Happiest Minds Technologies Ltd’s stake sale to ITC Infotech was not driven by fears over artificial intelligence, the management of the Ashok Soota-led company said on Tuesday, amid concerns about AI’s impact on India’s IT services industry.
The comments, made at a press conference, came a day after Happiest Minds announced its acquisition by ITC Infotech, the IT arm of cigarette-to-salt conglomerate ITC Ltd. The combined entity would have revenue of about $740 million as of March 2026.
Soota was not present at the press conference, and questions directed towards him were addressed by chief executive Joseph Anantharaju and managing director Venkatraman Narayanan.
The two executives attributed Soota’s decision to sell half of his 44% promoter and promoter group stake to his plans to invest in Happiest Health, his healthcare venture, and SCAN, his medical research trust. They dismissed AI-related concerns as a factor.
“Mr Soota’s intent to pare down his holding, this was said quite a while back about his intent to, you know, raise money. This was even before the foundation or the AI-related deflation was seen, and all of that,” said Narayanan, in response to Mint’s questions.
The clarification comes at a time when artificial intelligence has cast a shadow over the future of the country’s $300 billion IT sector, as clients look to shrink their outsourcing costs by deploying AI agents.
Meanwhile, Soota’s decision to sell his stake came under scrutiny because the transactions were announced alongside the ITC Infotech deal. He will sell a 11% stake in the first tranche at ₹390 per share and another 11% at ₹400 per share, valuing the two tranches at about ₹1,330 crore. Both prices are lower than Happiest Minds’ closing price of ₹407 on the bourses on Monday, when the acquisition was announced.
The company’s shares have fallen more than 21% so far this year, including an 11% decline on Tuesday. However, the management rejected a bleak future as a reason for Soota’s stake sale.
“Does the ₹405 discount that the future is very bleak, given that AI is going to come? This is not correct,” said Anantharaju. “Not because I think the future is bleak and I’m selling it at ₹400. Otherwise, if the future was better, I would have sold it at 600 rupees. That I think that is the logic which I understand from, you know, a holding standpoint, but the reality is it’s a fair value.”
The management added that Soota’s receiving ₹390 and ₹400 in cash consideration is a relatively fair value, and that this value already takes into account the “next five or six years or 10 years of business.”
A $1.9 billion deal
Post the acquisition of Soota’s share, ITC Infotech will merge with Happiest Minds, giving shareholders 25 ITC Infotech shares for every 81 Happiest Minds shares they own. The management said Happiest Minds shares would be valued at ₹405 for the swap, implying a value of about ₹1,312 for each ITC Infotech share.
This implies that the value of the equity value of the deal would come up to about ₹18,000 crore ($1.9 billion) for the 13.76 crore shares of the merged entity.
The result would be a ₹7,000-crore revenue, 19,000-employee IT company in which ITC Ltd will control a 73.4% stake, becoming its promoter. While Soota’s stake would be reduced to 7.6%, public investors of Happiest Minds would have the remaining 19%.
The transaction could result in a third listed ITC company following the demerger of ITC Hotels Ltd into a separately listed entity in early 2025.
“Once the NCLT (National Company Law Tribunal) approves, shareholders of Happiest Minds will get their Happiest Mind shares converted to ITC Infotech shares, and those shares will then list within a period of 60 days,” said Narayanan, adding that the combined entity will operate with a new name after the regulatory process is completed.
The management added that Soota did not want to sell his entire stake at once, as that might impact investor sentiment. The company was also looking for an investor, which led to discussions with ITC Infotech.
ITC Infotech’s aim
For now, ITC’s ambitions go beyond listing on the stock exchanges as the conglomerate is looking to place its IT arm in the country’s billion-dollar IT club.
Happiest Minds Technologies’ management said the company aims to touch the $1 billion mark by March 2028. For now, the combined entity will be the country’s thirteenth-largest tech services firm, below Sonata Software and Firstsource Solutions, both of which have crossed the $1 billion mark.
The combined entity also expects to gain from the markets and verticals in which they were strong. For ITC Infotech, the largest geography is Europe. “For us, that’s a very very small geo,” said Anantharaju.
“ITC’s presence in the US was much smaller than Happiest Minds. About a third each of the company’s revenue comes from Europe and the Rest of the World. About 38% of the revenue comes from America.”
There’s a nice diversification in terms of industry exposure, he said. “Our primary industries were BFSI, healthcare, edtech, and high tech and media. Whereas for ITC Infotech, it was CPG and retail, manufacturing, and travel and hospitality,” added Anantharaju.
The deal also marks Soota’s second exit as an IT company founder after his previous company Mindtree Ltd was acquired by L&T in a hostile takeover in 2019. Soota founded Mindtree in 1999 with nine others.
He founded Happiest Minds in March 2011 and the company listed on the stock exchanges nine years later. It always stood out for its unique way of functioning, as Soota was not in favour of having a chief executive. This changed in March last year when the company announced Anantharaju as its chief executive to accelerate growth.