Mastek jumps after board OKs demerger of insurance biz

Mastek rose 11.94% to Rs 262.50 at 11:49 IST on BSE after the company said its board approved demerger of insurance products and services business into a separate listed company.

The announcement was made during trading hours today, 15 September 2014.

Meanwhile, the BSE Sensex was down 199.79 points, or 0.74%, to 26,861.25.

On BSE, so far 5.56 lakh shares were traded in the counter, compared with an average volume of 49,494 shares in the past one quarter.

The stock hit a high of Rs 269.50 so far during the day, which is also a 52-week high for the counter. The stock hit a low of Rs 240.60 so far during the day. The stock hit a 52-week low of Rs 117 on 1 October 2013.

The stock had outperformed the market over the past one month till 12 September 2014, rising 27.20% compared with 4.56% rise in the Sensex. The scrip had also outperformed the market in past one quarter, rising 20.23% as against Sensex's 5.81% rise.

The small-cap company has an equity capital of Rs 11.15 crore. Face value per share is Rs 5.

Mastek's board has approved the demerger of the Insurance Products and Services business of the company into a new company to be named as 'Majesco', followed by transfer of the offshore insurance operations by Majesco to Majesco Software and Solutions India, a wholly-owned subsidiary of MajescoMastek Insurance Software and Solutions Inc.

Under the arrangement, Mastek shareholders will get one equity share of Majesco for every equity share held in Mastek. In addition to their existing Mastek shares, Majesco is proposed to be listed on the BSE and the NSE, being exchanges where Mastek is currently listed.

The scheme is subject to approval of the High Courts of Bombay and Gujarat. The appointed date for the demerger is 1 April 2014 and the appointed date for the offshore insurance transfer will be 1 November 2014. The scheme of arrangement will be further subjected to various statutory approvals, including those from the shareholders and the lenders/creditors of Mastek.

Mastek Chairman S. Sandilya said, "This is part of Mastek's continuing endeavor to maximize shareholder value and create a platform for the insurance products and services business to tap the immense opportunity in the US and Global Insurance market."

Mastek Managing Director and Group CEO Sudhakar Ram commented, "This move is in line with Mastek's core ideal of 'Win for All. The proposed business structure enables the group to take advantage of the market opportunity presented in the US and in the UK and is aimed at aligning the business models, capital allocation and decision making within the Group. The restructuring will create value for all its stakeholders including customers, employees and shareholders."

On a consolidated basis, Mastek's net profit fell 92.03% to Rs 0.90 crore on 0.9% decline in total income to Rs 227.60 crore in Q1 June 2014 over Q4 March 2014.

Mastek is a publicly held leading IT player with global operations providing enterprise solutions to insurance, government, and financial services organizations worldwide.

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