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3i Infotech – Corporate action led suspension of stock trading, to resume in October 2021

Event check:

The company had reduced its share capital by 1/10th. Consequently, share trading has been suspended for three to four weeks as per regulatory requirements i.e. the cooling period. Trading of shares is expected to resume in the first half of October 2021.

Impact on shares:

The share price would be adjusted as per share capital reduction (i.e. 10x of CMP)

Our Perspective:

Erstwhile 3i Infotech had two businesses i.e. product business and IT services business. The company has divested its product business, which was a high gross margin business (gross margin of 48%, 39% of the revenue mix) at Rs 1,000 crore, at implied valuation of 2.3x of price/sales. The company is now looking to accelerate the remaining business i.e. IT services and aiming to reach US$1 billion revenue by 2030, at an implied 29% CAGR over FY23-31.

It has taken certain steps to reach the desired target:

i)  from a business perspective, the company known for its capabilities in the BFSI space, is looking to retain and accelerate client addition in the space after business rejig, to further strengthen its market positioning in the space,

ii)  the company is also looking invest in new areas like the telecommunication and media, especially on the 5G side looking to offer 5G powered edge services,

iii)  to facilitate the above factors, the company has amassed some of the best talents in the industry in the last 90 days. The new talent will be focused on growing the business in the assigned geographies and will help in accelerating growth in the areas of cloud, blockchain, artificial intelligence, 5G related services, cyber security, etc.

 

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