Simplified Corporate Structure: Streamlining of legal entities to reduce redundancies and compliance costs.
- Improved Customer Offerings: A broader portfolio of services targeting a wider range of customers across geographies.
Shareholding and Exchange Ratio
The amalgamation does not involve any cash consideration. Instead, Coforge will issue 1 equity share of ₹10 each for every 5 equity shares of ₹10 held in Cigniti.
Post-merger, the shareholders of Cigniti will become shareholders of Coforge, and Cigniti will be dissolved without winding up. The shareholding pattern of Coforge will remain entirely public, with the number of shares increasing from 6,68,59,385 to 6,93,44,331.
Notably, Hulst B.V., previously classified as a promoter, had requested reclassification to the public category in June 2024. The request was approved by Coforge’s Board and is currently under process with stock exchanges.
Outcome
The merger aims to position Coforge as a global leader in IT and digital transformation services, capitalizing on advancements in AI and digital engineering. By combining resources, capabilities, and market reach, the amalgamation is expected to deliver significant value to stakeholders, including shareholders, customers, and employees.
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