Cigniti Technologies slips 8% after board approves merger with Coforge

Coforge will absorb Cigniti and as per the announced swap ratio, Cigniti's shareholders will receive one equity share of Coforge for every five shares of Cigniti held by them

Cigniti Technologies shares slipped 8 per cent to Rs 1,707.15 on the BSE in Monday’s intra-day trade on profit booking after the company’s board approved the scheme of amalgamation of the company with and into Coforge. The stock price of the information technology (IT) enabled services company has corrected 14 per cent from its 52-week high of Rs 1,980.75 that it hit on December 17, 2024.

 

In an exchange filing, Coforge informed the stock exchange that the merger of Cigniti has been approved. Following this Coforge will absorb Cigniti and as per the swap ratio announced, Cigniti’s shareholders will be issued one equity share of Coforge for every five shares held by them in Cigniti.

 

 

Shares of Coforge are down 1 per cent at Rs 9,388.50 on the BSE in intra-day deal. In comparison, the BSE Sensex was down 0.36 per cent at 78,413 at 09:45 AM.

 

Thus far in the calendar year 2024, the stock price of Cigniti has surged 62 per cent, and Coforge has gained 52 per cent, as compared to the nearly 9 per cent rise in the benchmark index.

 

According to ICICI Securities, the swap ratio is largely in line with the current market price ratio. Cigniti is in the business of assurance and digital engineering services across the world; and the merger will help the company to expand across diverse industries and regions, with a strong focus on the US market wherein both the companies have their clients in the east and Midwest coast, respectively.  Coforge will also create three new scaled up verticals - Retail, Technology and Healthcare, and together the entity will focus on opportunities in AI, the brokerage firm said in a note.

 

Meanwhile, the merger scheme is subject to the receipt of necessary statutory and regulatory approvals, including approval of the stock exchanges, the Securities and Exchange Board of India (Sebi), the respective shareholders and creditors of respective companies and jurisdictional bench of the National Company Law Tribunal.

 

Cigniti is engaged in the business of providing digital assurance and engineering (software testing) services that help in predicting and preventing unanticipated failures, by leveraging AI-driven, proprietary Continuous Testing & Test Automation solutions, which are platform and tool agnostic, thereby optimising engagement for customer experience.

 

Meanwhile, Coforge is engaged in delivering services around the world directly and through its network of subsidiaries and overseas branches. The company renders information technology/ information technology enabled services across geographies, including the Americas, Europe, Middle East and Africa, India and Asia Pacific, and it is engaged in the application, development and maintenance of managed services, cloud computing and business process outsourcing for organisations in a number of sectors, including financial services, insurance, travel, transportation and logistics, manufacturing and distribution, apart from the government.

 

The amalgamation of Coforge and Cigniti will create synergised capabilities between the businesses of both the companies and create synergised capabilities to offer a strategic advantage in the global arena of AI-led assurance and digital engineering IT solutions. The merger will further be strategically positioned to expand across diverse industries and regions, with a strong focus on the US market, the company said on rationale behind the amalgamation/merger.

 

With prior acquisitions and the amalgamation, the combined entity will create 3 (three) new scaled up verticals - Retail, Technology and Healthcare. The consolidation will also help Coforge realise its objective of scaling up its presence across the South-West, Mid-West and Western US markets. The combined entity will be able to address the significant opportunities that the proliferation of AI is creating for specialised Assurance Services, the company said.

 

The amalgamation will also provide an opportunity for the reduction of operational costs through pooling of orders and improved sales. Further, a culture of sharing of best practices, cross functional learnings, will be fostered which will promote greater systemic efficiency, it added.