Quess Corp's Three-Way Demerger: Targeting Value and Focused Growth
19-02-2024

Quess Corp has announced a three-way demerger to streamline its operations and unlock value for shareholders. Each shareholder of Quess Corp shall receive one share of the newly created entities. The move aims to narrow the focus of each company, providing enhanced strategic clarity and management focus to accelerate profitable growth. With a simplified corporate structure, each entity can pursue independent strategies with strong management focus. 

Structure of the Demerger:

Quess Corp Ltd (Remaining Company): Largest Workforce Management Entity in India, serving over 440,000 associates with a focus on hiring, deployment, performance management, and upskilling.

Digitide Solutions Ltd (New Company-1): Provider of BPM Solutions, Insurtech, and HRO Business, aiming for $1 billion in revenue with a global presence across 30 countries.

Bluspring Enterprises Ltd (New Company-2): Offering Facility Management, Industrial Services, and Investments, targeting 20% YoY revenue growth through premium services and strategic expansion.

Positives from the Demerger:

The demerger aligns its businesses to seize the evolving opportunities by granting each entity a narrowed focus, the demerger enhances customer service as well as shareholder value through heightened management attention. Quess Corp Ltd, Digitide Solutions Ltd, and Bluspring Enterprises Ltd are poised to lead their respective sectors, supported by robust market positions and growth prospects. With dedicated focuses on workforce management, BPM solutions, insurtech, HRO business, facility management, industrial services, and investments, each entity is positioned for substantial revenue growth. Shareholders stand to benefit from this restructuring firstly on account of value unlocking and also because of better business prospects for each company with improved management execution. 

Moneyworksme Opinion: This merger was long overdue for the company as it shall expedite value generation in the business. We had highlighted in our previous note that, while the future potential is large, the weak macro environment, execution, and regulation has resulted in lower than expected performance and hence disappointment. Even though our priority remains to exit the company where our growth assumptions are not playing out, we need to see how the demerger shapes and if the risk-reward is in our favour to stay invested. Thus, we are looking for an appropriate valuation to exit the stock.