Vakrangee to spin off IT business, listed separately

The demerger plan

Vakrangee Ltd said it would spin off its IT services business into a separate, listed entity.

The company’s mainstay business of franchising Vakrangee Kendras, as well as its BharatEasy app, will remain with the current listed entity known as Vakrangee Ltd.

The company said it was doing so as both businesses have evolved into very different entities.

The company essentially started as a tech company that helped small entrepreneurs set up common service centers or CSCs under a Government of India scheme to promote entrepreneurship and access to digitized government services, such as certificate application and issuance.

Gradually, the company added more and more features and services to its outlets, and in recent years, started pushing a standardized design and look-and-feel to its outlets under the Vakrangee E Kendra brand. Instead of a tech-enabler, it is now looking at itself more like a branded chain of e-service centers.

Over time, the company’s franchisees have evolved to provide a variety of internet-enabled services, such as assisted e-shopping (including from sites like Amazon), e-consultation with doctors, provision of farming-related information and physical products, bank account opening services, money transfer, ATMs and so on.

The franchising business is very unique and reportedly has high growth potential.

At the same time, the company also has an IT services unit, which is more like other, traditional IT services companies and takes up projects from clients and implements them. This part of the company also helps governments set up e-governance platforms.

This unit also assisted the consumer-facing, Kendra business by developing solutions for it.

Now, said the company, it is time to separate the Kendra business from the IT services business, given the vastly different foci, growth prospects and business models.

“Vakrangee Kendra Business is Retail centric Consumer facing business whereby we are building the last mile physical distribution platform as well as a B2C E-Commerce focused Mobile Super app Digital platform. Further, Vakrangee Kendra business (Physical as well as Digital) is an Asset Light, High return on capital business and thereby will get the proper representation post the demerger,” it said.

“The e-governance & IT/ITES business is a capital intensive B2B business. It is capex heavy as well as working capital Intensive. The e-governance & IT/ITES business division requires different skill sets and focused approach towards time bound project execution capabilities as well as dedicated efforts on collection of debtors, vendor management and trading of IT equipment,” it pointed out.

“The Demerger will enable both the Companies to enhance business operations by streamlining operations, more efficient management control and outlining independent growth strategies. Enable dedicated management focus, resources and skill set allocation to each business, which will in turn accelerate growth and unlock value for the shareholders,” the company added.

Existing shareholders of Vakrangee Ltd will automatically get 1 new share of the new, IT services company in the ratio of 10:1, based on the record date. In other words, they will get 1 share of the new company ‘free’ of cost for each 10 shares of Vakrangee Ltd that they currently hold.