Here's why Quess Corp is demerging into three entities and how does each entity stack up

Shares of Quess Corp Ltd. have gained as much as 13% on Monday, their biggest gain in a single trading session since November 2020 after the company announced a demerger of its existing business into three independent, listed entities.

As per the demerger, the currently listed entity, Quess Corp, will focus on workforce management, the first demerged company, Digitide Solutions will focus on insurtech and the HRO business, while the second demerged entity, Bluspring Enterprises, will focus on facility management and industrial services.

In a conversation with CNBC-TV18, Ajit Isaac, the Chairman of Quess Corp said, "All the investments that are going into infrastructure into creating capacity in India in terms of ports, roads, airports, public utility space etc, needs maintenance. So that has immense opportunity and that is why we carved out these three companies to leverage the opportunities that is emerging in each of these three sectors."

The shareholders of Quess Corp will get one share each of the two demerged companies for every one share they own in the currently listed entity. Isaac highlighted that the shareholders will benefit from the clarity provided by the company's division into three distinct business verticals.

Quess Corp has highlighted an improved focus on business verticals, creating pure play verticals to help business positioning, a simplified corporate structure due to independent scaled platforms and an optimal apital allocation strategy as its rationale behind the demerger.

The demerger is likely to take 12-15 months for completion.

“Finding a strategic investor will be related to the opportunity to bring with them and not for the sake of the money that they bring because we are sufficiently capitalised, we have Fairfax is an investor, got $90 billion of assets under management, promoters own 57% of the company. So, it's unlikely that we need cash,” Issac said. He added that if there is a principle of additionality and something that investors can bring to the table, then the company would be open to discuss but not otherwise.

Based on the demerged entities, Quess Corp will contribute 68% to the consolidated revenue of the company, Digitide will contribute 14%, while the remaining 18% will come from Bluspring.

"This proposal should help the company compare on comparable metric with listed players, which might be welcomed by investors," brokerage firm Motilal Oswal said in its note.

Quess Corp will hold an investor meet on February 21 for the same.

Shares of Quess Corp settled 7.59% higher at ₹539.45 apiece. The stock has gained 44% over the last 12 months.