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JP Morgan cuts Aptech to neutral

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CIOL Bureau
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MUMBAI: JP Morgan Stanley has downgraded its investment recommendation on the

Indian computer education and software services company, Aptech Ltd, to

'neutral' from 'outperform', citing the uncertainty created by a recent merger

proposal. The company's board is to consider today a proposal to merge its

software division with Hexaware Technologies Ltd., another software firm

controlled by Aptech's founder.

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Morgan Stanley noted that the proposal was contrary to the management's

earlier stance that the two operations would be kept apart, adding that change

was a point of concern. "This could be construed as an indirect way of

listing Hexaware, which otherwise would be difficult in the present capital

market environment," Morgan Stanley said in a report dated February 23.

Morgan Stanley said one of the three possible outcomes of the company's plan

to separate its software and training business into two separate companies,

could be the merger of Hexaware Technologies with the software business of

Aptech. The other possibilities were the merger of Aptech and Hexaware or

maintaining the status quo.

However, the report said there were no fundamental concerns, provided the

merger ratio is not in favor of Hexaware and if the management changes are made

quickly. "The first set of announcements are likely to be made on February

27 and it could be at least a month after that before the final structure is

known. Until then, there will be uncertainty, which may be an overhang on the

stock price," the report said.

(C) Reuters Limited 2001.

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