CK Birla group firm, KPIT merger to carve out two listed entities
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In a complex two-tier deal, CK Birla Group-owned Birlasoft and KPIT will be merged to create a $700-million entity, before splitting into two independent public listed companies focussing on specialised businesses, said a release from KPIT.

KPIT and Birlasoft promoters will launch an open offer for KPIT’s minority shareholders. Following the news, the shares of KPIT rose 4.23% to 218.10 in the early hours of Tuesday.

The combined entity will be demerge into two separate companies – Birlasoft, a $500 million enterprise digital IT services company, and KPIT Technologies, a $200 million company providing automotive engineering and mobility solutions.

While KPIT Technologies will be created by tapping into the current engineering business of KPIT, Birlasoft, in its new avatar will be created by combining the KPIT ITSS business.

Till the completion of the deal, KPIT and Birlasoft will continue to be run by their respective management teams, while they work together to familiarise Birlasoft with the ITSS business.

“Over the years, we have gained a reputation as one of the global leaders in automotive embedded software. We will be focused on building the KPIT brand as the foremost organisation in the world for automotive engineering and mobility solution,” said KPIT chairman Ravi Pandit.

According to Pandit, the value created by KPIT over the last 27 years will continue two guide the two new companies in their respective spaces.

“Digital solutions are today not confined to the periphery of business, but are transforming the very core of business processes,” said Birlasoft chairman Amita Birla, adding that the digital age requires each organisation to re-invent itself to address and lead the disruptions and opportunities it brings.

The new KPIT Technologies will have Kishor Patil as its CEO and managing director, while the new Birlasoft, which will be created over the next year, will be led by Anjan Lahiri as its CEO and managing director.

Avendus Capital Pvt. Ltd was the advisor to KPIT, while Kotak Investment Banking acted as the advisor to the CK Birla Group. The valuation report was prepared by EY.

PE interest

KPIT Technologies has seen interest from several PE investors in the past. Last year, ChrysCapital Investment Advisors India Pvt. Ltd had exited from its six-year-old investment in KPIT Technologies Ltd.

The early investors of KPIT, formerly KPIT Cummins Infosystems Ltd, include Rakesh Jhunjhunwala, International Finance Corporation and Lehman Brothers.

The firm had started operations as a financial auditing firm, before moving into the software services space. In 2002, it had acquired the IT arm of diversified machinery maker Cummins Inc.

Since then, it has acquired eight companies, besides forming a joint venture with the world’s second-largest forging company Bharat Forge in 2010 to manufacture and sell a new hybrid technology for automobiles.

CX Partners, which was started by former Citi Venture Capital International India head Ajay Relan, had exited KPIT early last year.

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