TDCX’s CEO aims to delist the BPO firm amidst struggling valuation

Last week, business process outsourcing (BPO) firm TDCX announced that it had received a non-binding proposal from its founder and CEO, Laurent Junique, to acquire all outstanding shares in the company that he did not already own.

Junique, who is also TDCX’s executive chair, currently owns 86% of all shares in the company, which represent 98% of the voting rights. The firm’s other major shareholders include Asia Pacific equities investment management firm Indus Capital Partners and Capital World Investors, a division of global investment manager Capital Group.

If the deal goes through, TDCX, which listed on the New York Stock Exchange just over two years ago, will become a private company.

TDCX listed on the New York Stock Exchange in September 2021. / Photo credit: TDCX
The New York Stock Exchange welcomes TDCX Inc. (NYSE: TDCX) ), today, Wednesday, October 6th, 2021, in celebration of its recent listing. To honor the occasion, Laurent Junique, CEO, joined by Chris Taylor, NYSE Vice President and Head of Listings and Services, rings The Closing Bell®.
Photo Credit: NYSE

What are the reasons for this possible delisting, and what does it say about the future of other listed Southeast Asian tech companies?

Attractive offer?

In a letter to the board of directors dated January 2, Junique said that his offer “provides an attractive opportunity” to the company’s shareholders.

He noted that the proposed acquisition price of US$6.60 per ordinary share “represents a 36% premium to the closing price” on the last trading day prior to the date of the proposal.

Indeed, anyone lucky enough to have purchased TDCX’s shares at their all-time low of US$4.31 on December 18 would see an upside of 53% from this trade.

However, shareholders who invested in TDCX at above US$6.60 in the past two years would crystallize their losses if Junique’s proposal goes forward. And that’s to say nothing of the investors who bought into the IPO at US$18 per share.

Of course, the CEO’s offer would have taken into account the sharp fall in TDCX’s share price since its IPO, and he is not under any obligation to protect other shareholders from losses they have incurred as a result of their investment decisions.

Still, it is fair to ask whether his current offer is in fact an “attractive opportunity” to the firm’s shareholders as Junique describes.

Notably, as of December 2023, the average one-year price target by analysts for TDCX is US$8.10, 23% above the current offer price.

Moreover, during the firm’s most recent Q3 2023 earnings conference call, Junique said that the company’s “overall business continues to be strong and resilient.”

If this is so, then an offer to privatize the company now, at a price lower than analysts’ estimates of its intrinsic value, is likely to result in the CEO fully capturing any future upside in the value of the company.

Tackling “significant challenges”

Other factors at play

Not a bellwether