India's Happiest Minds slides as investors fret over lengthy ITC deal closure

Sept 1 : India's Happiest Minds shares fell as much as 12 per cent on Tuesday after Indian conglomerate ITC unveiled plans to merge its unit with the IT services provider, fueling concerns over a prolonged integration.

The deal comes at a time when India's $315 billion IT industry is racing to bulk up capabilities to combat AI-led disruption of the software market.

ITC Infotech India, a wholly owned subsidiary of ITC, will buy 22.1 per cent of Happiest Minds for about $140 million in cash. ITC Infotech would list on the BSE and the NSE after the deal.

The combined entity will set a target of $1 billion in revenue in fiscal year 2028, ITC said in an exchange filing on Monday. Happiest Minds Managing Director Venkatraman Narayanan said the merger would happen by second or third quarter of fiscal 2028.

"All the approvals are going to take a lot of time. There will be uncertainty until the merger and then the listing happens in almost one or one and a half years", Karan Uppal, lead IT analyst at PhillipCapital, said.

The acquisition will be subject to approval of the Competition Commission of India.

Shares of Happiest Minds trimmed some losses and closed 10.9 per cent lower at 362.7 rupees. ITC shares closed 4.3 per cent higher at 266.6 rupees.

Morgan Stanley said the deal was small relative to ITC's overall market value, but said it could expand ITC Infotech's presence in the United States, broaden its client base and improve its capabilities.

Sagar Shetty, an ‌analyst at online trading platform StoxBox, said the market reaction appears to be driven by uncertainty over valuation and a lack of clarity on what Happiest Minds shareholders will receive from the merger.

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