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Entry Price

645.00

Target

785.00

Recommend Date

10-08-2020

Return

21.71 %
BUY

Date : 10-08-2020

Majesco US (the US listed company) has signed an amended agreement to sell its company to a private equity (Thoma Bravo, LP) at a revised price of US$16/share (from earlier offer of US$13.1/share), valuing the company at US$729 million (~| 5,467 crore). The increased offer from Thoma Bravo and the amendment followed Majesco’s receipt of an unsolicited acquisition proposal from an unaffiliated third party. The company is now valued at 5x 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 now receive cash of US$513.8 million (| 3853.3 crore). Assuming a capital gains tax, the company would receive cash of ~| 3121.2 crore. This, coupled with cash of | 23.5 crore on the company's balance sheet, the total cash with the firm would be | 3144.7 crore or ~| 1037/share. The company plans to distribute this cash via buyback and/or dividend. Considering the uncertainty on method of distribution, we conservatively revise our target price to | 785/share, 22% upside from current levels.