i-flex shares surge on Oracle open offer buzz

Shares of i-flex, an IT solutions provider for banking space, today rose by 11 per cent on speculation that Oracle Corporation, which owns over 81 per cent in the firm, might make an open offer to buy more shares.

The i-flex scrip soared to an intra-day high of Rs 2,440, a rise of 10.95 per cent or Rs 241 over its previous close of Rs 2,199.15 as nearly 82,000 shares were traded on the Bombay Stock Exchange.

Oracle, which holds stake in the Indian company through Mauritius-based Oracle Global, had earlier this year acquired 35 per cent stake after sweetening its offer price from Rs 1,475 to Rs 2,100 per share.

With speculation again doing rounds, the i-flex stock rose to closed at Rs 2,425.8, up 10.31 per cent today. This is the company's second-highest closing after the scrip touched its 52-week high of Rs 2,545 on April 27.

Market observers believe the speculation stems from the fact that Oracle wanted to hike its stake to 89.69 per cent in the earlier open offer. But even after hiking its offer price by 42 per cent, it managed to garner a shade over 28 per cent against its proposed 34.89 per cent.

I-flex operates in the lucrative banking software space with its solution called Flexcube and currently faces competition from Infosys' Finnacle as international as well as domestic banks gear up to meet Basel-II norms.

Reuters adds: An i-flex spokesman refused to comment on the market speculation of a offer to shareholders, while officials at Oracle could not immediately be reached.

Oracle owned about 81 percent of i-flex as at end-March.

Last December, Oracle increased an open offer for i-flex shares to Rs 2,100 from Rs 1,475. Shares in i-flex rose 17 per cent on December 8 on news of the offer.

The analyst said another offer could be made at between Rs 2,500 and Rs 3,000 per share ($61.7-$74).

"It's definitely going to be above Rs 2,500 this time given the sharp run-up the stock has witnessed in the past few weeks, although it looks overstretched at the current levels from the valuation perspective," he said.

Mumbai-headquartered i-flex counts Citigroup and HSBC among its clients. Its March quarter net profit fell 6 per cent to Rs 1.32 billion.

While India has a booming outsourcing industry serving a growing list of global firms, Asia's third-largest economy has been slow to throw up companies like i-flex that design software products. Other Indian product firms include telecoms software firm Subex Azure Ltd.