Polaris Financial Technology shares up 15 per cent on demerger of products business

Shares of Polaris Financial Technology today climbed 15 per cent after the company announced the demerger of its products business.

Polaris Financial Technology Ltd.

BSE

162.35

9.55(6.25%)

Vol: 1146905 shares traded

NSE

162.30

9.05(5.91%)

Vol: 4088286 shares traded

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BANGALORE: Polaris FinancialBSE 6.25 % Technologies jumped as high as 18% in Mumbai trading after the Chennai-based financial software and services company said it was separating its products unit into a separate listed company. Shares at the company that's been widely rumoured to be in sale talks ended 15% higher at .`158 on the National Stock Exchange on Tuesday after the news.

PolarisBSE 6.25 % said it is restructuring its business into two entities: one that manages the company's services business while demerging the products business into a separate listed company.

The product entity will be known as Intellect Design Arena and will focus on segments such as insurance, risk and treasury management, Polaris, which provides outsourcing services mainly to the banking and financial services sector, said in a statement on Tuesday.

The company will file the scheme of demerger with the stock exchanges and the Securities and Exchange Board of India.

The demerger will bring greater focus and competency into its products business, Polaris said. "From a customer perspective, this new structure aligns investments, competencies, decision making and processes to drive the next level of value creation," Arun Jain, executive chairman said in a statement.

Polaris shareholders will receive one share of Intellect for each share in the current company they hold. They will then have the option of exchanging those shares for fully secured non-convertible debentures of.`42 each that will pay out an interest of 7.75%.

CEO Jain will discuss the move with investors and analysts in a call on Wednesday, but described it as one that was in continuation of the 'Polaris 4.0' restructuring plan announced two years ago.

Since then, the company hired Boston Consulting Group to work on its strategy and internally split its services business from the product unit. According to industry insiders, Polaris has been in talks with large software companies to sell its services business.

"Polaris remains a fantastic asset to acquire and hence an acquisition premium shall reflect in valuation," analysts Soumitra Chatterjee and Nitin Padmanabhan at Espirito Santo Investment Bank Research wrote in a report earlier this month. The analysts have a "Buy" rating on the stock.

Manish Maakan, chief executive of Polaris global transaction banking unit, will become the CEO of the products unit, while Jitin Goyal will continue as the head of the services business. The two companies will have independent management teams and boards ofdirectors.