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.
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.