The completion of the merger of Larsen & Toubro Infotech and Mindtree in November sparked speculation of the new entity, India’s fifth largest IT firm by market capitalisation, making its entry into the Nifty50 index.
Based on the existing methodology and the NSE’s recently floated consultation paper on stock inclusion based on mergers and acquisitions, the quantitative research firm said that LTIMindtree has very little scope to find its way into the Nifty50 during the March review.
“We are confident in our understanding of the current methodology and rule out its inclusion in this review,” said Abhilash Pagaria, head – of alternative and quantitative research at Nuvama Wealth, in a report on Monday.According to Nuvama Wealth, until the merger got completed and fresh shares were credited to the shareholders, NSE considered L&T Infotech as an independent entity.
Hence, the elementary deduction is that L&T Infotech’s average market cap will be considered with 26% free float, and once fresh shares are credited, the free float considered will be approximately 31-32%.As per Nuvama’s calculation, taking into account existing shares and hypothetically from December 1 till January 31, L&T Infotech’s free-float m-cap is pegged at 32%.
Even after taking into account the existing shares from November 15-January 31, it increases the total market cap by 30%.L&T Infotech still stands no chance in replacing
(lowest free-float market-cap contender), at least in the March review, believes Nuvama Wealth.
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