Majesco expects share buyback to be completed by December: Farid Kazani, MD & Group CFO

Farid Kazani, Managing Director & Group CFO, Majesco Limited, talks about the how the proceeds of US subsidiary sales will be used, way to return the proceeds, buyback and Q2FY21 numbers during an exclusive interview with Swati Khandelwal, Zee Business. Edited Excerpts: 

Q: You are taking proceeds of around Rs 3,000 crore from the sale of the US subsidiary and you have taken the first step by coming up with a buyback of Rs 631 crore at Rs 845 per share. By when is this buyback process is expected to complete?

A: In our presentation to the stock exchanges, we have informed that the buyback process in which buyback of 25% shares will be done through the tender route. It will require shareholder ad SEBI approval and as per the timeline, we have called a shareholders’ meeting on November 2, 2020. After the shareholder meeting, we will immediately approach SEBI for approval. The tender offer will be opened immediately after SEBI approval is received. So, I think that it will be completed by mid-December. 

Q: How are you planning to return the balance proceeds after this buyback and by when can we expect the announcement will be made?

A: We have received Rs 3,778 crores through the stake sale of the US subsidiary. The complete proceed after filing the tax (tax on capital gains and the buyback tax), we want to distribute the entire proceeds among the shareholders. 25% of shares will be buyback after, which means 75% of shares will remain and we will distribute around Rs 2,300 crore to them. And we will try that immediately after the buyback closes, we will be able to distribute even the money of Rs 2,300 crores by end of December or early January. Our objective of distributing the entire proceeds should get completed by end-December and early January. 

Q: After this buyback can we see another buyback announcement from your end because we are seeing the trend of the overall IT sector and the companies, whether it is TCS, Wipro or even you?

A: You should understand that this is not a normal buyback, where you are buying back some shares of the old company in a percentage term. This buyback is a process that we want to distribute the entire sales proceeds, which is there in the company that we have received after selling the company. So, we want to distribute the entire proceeds and have chosen two options for the purpose and they are buyback and dividend. The board has decided to do so because we have to hand over the money the shareholders at the earliest. I think that if this combination of the buyback and dividend is completed in three months then we will be able to hand over the entire money to the shareholders. And there is no operation in the company, which means the shareholders will get the full value of the company. The remaining that is real estate, then the proceeds of the real estate will also be distributed whenever it will be monetized. 

Q: We have seen that your revenue fell by 12.50% in the September quarter. How will you summarize the numbers and what is the outlook for the future?

A: If you have gone through the results than in the consolidated numbers, we have informed that we have sold our main business in the US and accounted for it as a discounted business. So, in the consolidated financials you will not be able to see the complete consolidated business of the company. Thus, standalone numbers are visible in the consolidated financials and as per the accounting norms, we have accounted for the profit of the business till the day we had the business, i.e. September 21, 2020.

Going forward, there will be no consolidated statement and there will be the only standalone statement. So, on a standalone statement basis, our income stands at Rs 5.8 crores and profit around Rs 2.3 crore. I think this should be steady, however, as you know that funds will be distributed in the next quarter and accordingly, we will take expense to distribute the funds. It is going to be a one-time expense in the next quarter. Going forward, the balance business will be associated to the real estate income and it will remain steady till when the real estate business remains with us and will be around Rs 5 crore in the real estate and other income.

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After completion of monetization and distribution of the real estate is completed then we will have to take the company to a possible closure and we have not discussed the options of closure and it will be discussed at the board meeting.