Birlasoft, KPIT Technologies to merge to create two separate entities

The first entity would focus on digital business IT services, while the other business would focus on automotive engineering and mobility solutions

Birlasoft, part of the $1.6-billion diversified CK Birla Group, and KPIT, have announced a merger to create an over $700-million combined entity. The entity would be demerged into two separate companies later. 

The first entity, which would focus on digital business IT services, would be known as Birlasoft, while the other business, which would focus on automotive engineering and mobility solutions, would be known as KPIT Technologies.

The new Birlasoft, which would emerge over the next year, would combine the management team and the IT services business of KPIT with the current Birlasoft. It would continue to be led by Anjan Lahiri as the CEO and MD. The new KPIT Technologies would be led by Kishor Patil as the CEO and MD. 

"The board has approved a draft composite scheme for amalgamation of Birlasoft (India) with the company and demerger of the engineering business of the company into KPIT Engineering, a wholly-owned subsidiary of the company to be renamed as KPIT Technologies,” KPIT said in a regulatory filing. 

As a part of the proposed merger, Birlasoft and KPIT promoters would make an open offer for the minority shareholders of KPIT. Shareholders of Birlasoft would receive 22 equity shares of the combined KPIT-Birlasoft for every nine equity shares of Birlasoft. 

The shares of KPIL Engineering would be listed pursuant to the proposed demerger and the shareholders of combined KPIT-Birlasoft would receive one share of KEL for every one share they hold in the combined firm, it said. "After the proposed demerger, the existing promoters of the company propose to acquire sole control and substantial shareholding in KEL from the Birlasoft promoters," it added.

During the period prior to completion of the deal, Birlasoft and KPIT will continue to be run by their current managements. 

The new Birlasoft would be a $500-million digital business IT services company that will be created by merging the KPIT ITSS business with the current Birlasoft. The new mid-tier IT services company would also be called Birlasoft. 

The new KPIT Technologies would be a $200 plus-million focused engineering services company that would be created by tapping into the current engineering business of KPIT to create a company focussed on automotive engineering and mobility solutions. 

“Digital solutions are today not confined to the periphery of business but are transforming the very core of business processes. The digital age requires each organisation to reinvent itself to address and lead the disruption and opportunities it brings,” said Amita Birla, chairman of Birlasoft. Ravi Pandit, chairman of KPIT, said: “The tremendous value created by KPIT over the last 27 years will continue in two new avatars and become leading companies in their respective spaces.” 

Kotak Investment Banking was the advisor to the CK Birla Group and Birlasoft while Avendus was advisor to KPIT.