ITC shares surged as much as 5% to a high of ₹267.50 on Tuesday, emerging among the top gainers after its subsidiary ITC Infotech announced a deal to acquire a promoter stake in Happiest Minds Technologies. The stock rallied strongly following the official confirmation of the merger, with the company's market capitalisation standing at more than ₹3.29 lakh crore. On the flip side, Happiest Minds shares declined by over 12% to ₹359.20 per share as the market digested the implications of the acquisition. The rally comes after a sharp decline in the stock this year, with ITC down 27.8% year-to-date, compared with an 8.1% fall in the Nifty 50. According to ET Now, ITC shares were up 3.2% at ₹263.55 as of 11:00 am on Tuesday, reflecting the continued positive market sentiment around the merger announcement.
ITC has officially confirmed that its IT arm will acquire a 22.1% stake in Happiest Minds Technologies for approximately ₹1,330 crore. As per the latest stock exchange filing, the acquisition represents a significant development in the ongoing speculation that began with media reports earlier this year. The deal involves ITC Infotech purchasing shares at a negotiated price of ₹390-400 per share, with the companies' boards potentially approving the transaction next week. For the remaining 22% stake, ITC Infotech could offer its shares and that would be followed by the mandatory open offer, with the company potentially getting listed separately. The transaction values Happiest Minds at ₹405 per share, or around ₹6,167 crore, while ITC Infotech has been valued at ₹1,312 per share, or around ₹11,920 crore. The transaction involves the acquisition of 3,36,61,700 equity shares - the first tranche covers 1,67,50,000 shares (11% of the company) at ₹390 per share for ₹653.26 crore, while the second tranche covers 1,69,11,700 shares (11.106%) at ₹400 per share for ₹676.46 crore. According to the latest exchange filing, the proposed transaction has been endorsed by the Board of Directors of ITC Limited, with the acquisition and amalgamation subject to necessary statutory approvals including approvals from Stock Exchanges, Competition Commission of India, and National Company Law Tribunal.
According to ITC's latest presentation, the implied value of Happiest Minds stands at ₹6,167 crore, while ITC Infotech is valued at ₹11,920 crore. ITC will hold a 73.4% stake in the combined entity that will list after Happiest Minds merges and dissolves into ITC Infotech. The combined entity targets nearly 10% revenue synergies, margin expansion of 100 basis points and revenue of over $1 billion by financial year 2028. Based on current multiples, the combined entity can report revenue between ₹9,500 crore to ₹10,000 crore by FY28 and net profit of ₹1,080 crore to ₹1,120 crore, potentially taking the valuation to ₹26,000 crore to ₹28,000 crore. ITC's 73.4% stake in the combined entity will mean the stock could trade at a holding company discount ranging 25% to 30%, with the IT stake implying a value between ₹12 to ₹15 per share. Together, the two companies have a combined valuation of more than ₹18,000 crore, significantly higher than the earlier reported figures. The combined business is expected to benefit from increased scale, with Americas revenue targeted to double and the companies also targeting synergies of around 10% of revenue. The combined entity will set a target of $1 billion in revenue in fiscal year 2028, with the combined entity expected in the second or third quarter of fiscal 2028, as per MD of Happiest Minds Venkatraman Narayanan in an analyst call.
The acquisition will be funded through a ₹1,330 crore rights issue, with the transaction structured as a share-swap arrangement that will result in a backdoor listing of ITC Infotech. Under the proposed arrangement, Happiest Minds shareholders will receive 25 ITC Infotech shares for every 81 shares held in Happiest Minds. Following the completion of the merger, ITC Infotech will be listed on the stock exchanges through a backdoor listing. Upon the amalgamation becoming effective, ITC Infotech shall issue and allot 25 fully paid-up equity shares of ₹10 each for every 81 fully paid-up equity shares of ₹2 each held by HMTL shareholders (other than ITC Infotech), as on the Record Date. The shares of ITC Infotech proposed to be listed on BSE Limited and the National Stock Exchange of India Limited. Exchange data showed that Ashok Soota, founder and executive chairman, currently holds over 32% in the IT services firm directly and more than 40% through other promoter holdings, while Ashok Soota Medical Research LLP holds about 11.8% stake in the company. The announced transaction covers 22.106% of Happiest Minds, with the shares being acquired from Soota and the promoter group, bringing the total promoter stake to 53.9% (22.1% + 32%), significantly reducing the public float and potentially impacting liquidity in the stock. Following the merger, ITC Ltd is expected to hold around 73.4% of the combined entity, while existing Happiest Minds shareholders will own approximately 26.6%. The acquisition will be subject to approval of the Competition Commission of India, as per The Hindu BusinessLine.
The merger will create a combined entity with annual revenue of roughly ₹7,033 crore, or more than $850 million. ITC Infotech reported revenue of around ₹4,718 crore in FY26, while Happiest Minds reported revenue of around ₹2,315 crore. Together, the businesses would have annual revenue of roughly ₹7,033 crore. ITC Infotech's EBITDA margin stood at around 18.5% in FY26, compared with 20.3% for Happiest Minds. At that scale, the combined business would remain smaller than IT services companies such as Coforge, Mphasis and Persistent Systems, while being larger than companies such as Cyient, KPIT Technologies and Zensar Technologies. Following the completion of the merger, ITC Infotech will hold a 73.4% stake in the merged entity, while Soota and his promoter entities will own 7.6%, with public shareholders holding the remaining 19%. The transaction marks ITC Infotech's biggest move yet to expand its digital engineering and AI-led technology services capabilities, building on its ₹4,856 crore revenue in FY26 and the ₹485 crore acquisition of cloud services company Blazeclan Technologies in October 2024. The combined entity is projected to achieve $1 billion turnover by FY28 as an AI-first enterprise. According to Morgan Stanley, 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. The combined entity will become India's eleventh largest listed IT services player by revenue, with a global workforce of over 19,000 professionals and presence in the USA, Europe, the Middle East, APAC, and India.
The merger 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. However, analysts have raised concerns about the integration process. Karan Uppal, lead IT analyst at PhillipCapital, said there will be uncertainty until the merger and then the listing happens in almost one or one and a half years. He noted that all the approvals are going to take a lot of time. Additionally, there is no clarity in terms of the leadership post the merger. Karan Uppal said his 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 of ITC, will buy 22.1% of Happiest Minds for about $140 million in cash. The combined entity will bring together its capabilities in AI, digital engineering, cloud, data, analytics and cybersecurity with ITC Infotech's expertise in enterprise transformation, SAP, product lifecycle management (PLM), cloud, Industry 4.0 and industry-specific technology solutions. Sanjiv Puri, Chairman and ITC Infotech Chairman, said the combination of the companies' complementary strengths, deep domain expertise and future-ready capabilities would further strengthen their ability to deliver cutting-edge solutions across geographies. The merger will create a combined talent pool of more than 8,200 product engineers, 1,400 data specialists, 9,000 AI-trained employees and over 400 cybersecurity professionals. The build-to-run ratio is expected to move to 50:50, significantly enhancing the combined entity's operational capabilities.
