Hexaware delisting: Focus on reverse book-building price discovery

KS Badri Narayanan Chennai | Updated on September 10, 2020

In early June, Baring PE Asia — which holds a 62.34 per cent stake in Hexaware — announced its intent to delist from Hexaware

Promoters have option to revise, reject or make counter offer

The delisitng offer to the public shareholders of Hexaware Technologies is currently on. The offer, open from September 9 to 15, has come out with fixed a floor price of ₹264.97 a share. As against the floor price, the stock price of Hexaware Technologies is currently ruling at a significant premium of ₹424 on NSE.

In early June, Baring PE Asia — which holds a 62.34 per cent stake in Hexaware — announced its intent to delist from Hexaware. Currently, 169 FPIs (foreign portfolio investors) hold 14.03 per cent stake in the company, while 12 MFs own 12 per cent; around 81,500 small investors hold 6.42 per cent and seven HNIs (high net worth individuals) have 0.43 per cent stake in Hexaware.

So far, the bid has come in the range of ₹264.97-800 on BSE with 11,871 shares being ‘confirmed orders’ and about 75.35 lakh shares placed under ‘yet to be confirmed’. The company plans to mop up 11.38 crore shares.

Revised price

As the market price is ruling at a healthy premium, most analysts expect a revised higher price, though some of them feel the fair value of the company’s stock price is between ₹290 and ₹400.

However, analysts cautioned investors that it is up to the promoters to decide. If the price discovered through the process is not attractive or very high, the promoters may unilaterally reject the price and the delisting, as in the recent case of Styrolutions India.

Promoters can also make a counter offer to shareholders. If the counter offer is accepted by the shareholders, the delisting will sail through. The company has set September 17 as the last date for announcement of a counter offer.

According to analysts, as the offer price is also in discount to its peers, and given the precedents, wherein offer prices have seen significant upward revisions, there is a good chance of Hexware offer price, too, getting revised higher.

According to Centrum Broking, mid-cap IT companies have been delivering strong performance in the recent period. Also, select mid-cap IT stocks have low free float (L&T Infotech, Mindtree, NIIT Technologies, L&T Technology Services, etc) and hence funds have huge impact cost to build a sizeable position in these stocks.

“The Hexaware delisting process is coming at this juncture and, hence, exiting investors could have difficulty in redeploying the amount raised from their stake sale. Hence, the bid price from existing large institutional investors might be a tad high,” it said, and added: “We believe investors could bid at ₹450-480 band; this could be fair price”.

“Though the current investors can expect a price revision, we advise retail investors not to buy it from the secondary market at this juncture, as the revision may come in at much lower to the current price,” cautioned a Chennai-based analyst. If the offer is rejected after the book-building exercise, the price may crash strongly, he further warned.

Published on September 10, 2020

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