Majesco US (the US listed company) has decided to sell its company to a private equity (Thoma Bravo, LP) at US$13.1/share, valuing the company at US$594 million (Rs. 4455 crore). This offer price is at a 77% premium to the last closing price of Majesco US. The company is valued at 4x FY20 EV/sales. Majesco India (the India listed company) holds 74.07% stake in the US entity (Majesco US). Hence, based on the stake, the company will receive cash of US$420 million (Rs. 3154 crore). Assuming a capital gains tax, the company would receive cash of ~Rs. 2555 crore. This, coupled with cash of Rs. 26 crore on the company’s balance sheet, the total cash with the firm would be Rs. 2581 crore or ~Rs. 852/share. The company plans to distribute this cash via dividend or buyback. Assuming a 10% holding discount to cash and uncertainty on method of distribution we conservatively arrive at a target price of Rs. 705/share, 76% upside from current levels.
Valuation of Majesco India (holding company)
Majesco India, which holds 74.07% stake in the US entity, will receive cash of US$ 420 million (Rs. 3154 crore). Assuming a capital gains tax, the company would receive cash of ~Rs. 2555 crore. This, coupled with cash of Rs. 26 crore on the company’s balance sheet, would take total cash with the firm to Rs. 2581 crore or Rs. 852/share. The company plans to distribute this cash via dividend or buyback. Assuming a 10% holding discount to cash and uncertainty on method of distribution, we conservatively arrive at a target price of Rs. 705/share, 76% upside from current levels. The transaction is expected to be completed by the end of 2020 and is subject to regulatory approval in India and the US.
For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Majesco_CoUpdate_Jul20.pdf
Shares of Majesco Ltd was last trading in BSE at Rs.401.15 as compared to the previous close of Rs. 382.05. The total number of shares traded during the day was 956 in over 15 trades.
The stock hit an intraday high of Rs. 401.15 and intraday low of 401.15. The net turnover during the day was Rs. 383499.
