Happiest Minds shares fall back towards listing price of 2021 as value erosion continues

Shares of Happiest Minds Technologies Ltd. have declined over 10% on Tuesday, September 1, after announcing that ITC's subsidiary, ITC Infotech Ltd. will be acquiring 22% of the company's promoter shareholding held by founder Ashok Soota, in two tranches, valued at over ₹1,300 crore.

The deal will result in the currently listed company merging into ITC Infotech and dissolving, post which, shares of ITC Infotech will list on both BSE and NSE.

Shareholders of Happiest Minds will receive 25 shares of ITC Infotech for every 81 shares they currently own.

The Value Erosion In Happiest Minds

Happiest Minds shares made their debut on the bourses back in 2021. The stock had made its debut at ₹350 per share, which is a 110% premium in comparison to its issue price of ₹166.

Based on the frenzy seen in the post-Covid-19 rebound in IT stocks, shares of Happiest Minds continued to grow from strength to strength reaching a peak of ₹1,580 on July 16, 2021. That was a 9x move from its issue price in just a few months of listing.

At its peak, Happiest Minds traded at a price-to-earnings multiple of over 100x on a one-year forward basis.

After the stock topped out, it began to witness frequent sharp intraday falls as investors chose to book profits at elevated levels. The stock fell nearly 10% on October 19, 2021 as midcap IT stocks witnessed aggressive profit booking from investors.

In February 2022, Russia's invasion of Ukraine led to the sell-off in global equity markets, in which, shares of Happiest Minds also witnessed a decline of over 9% on February 24.

In May 2024, the company's financial results disappointed the street and reflected margin pressure. The company's cautious guidance also led to the stock declining over 7% on May 10.

Soon after, Executive Chairman Ashok Soota sold a 6% stake through block deals at a discount to the then current price in June 2024, which led to a fall of over 10% in a single session for the stock.

Earlier this year, Happiest Minds revised its financial year 2027 revenue growth guidance to 12.5% and its financial year 2028 revenue growth guidance at 15%.

Why Are Happiest Minds Shares Down On Tuesday?

Despite the stake sale announcement, the stock fell on Tuesday because promoters will be getting cash at ₹395 for their 22% stake. Existing shareholders will get a newly listed ITC Infotech with an implied valuation of ₹405 per share, compared to Monday's close of ₹408.

The street was also expecting a complete promoter stake sale of 44%, followed by an open offer, neither of which has happened. Despite the transfer of control, the 22% stake sale does not cross the 25% threshold needed for an open offer.

Shares of Happiest Minds Technologies are now trading 11% lower at ₹363.2. With this move, the stock has extended its 2026 losses to 20%.