Majesco Ltd - Company Update - Aug 2020 - ICICI Securities

Majesco US (the US listed company) has signed an amended agreement to sell its company to a private equity (Thoma Bravo, LP) at a revised price of US$16/share (from earlier offer of US$13.1/share), valuing the company at US$729 million (~Rs. 5,467 crore). The increased offer from Thoma Bravo and the amendment followed Majesco's receipt of an unsolicited acquisition proposal from an unaffiliated third party. The company is now valued at 5x FY20 EV/sales. Majesco India (the India listed company) holds 74.07% stake in the US entity (Majesco US). Hence, based on the stake, the company will now receive cash of US$513.8 million (Rs. 3853.3 crore). Assuming a capital gains tax, the company would receive cash of ~Rs. 3121.2 crore. This, coupled with cash of Rs. 23.5 crore on the company's balance sheet, the total cash with the firm would be Rs. 3144.7 crore or ~Rs. 1037/share. The company plans to distribute this cash via buyback and/or dividend. Considering the uncertainty on method of distribution, we conservatively revise our target price to Rs. 785/share, 22% upside from current levels.

Valuation of Majesco India (holding company)

Majesco India that holds 74.07% stake in US entity, will receive revised cash of US$513.8 million (Rs. 3853.3 crore). Assuming a capital gains tax, the company would receive cash of ~Rs. 3121.2 crore. This, coupled with cash of Rs. 23.5 crore on the company's balance sheet, would take total cash with the firm to Rs. 3144.7 crore or Rs. 1037/share (vs earlier Rs. 852/share). The company plans to distribute this cash via buyback and/or dividend. Considering the uncertainty on method of distribution, we conservatively revise our target price upwards to Rs. 785/share, maintain BUY with 22% upside from current level. The transaction is expected to be completed by the end of 2020 and is subject to regulatory approval in India and the US.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Majesco_CoUpdate_Aug20.pdf

Shares of Majesco Ltd was last trading in BSE at Rs.711.75 as compared to the previous close of Rs. 677.9. The total number of shares traded during the day was 373 in over 16 trades.

The stock hit an intraday high of Rs. 711.75 and intraday low of 711.75. The net turnover during the day was Rs. 265482.

Source : Equity Bulls

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