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business | IST

Coforge files for US IPO via ADR route; Barings PE Asia to sell part stake

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The move comes after recent management commentary that Coforge’s investments in segments such as product engineering, cloud, data, automation, and integration capabilities would help it become a $1 billion-plus firm next year.

Top global IT solutions firm Coforge has filed papers with the United States Securities Exchange Commission (SEC) for an initial public offering (IPO) via the American Depository Receipts (ADR) route. Barings Private Equity Asia will sell part stake as part of the proposed transaction.
Coforge, which was formerly NIIT Technologies, is promoted by Barings Private Equity (PE) Asia and is listed on the domestic bourses.
The deal was first reported 
by Moneycontrol in a late evening newsbreak on November 15.
The move comes after recent management commentary that Coforge’s investments in segments such as product engineering, cloud, data, automation and integration capabilities would help it become a $1 billion-plus firm next year.
In a disclosure to domestic exchanges, the firm said it filed a Form F-1 registration statement with the US regulator and that its board of directors had approved New York Stock Exchange (NYSE) as the selected stock exchange for the ADR offer. Shareholders interested in participating in the ADR offer, can indicate their interest between November 18 and December 2, 2021.
The official ADR offer filing confirmed that Baring would be among the selling shareholders. It wasn’t immediately clear how much stake would be sold by the PE firm. Barings PE Asia currently holds 50.2 percent stake in Coforge, which had a market cap of Rs 33,322 core at the end of day’s trade on November 15.
Why opt for a US IPO?
The Coforge ADR offer filing also added, “Principal purposes of this offering are to create a public market for our ADSs and to facilitate our future access to the public equity markets. All ADSs sold in the offering will be sold on behalf of the selling shareholders. We will not receive any of the proceeds from the sale of the ADSs in this offering.”
The size of the offer is listed as $100 million which may be a placeholder and subject to change and possibly go up depending on Barings and other selling shareholders.
ADRs, are stocks that trade on US exchanges but represent shares in a foreign firm. They present an opportunity to American investors to invest in international companies. Firms like Infosys and ICICI Bank have also listed on US bourses via the ADR route in the past. The likes of Vedanta and Videocon D2H did the same, but had delisted their ADR’s later.
According to the SEC documents, JP Morgan, Citi, Barclays, Bank of America Securities, Credit Suisse, Evercore and Deutsche Bank are the investment banks working on the deal for Coforge. Khaitan & Co and Shardul Amarchand Mangaldas are the legal advisors, and Skadden, Arps, Slate, Meagher and Flom & Latham and Watkins named as US counsels.
A closer look at Coforge: strengths and footprint
In 2019, Hulst BV, an affiliate of Barings PE Asia, acquired an aggregate 70.1 percent stake in Coforge as of March 31, 2020.
Between March 31, 2021 and September 30, 2021, Hulst BV engaged in a series of transactions pursuant to which it sold an aggregate 13.8 percent of equity shares of Coforge in accordance with Barings' usual practices for returning capital to the investors of the funds it manages.
The primary geographic markets of Coforge are the Americas and Europe, the Middle East and Africa, which generated 52 percent and 34 percent of revenue, respectively, for the six months ended September 30, 2021, and 48 percent and 37 percent of revenue, respectively, for the fiscal year ended March 31, 2021.
The firm has a strong presence and expertise in the insurance, banking and financial services and travel, transportation and hospitality verticals and a growing presence in the retail, healthcare, hi-tech manufacturing and government (outside India) verticals.
The core services of Coforge include product engineering services, data services, cloud and infrastructure management services, digital process automation services, digital integration services and business process management services.
The firm has strengths in digital services, which comprise product engineering, digital integrations and digital process automation, collectively representing 48 percent, 51 percent and 48 percent of revenue in the six months ended September 30, 2021 and the fiscal years ended March 31, 2021 and 2020, respectively.
It’s consolidated net profit increased by 21.6 percent to Rs 146.7 crore for the September 2021 quarter. The company had posted a net profit of Rs 120.7 crore in the second quarter of FY21, it said in a regulatory filing. Its consolidated gross revenue rose 36 percent to Rs 1,569.4 crore in the quarter under review, from Rs 1,153.7 crore in the year-ago period, it added.