Relisted on October 22, 3i Infotech hits seventh straight upper limit

InGovern calls the company 'a case study of restructuring'; firm had emerged out of bankruptcy after both shareholders and lenders agreed to massive haircuts

Shares of 3i Infotech, a mid-tier IT firm, hit their upper trading limit for a seven straight trading session on Tuesday. The company got relisted on October 22 following its debt restructuring scheme, which entailed reduction in capital base by a tenth. Since its relisting, 3i’s stock has climbed 40 per cent and is expected to rise further as restrictive trading rules prolong the fair price discovery process.

Aggressive acquisition strategy since 2007, led to piling up of debt at 3i pushing the company to bankruptcy. However, the company has emerged out of it thanks to both shareholders and lenders agreeing to take haircuts.

InGovern, a corporate governance and voting advisory firm, has called this “a case study of restructuring and laying the foundation for the future.”

Shriram Subramanian, founder and managing director of InGovern said 3i is a unique case as it is a rare instance of shareholder-driven restructuring.

“Typically, companies where there is willful default are taken to the IBC. In this case, as there was no identifiable promoter there was no question of willful default. Shareholders have taken a huge haircut of 90 per cent as part of the restructuring scheme,” he said.

Following the restructuring, 3i’s capital base was reduced from 1,660 million to 166 million. Among the key shareholders of 3i are Canara Bank, HDFC Bank, Bank of India and SREI.

In December 2020, 3i sold its global software products business for Rs 1,000 crore. The sale helped the company repay debt of Rs 820 crore and left it with Rs 150 crore in cash to chalk its revival.

In its new avatar, with the products business sold off 3i plans to focus on the $180 billion IT services industry.

The company has also installed a new management team, headed by Thompson Gnanam. 3i is targeting revenues of $1 billion by 2030. It plans to focus on new service offerings in domains such as BFSI, telecom, media and healthcare.

“It is a case study of restructuring that shareholders got right by selling off the products business, restructuring the debt and paying off the debt, early redemption of FCCBs, reducing the share capital to write off the accumulated losses, bringing in a new management team, setting new directions and thus laying a solid foundation for future business growth and profitability,” says Subramanian.