KPIT surges post announcement of merger with Birlasoft

CK Birla Group owned Birlasoft and KPIT have announced a merger to create an over US$700-million combined entity. The entity would be demerged into two separate companies later. 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.

The purpose of this move is to create a leader in the mid-tier IT services space. The new Digital Business IT Services company will grow the Birlasoft brand by combining it with the KPIT ITSS business, which is a world leader in Digital Enterprise Solutions (SAP, JD Edwards, Oracle), IoT, Cloud and Digital Transformation. The new ‘Birlasoft’, will combine the management team and the IT Services business of KPIT with the current Birlasoft. It will be led by Anjan Lahiri as the CEO and MD.

As a part of the proposed merger, shareholders of Birlasoft would receive 22 equity shares of the combined KPIT-Birlasoft for every 9 equity shares of Birlasoft. The shares of KPIL Engineering (KEL) 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. However, this idea is subject to approval by shareholders.

It seems that investors of KPIT are excited with this development as stock of KPIT on Tuesday spikes as much as 6 per cent to touch a high of Rs. 223.3 per share from previous close of Rs. 209.25. The stock close at Rs. 219.3 per share.