ValuePickr Forum

HCL and Geometric merger. Can someone Please point out the Pros and Cons

Your calculation is correct. This is an arbitrage opportunity. Debenture will be listed and going by tax free bond rates (which are trading at close to yield of 7%), it should not trade at discount. So you can sell it or wait for redemption while you enjoy a 7% tax free dividend.

On top of this HCL is trading at historically low valuations. Cheapest large cap IT and cheaper than most mid-cap. HCL is fairly diversified across geography and also across service lines (IT, BPO, Infra management, Engineering Services).

Sounds like a good opportunity to me.

Pls do your own diligence.

Disclosure: Invested 8% of my portfolio in Geometric @ 230.

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Any information about the likely date of merger?

Tried calling kavita mentioned in the media report phone not ringing and also sent a mail to the mentioned email I’d. It has bounced back.

Should take about 6 months.

@nav_1996
Hey can anybody clear this out:

How can we redeem preference shares on the exchange? I’m having an account with Zerodha. Can I do it?

And what’s the record date for this merger?

And what’s this statement means?

Geometric will be merged into 3DPLM, thereby giving 100 per cent ownership of the latter to Dassault Systemes (3DS)

Found a related news shot:

http://www.business-standard.com/article/companies/geometric-more-than-just-a-value-buy-for-hcl-tech-116040300272_1.html

Have a read.

And also consider that merging with geometric will create additional 1.5 crores of shares which will decrease the per share value of the HCL tech.

My view from HCL Tech’s point of view.
I am surprised that HCL Tech has used shares to buy Geometric. HCL Tech has few billions dollar as a cash and current investment on the balance sheet and it generate a lot of money (PAT for last year 7400), and it distributed half of the profit as a dividend (Dividend Payout of 46% last year). It could have used cash to buy Geomeritc (approximately 1500 cr), without further dilution of shares.

On a business side, I think it is a good acquisition for HCL Tech as Geometric has a strong business with strong MOAT. HCL Tech will further bolster its position on Engineering services and not to mention tremendous opportunity to cross-sell other services to Geometric’s existing client.

On a flip side, Geometric business has less gross margin than HCL Tech, which means HCL Tech’s margin will be negatively impacted next year. I think it is one of the reason’ why HCL Tech’s stock has taken a beating in last few months.
Based on results from other IT companies, HCL Tech’s current quarter may not be great.

Note- I am long time investor in HCL Tech.

For buying a listed company, share swap is best option. As Geometric is listed, buying in cash is a tedious process due to open offer and not everyone rendering shares and challenges with delisting.

There is no significant dilution. Margins will be slightly dilutive but opportunity to upsell and cross-sell is huge.

If you look at the bigger picture, HCL becomes largest player in engineering services with Geometric merger. This is is a great derisking strategy when IT is getting commoditised.

HCL is nicely placed with 4 pillars - IT infra mgmt, IT services, BPO, Engineering services.

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Can anybody throw some lights on when did the merger date of geometric is likely to happen?

The company acquired Geometric in April but there’s no news after that for any further actions.

The merger has been approved by the shareholders. There is a latest filing with BSE on the same.

Disc: Sold off my shares in geometric.

Although many websites have reported that CCI has approved the merger. On the CCI website it is showing as still under review.

http://www.cci.gov.in/notice-order?field_case_date_value[min]&field_case_date_value[max]&combine=&page=1

You need not worry about this as they don’t have any overlapping business in India. It will be a mere formality.

Disc: Sold my shares in geometric around 240.

Hello
IS Geometric merger with HCL completed ?
Can someone share current status please.
Thanks

Yes it is. From March 31st Indian entity of Geometric will cease to exist. US and European entities will still remain though, as subsidiaries of HCL.

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OK Thank you. Will wait for allotment of HCL and 3DPLM allotment :slight_smile:

Hi,
I was holding shares of Geometric and now I have shares of HCL and the preference shares of 3D PLM. When does one get to divest them?

I understand that both of these shares need to be given approval to be listed. Is my understanding correct?

thanks to anyone who can enlighten me. Also, can the preference shares of 3D PLM be sold on the exchange? how does this work?

regards
Mathew

3D PLM. Pr shares got listed in the first week of may. U could also lodge it with company for buy back

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I am dealing with redeemable preference shares for the first time. I had shares of Geometric in my account and now I have HCL shares. But I do not see 3d PLM shares in my account. Where do I check for them?

Also what happens if I do not redeem?

Any help is appreciated.

Thanks,
Lav

Hi Lavpatel

I have a trading account with Zerodha and under my various holdings I can see 3D PLM. I can sell them thro Zerodha.

Also:- I checked my CSDL account and I can see 3D PLM.

I understand that these shares will redeemed in 18 months from March 17. My understanding is that the money will be credited into our bank accounts. I have written to the company secretary. I have had no reply as yet.

In the meantime we should be getting paid 7% dividend.

Regards
Mathew

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Hi

I also just received an email from their Company sec. You should also have received it. You can redeem it at the end of every quarter. This it seems is a right for holders but not an obligation. There is also an attached form to fill up and send.

Incidentally it is not 18 months but 15 months.

Trust that this helps.

Regards
Mathew