Mastek's subsidiary Majesco is all set to be SEC compliant at the earliest that will see the stock debut on NYSE by June end or beginning of July, says Farid Kazani, CFO and Director Finance of Mastek and MD of Majesco told CNBC-TV18.
Meanwhile, all major approvals for merger of its recently acquired company Cover-All Technologies are complete. "The shareholder meeting is scheduled for June 22 and once we get the positive approval from the shareholders," he said.
The stock will be traded ex-Majesco from June 12 onwards. The record date for the split of the shares between Mastek and Majesco has been scheduled for June 15. Each shareholder would get equivalent shares of the two, he said.
Below is the edited transcript of Farid Kazani’s interview with Nigel D’souza and Ekta Batra on CNBC-TV18.
Nigel: We wanted a quick update in terms of Majesco. I believe that in fact shareholders of Cover-All will be approving the merger and that is expected later this month. Take us through those details.
A: We have progressed pretty well on schedule as far as the US listing is concerned. As you mentioned, the shareholder meeting is scheduled for June 22 and once we get the positive approval from the shareholders, we should be able to list the Majesco US entity on the New York City (NYC) market in a week from there.
So, hopefully we should be listing by the end of June or the first week of July. On the India front, we have also progressed pretty well in terms of timeline. So, we have announced the record dates for the split of the shares between Mastek and Majesco where each of the shareholders will get equal shares of Majesco.
The record date is on June 15 and as part of the call auction process of the stock exchange, Mastek stock will be going through that process on June 12 and will be traded ex-Majesco from June 12 onwards. The allotment of shares to the shareholders will happen three or four days after the record date and then thereafter we have a period of around 45 odd or 50 days by the time we end up listing the Majesco India entity on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE).
Ekta: Have you finished all of the other regulatory requirements for a listing in the US besides the merger, besides the approval for Cover Tech?
A: The major approvals for getting the Securities and Exchange Commission (SEC) effectiveness, it is going through a review with the SEC which was done last month and the other was to complete the preliminary clearance from the New York Stock Exchange (NYSE) which has also been done.
So, once the shareholder approval comes in, we will have multiple documents that are required to be submitted to the SEC and NYSE and we will have to comply with certain conditions that are there for listing on the NYSE.
Hopefully, we are in compliance with that, so we should have the listing done by June end or early July.
Ekta: For the Indian entity which will be listed Majesco, it will have a mirrored shareholding of Mastek?
A: That is right, you will have equal shareholders between Mastek and Majesco, based on shareholders who are on the registrar as on June 15.
Nigel: Let us just get this right, for a shareholder who has 100 shares of Mastek, could you just explain what exactly he gets and by when does he get that stake of Majesco?
A: A shareholder who owns 100 shares of Mastek will also get 100 shares of Majesco and Mastek will continue to be listed, albeit at an ex-Majesco price post June 12. Once, the Majesco stock gets listed and we are expecting that to happen around 45-60 days from now, he will hold 100 shares which he will be able to trade once the stock gets listed.
Ekta: We have your pro-forma financials of the two companies which is Mastek and Majesco for FY15. If I look at the Majesco numbers, your operating revenue actually saw a little bit of a downtake on a year-on-year basis and so did your earnings before interest, taxes, depreciation and amortization (EBITDA) margins. What is the outlook going forward for Majesco in FY16? What would numbers look like and growth and where would it come from?
A: This year the investment on the product development side has been higher. Secondly, we have spent on the restructuring and the listing and the other expenses which is why the margins are much lower than last year.
We do expect a pretty good growth to happen in the coming year, especially with the addition of the two acquired entities which is the business that we acquired from Agile Technologies and Cover-All Technologies which also then merges into this.
From a margins perspective, the business is looking good, but we do need to invest in our business in North America. So, there will be higher product expenses and sales and marketing expenses to take care of the opportunities that are there in the US.
So, while the long-term business model looks pretty sound and solid, there will obviously be investments in the initial year.
Ekta: So, if you did margins of two percent in your EBITDA for FY15, how much can you scale it back up to?
A: We are looking at getting back to double digits in the three years time. We are not giving any specific guidance for the next year.
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