India's Happiest Minds slides as investors fret over lengthy ITC deal closure

Sept 1 : Shares of India's Happiest Minds fell as much as 12.2 per cent on Tuesday after Indian conglomerate ITC unveiled plans to buy a large stake and merge its unit with the IT services provider, fueling concerns over a prolonged integration.

ITC shares rose as much as 4.7 per cent in early trade in Mumbai.

The deal comes at a time when India's $315 billion IT industry is racing to bulk up capabilities to combat AI-led disruption of the software market.

The combined entity will set a target of $1 billion in revenue in fiscal year 2028, ITC said in an exchange filing on Monday. The combined entity is expected in the second or third quarter of fiscal 2028, MD of Happiest Minds Venkatraman Narayanan said in an analyst call.

"All the approvals are going to take a lot of time. There will be uncertainty until the merger and then the listing happens in almost one or one and a half years", Karan Uppal, lead IT analyst at PhillipCapital, said.

"There is no clarity in terms of the leadership post the merger. My sense is that it will mostly be led by ITC Infotech, so there could be some leadership churn which can happen at Happiest Minds."

ITC Infotech India, a wholly-owned subsidiary if ITC, will buy 22.1 per cent of Happiest Minds for about $140 million in cash. ITC Infotech would list on the BSE and the NSE after the deal.

The acquisition will be subject to approval of the Competition Commission of India.

Morgan Stanley said the deal was small relative to ITC's overall market value, but said it could expand ITC Infotech's presence in the United States, broaden its client base and improve its capabilities.

Shares of Happiest Minds were trading 11.5 per cent lower at 360 rupees as of 11:19 a.m IST. ITC shares were up 3.7 per cent at 264.8 rupees.