Hexaware Technologies Board of Directors has approved the delisting proposal and give the nod to take the company private. However, they are proposing a floor price which is several notches lower than its current share value, and it might not please the shareholders. The market observes that private owners may gain if they can keep the market price high for the current stocks. In that case, the company might agree to pay a premium price instead of a discounted rate as a buyback offer.
The market went rife with speculations after the news of Hexaware Technologies delisting hit the market, and many experts believe that the company may re-evaluate the floor price to give shareholders a premium deal instead. Current Hexaware Technologies shares are trading at Rs 325, and the company is proposing a value that is 20 percent discounted.
Hexaware expressed its desire to go private and buy back the 8 percent share from its private shareholders. Currently, Barings PE, which is the parent company of Hexaware, holds 62.4 percent in the company. In 2018, Hexaware went ahead by listing itself in Indian bourses and selling 8 percent of its stakes at a floor price of Rs 447.5 apiece.
Delisting is a process in which a company removes itself from stock exchanges and buyback all its shares from private shareholders. Company may decide to delist themselves for various reasons – for operational or financial streamlining or mergers and acquisitions. However, delisting becomes an attractive proposition for the company when share prices are falling – making delisting an affordable option. In the case of Hexaware, share prices are on the higher side, and shareholders might reject a discount rate as they will incur a loss.
In analysing the current scenario, Karan Uppal, Analyst, PhillipCapital, mentioned, “Previous delisting proposals in India give a cue about the hefty premiums demanded – up to 100 per cent – by minority shareholders and the indicative offer price at 285 appears significantly lower than what they would be willing to accept,”
He thinks the company can possibly revise the proposed delisting price and the final floor price may rise to the bracket of Rs 350- 450 apiece. But for that, shareholders will have to hold on to their forts for some more time. Arjun Yash Mahajan, Head – Institutional Business, Reliance Securities, also expressed the same view. He opined that under the current Covid-19 environment, Baring PE might not be able to entice its shareholders to give up their stakes unless the floor price is 30-40 percent premium of its current value.
As for the current situation, Baring PE has given delisting approval for Hexaware and appointed ICICI Securities as its merchant banker. On June 20, Hexaware told BSE in its filing that, “The Board has discussed and provided its consent to the Proposed Delisting with Regulation 8(1)(a) of the Delisting Regulations.”
In the past also, companies were seen offering premium buyback offers – sometimes up to 100 percent to its shareholders. Hexaware might also have to walk on the same path and come up with a new delisting floor price offer. What does it mean to you as an investor? Well, market pundits believe that investors can gain by buying Hexaware Technologies shares now and selling them at a higher price when the company announced the final delisting price.