Shares of India’s Happiest Minds
fell as much as 12.2% on Tuesday after Indian
conglomerate ITC unveiled plans to buy a large stake
and merge its unit with the IT services provider, fueling
concerns over a prolonged integration.
ITC shares rose as much as 4.7% in early trade in Mumbai.
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.
The combined entity will set a target of $1 billion in
revenue in fiscal year 2028, ITC said in an exchange filing on
Monday. The combined entity is expected in the second or third
quarter of fiscal 2028, MD of Happiest Minds Venkatraman
Narayanan said in an analyst call.
“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.
“There is no clarity in terms of the leadership post the
merger. My sense is that it will mostly be led by ITC Infotech,
so there could be some leadership churn which can happen at
Happiest Minds.”
ITC Infotech India, a wholly-owned subsidiary if ITC, will
buy 22.1% of Happiest Minds for about $140 million in cash. ITC
Infotech would list on the BSE and the NSE after the deal.
The acquisition will be subject to approval of the
Competition Commission of India.
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.
Shares of Happiest Minds were trading 11.5% lower at ₹360
as of 11:19 a.m IST. ITC shares were up 3.7% at ₹264.8.