Coforge block deal: Impact on FTSE, MSCI passive flows; stock performance & more

With reports suggesting Baring PE may potentially exit Coforge (erstwhile NIIT Technologies) by selling its entire 26 per cent stake in the IT firm, the development may likely result in passive flows.  FTSE should include additional floating shares of Coforge into its calculations within the next three to four days itself, said Abhilash Pagaria of Nuvama Alternative & Quantitative Research,  who added that the inclusion may generate a passive flow of approximately $29 million, involving 0.5 million shares and resulting in a volume impact over 1.5 days.

In the case of MSCI, given the stock's current low total market capitalisation, transitioning from the Small-cap to Standard Index might be challenging, Pagaria said in a note.

As per reports, Hulst BV, a Baring PE affiliate, would sell its entire stake in the IT services company through block deals on Thursday morning. The floor price for the deal is set at Rs 4,550 per share, which was at a 7 per cent discount to Wednesday's closing price, as per the report.

Coforge is an IT solutions organisation with focus on three key verticals: Banking and Financial Services, Insurance, Travel and Transportation. It has capabilities in Data & Analytics, Automation, Cloud, and Digital.  Shares of Coforge are up 23 per cent year-to-date compared with 8.47 per cent rise in the BSE IT index. The stock has an average price target of Rs 4,898, as per Trendlyne, which suggests upside is capped on the counter.

The company management has targeted FY24 organic revenue growth in 13-16 per cent YoY CC range and Ebitda margin at 18.3 per cent. These are positives in an environment where peers are seeing sharp guidance cuts, Elara Securities said in a July note.

Data compiled from corporate database AceEquity suggests promoter stake in the company has been falling since September quarter of 2019 (70.04 per cent). In the June quarter, promoters held 26.63 per cent stake against 30.16 per cent in March and 40.06 per cent in the December quarter. In February this year, the private equity firm sold 9.8 per cent stake in the technology company for Rs 2,430 crore. Later in May, Hulst BV sold 3.5 per cent stake in Coforge through the open market for Rs 887 crore.

Under the block deal, Hulst BV would offload 1.62 crore shares. The deal value is pegged around Rs 7,400 crore. Hulst BV is owned by private equity firm Baring PE.

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Also read: Block deal: Coforge shares in focus as promoter may sell entire stake today