Polaris Financial Technology spurts on demerger of products biz

Polaris Financial Technology jumped 14.60% to Rs 156.95 at 15:27 IST on BSE after the company announced the demerger of its products business into a separately listed company.

The company made the announcement during trading hours today, 18 March 2014.

Meanwhile, the BSE Sensex was up 22.10 points, or 0.10%, to 21,831.90.

On BSE, so far 10.72 lakh shares were traded in the counter, compared with an average volume of 2.47 lakh shares in the past one quarter.

The stock hit a high of Rs 160.60 and a low of Rs 136 so far during the day. The stock hit a 52-week high of Rs 168 on 26 February 2014. The stock hit a 52-week low of Rs 96.10 on 14 May 2013.

The stock had outperformed the market over the past one month till 14 March 2014, rising 9.21% compared with the Sensex's 7.08% rise. The scrip had also outperformed the market in past one quarter, rising 9.17% as against Sensex's 5.28% rise.

The small-cap company has an equity capital of Rs 49.77 crore. Face value per share is Rs 5.

The board of Polaris Financial Technology at its meeting today, 18 March 2014, gave an in-principle approval for demerging the products business undertaking of the company into a separate listed firm.

The scheme/structure is subject to the approval by the various regulatory authorities like stock exchanges, Securities and Exchange Board of India (Sebi), Madras High Court, Registrar of Companies, shareholders and creditors, the company said in a statement.

After demerger, the product company will be known as Intellect Design Arena (Intellect) and comprise of four distinct businesses: global universal banking; risk and treasury management; global transaction banking and insurance, the company said in a statement.

Polaris Financial Technology said it will continue to run the services business with a strong vertical and solution focus. As consideration for the demerger (technically called a vertical split), every shareholder of Polaris Financial Technology, will receive one share of Intellect.

The product business is significantly different from the services stream, in terms of investments into product development, talent and sales & distribution. Given this, the Polaris board, taking into consideration the recommendations made by the Special Committee comprising of independent directors of the Board as well as the Audit Committee, has decided to offer a special option to the shareholders of Intellect to exchange the shares (should they wish to) allotted pursuant to the demerger against fully secured non-convertible debentures (NCD). These NCDs shall have a face value of Rs 42, with a coupon of 7.75% per annum, redeemable at par after 90 days.

Arun Jain, Executive Chairman, Polaris Financial Technology said, "This is a decisive step towards unlocking the potential of the company to respond to emerging opportunities in Financial Technologies in the coming decade. In fact, it is a win-win for customers, employees and investors alike. From a customer perspective, this new structure aligns investments, competencies, decision making and processes to drive the next level of value creation. On one side, the customer will be able to enjoy deeper focus for his specific needs, say Services, while he would be able to accelerate his change-the-business agenda with truly next-gen Products. From an employee perspective, alignment to their individual talent and interests will become a lot sharper, opening up clear streams for career advancement. From an investor perspective, on one hand, the shareholder will get an additional share of Intellect, a new horizon business. On the other hand, expanded leadership capacity, greater customer centricity and sharper focus will drive higher value in each of the businesses."

On a consolidated basis, Polaris Financial Technology's net profit fell 15.13% to Rs 50.76 crore on 0.68% growth in net sales to Rs 614.24 crore in Q3 December 2013 over Q2 September 2013.

Polaris Financial Technology is a global leader in financial technology for banking, insurance and other financial services.

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