Why Coforge Share Price is Rising

It was sometime in March 2023 when we discussed the reasons why Coforge share price was falling.

However, it wasn't an isolated challenge, as the entire realm of IT stocks was struggling for the preceding two years. The Nifty IT index, which was once considered a symbol of vigorous growth, was showing lackluster performance on a year-to-date (YTD) basis.

Despite this prolonged period of lackluster performance, shares of midcap IT firm Coforge experienced a remarkable upswing of 10% within a day.

Let's delve into the reasons propelling this sudden rally in the company's shares.

#1 Block deal

Global private equity firm Baring PE sold its entire stake in IT services company Coforge through block deals on Thursday for Rs 76.8 billion (bn), according to exchange data.

Through its affiliate Hulst BV, Baring PE held a 26.63% stake in the company as of 30 June 2023. Now, the company is 100% owned by public investors.

According to BSE bulk deals data, Baring PE sold 16.3 million shares at Rs 4,722 apiece.

This move eliminated the overhang of a significant stakeholder and bolstered investor confidence in the company's future.

The sale also transformed Coforge into a company fully owned by public investors, enhancing market liquidity and attracting attention from notable institutional investors.

Some of the buyers include Aditya Birla Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund, SBI Mutual Fund, Morgan Stanley Asia and Societe Generale.

This reshaping of ownership, coupled with the positive signal of Baring PE's exit, instilled optimism in the market about Coforge's growth potential and financial performance, triggering a notable rally of 9.78% in the company's share rallied 9.78% on Thursday.

The private equity firm has been offloading stake in tranches in Coforge, the erstwhile NIIT Technologies, over the past 2-3 years.

Earlier in May, Hulst BV divested a 3.5% stake in Coforge for Rs 8.9 bn through an open market transaction. The shares were disposed of at an average price of Rs 4,125.44 apiece.

In February this year, Hulst BV offloaded a 9.8% stake in the IT company.

The private equity firm acquired a stake in the mid-tier IT company in 2019. It held a 63.99% stake in Coforge at the end of the March 2021 quarter, which was brought down subsequently via stake sales.

#2 AI platform launch

Coforge, on 24 August 2023, launched a Gen AI platform designed to build enterprise AI capabilities. Coforge Quasar comes pre-loaded with a set of 100 plus APIs, readily available for integration.

The platform operates on a fully governed framework, incorporating process governance, Application Programming Interface (API) governance, and model governance within its foundation.

Enterprises can choose a cloud-based set-up or an on-premises set-up with enhanced security and controls.

AI, with its cognitive and generative capabilities, possesses the remarkable ability to revolutionise every facet of an organisation, including customer service, operations, research, sales and marketing, finance, and human resources.

How Coforge shares have performed recently

The share price of Coforge has surged over 5% in the past week. While over six months they are trading higher by 11%.

Coforge has a 52-week high quote of Rs 5,419.9 touched on 16 August 2023 while the stock touched its 52-week low of Rs 3,210.1 on 19 August 2022.

The stock is currently trading at a PE (price to earning) ratio of 40.7x.

About Coforge

Coforge is a global digital services and business solutions provider with in-depth domain expertise that specialises in selected industry verticals.

The company delivers services around the world directly and through its network of subsidiaries and overseas branches.

Presently it is rendering information technology solutions and is engaged in application development and maintenance managed services, cloud computing and business process outsourcing to organisations in a number of sectors viz.

The company delivers services around the world directly and through its network of subsidiaries and overseas branches. The company also has a sound business continuity plan in place that can address any natural or accidental disasters at its development and operation centres.

To know more about the company, you can check out Coforge fact sheet and its quarterly results.

For a sector overview, read our IT sector report. Since small-cap stocks interest you, here's a proven approach on investing in small-cap stocks

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...