On June 25, 2024, the CCI approved the acquisition of up to 54% of the equity share capital by Coforge Limited (‘Coforge/Acquirer’) of Cigniti Technologies Limited (‘Cigniti/Target’) (‘Acquirer’ and ‘Target’ are collectively referred to as the ‘Parties’). ^[1]

Description of Transaction and Parties

On May 21, 2024, a Notice was filed jointly by the Parties pursuant to the share purchase agreement dated May 2, 2024, entered into amongst Cigniti, Coforge, and the Cigniti promoters (‘Promoter SPA’) and the share purchase Agreement dated May 2, 2024, entered into between, Coforge and identified public shareholders (‘IPS SPA’).

Pursuant to the Promoter SPA and IPS SPA, Coforge proposes to acquire at least 50.21% and up to 54% of the equity share capital of Cigniti on a fully diluted basis in the manner given below:

i.     Acquisition of up to 32.47% of the equity share capital of Cigniti on a fully diluted basis from the Cigniti Promoters by Coforge; and

ii.   Acquisition of 17.73% of the equity share capital of Cigniti on a fully diluted basis from certain identified public shareholders of Cigniti by Coforge (‘Proposed Combination’).

As Cigniti’s equity shares are listed on both the National Stock Exchange (‘NSE’) and the Bombay Stock Exchange (‘BSE’), and Coforge has agreed to acquire more than 25% of Cigniti’s equity share capital, Coforge made an open offer to purchase an additional 26% of Cigniti’s equity share capital on a fully diluted basis as per the Securities and Exchange Board of India (‘SEBI’) (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, from public shareholders (in addition to the identified public shareholders).

Acquirer: Coforge is a publicly listed company on the NSE and BSE, with its equity shares solely held by public shareholders. The Coforge group comprises various affiliates incorporated in India and abroad (‘Coforge Group’). Coforge and its affiliates are engaged in providing information technology (‘IT’) and IT-enabled services (‘ITeS’) in India, including various sub-segments.

Target: Cigniti is listed on the NSE and BSE. Currently, the promoters of Cigniti hold 32.47% of its equity share capital on a fully diluted basis, while public shareholders hold the remaining 67.53% of the equity share capital. Cigniti has affiliates in India and abroad (‘Cigniti Group’). The company provides IT and ITeS including various sub-segments.

Overlaps and Assessment by CCI

The CCI observed that both the Coforge Group and the Cigniti Group are engaged in the broader segments of the provision of IT and ITeS. Within the IT and ITeS, the Coforge Group and the Cigniti Group are engaged in the provision of: (i) IT outsourcing services; and (ii) development and integration services. Within IT outsourcing services, both are engaged in the provision of application outsourcing services in India, and within development and integration services, both are engaged in the provision of application development services in India.

Based on these observations, the CCI observed the following overlaps:

Horizontal Overlaps: In the broad segments of IT and ITES, specifically in segment of provision of IT outsourcing services, provision of application outsourcing services, provision of development and integration services, and provision of application development services in India.

Complementary Overlaps: A potential complementary overlap between the activities, in the segment of the provision of application development services (‘Application Development’) and provision of software testing services (‘Software Testing’) in India.

Assessment:

The CCI found that: (i) the combined market share of the Coforge Group and the Cigniti Group, in each of these market segments is in the range of 0 – 5%; (ii) these segments are characterized by the presence of several big players such as TCS, Infosys, HCL, Accenture, Wipro, etc.; and (iii) the respective market share(s) of the Coforge Group and Cigniti Group in the segments of Application Development and Software Testing and its sub-segments is miniscule. Accordingly, neither the Coforge Group nor the Cigniti Group has the ability, let alone incentive, to foreclose competition.

Thus, the CCI concluded that the Proposed Combination is not likely to have an appreciable adverse effect on competition in India. Therefore, in the absence of any competition concern, the CCI approved the Proposed Combination.

[1] Coforge Limited / Cigniti Technologies Limited (Combination Registration No. C-2024/05/1151).