Majesco's evolution from insurtech to Aurum Proptech
When shareholders approve Majesco's name change at its annual general meeting on September 6, 2021, it will be rechristened Aurum Proptech.
This is the story of what Majesco was born to do (insurance-technology services), how it traversed a global pathway as a publicly-listed company in India—and why it is on a whole new mission under a new name.
"We are shaping the future of insurance by bringing about the next big change," said Majesco in its annual report for financial year (FY) 2020.
But six months ago, property developer Aurum Group bought the promoter's stake in Majesco through its subsidiary, Aurum Platz IT. It now owns 35.07 percent stake in Majesco, listed on the Bombay Stock Exchange, which it plans to develop as a property technology—proptech—company. PropTech ventures develop technology solutions for the real estate market.
For most of its life, Majesco has been a provider of insurance software, consulting and services for global enterprises.
It began in 1992 as a subsidiary of Mastek, a multinational software company in India that helps global enterprises in digital transformation. Mastek clocked an income of Rs 1,750 crore, and profit of Rs 252 crore in FY 2021.
Majesco served as Mastek's insurance business to leverage the opportunities in the growing global market. Its main business was in the United States, where the company was known as MajescoMastek. It provided core technology solutions and services that help modernise and bring change to property and casualty (P&C), life and annuity (L&A), and group and employee benefits insurance carriers.
In 2014, Mastek decided to demerge its insurance products and services business to Majesco.
"While the insurance business offers us tremendous growth potential, it has high investment requirements in terms of R&D, brand-building, and sales," Mastek said in a demerger presentation in September 2014.
Mastek provides technological solutions to businesses to help them in digital transformation. Majesco—the insurance products and services business—was largely Intellectual Property (IP) centric and domain sensitive. It contributed about 55 percent of Mastek’s revenue then.
With different business models and growth opportunities, Mastek said the insurance business required different kinds of investments and a larger talent pool.
Mastek had already invested $90 million in research and development between 2009 and 2014. It needed more capital to grow, faced challenges in raising funds independently because of its business structure.
“The US insurance industry is in the midst of a once-in-a-generation modernisation cycle, providing an excellent opportunity for Majesco to gain a large share in the growing market," said Ketan Mehta, Director and Co-founder of Mastek, back then.
"This restructuring will enable creation of a strong platform to pursue the next stage of growth,” he said, in the statement. Mehta was CEO of Majesco, and later its chairman.
The demerger led to the transfer by Majesco of the offshore insurance operations business in India to Majesco Software and Solution India, a wholly owned subsidiary of Majesco Software and Solution, USA.
And Majesco focused solely on products related to the insurance industry. It launched products such as Majesco DigitalConnect, Majesco Business Analytics and Majesco Testing Services in 2016. In the previous year, it increased its R&D investments by 57 percent that year, according to its annual report.
Majesco clocked revenue of Rs 1,040.5 crore in financial year 2020, with a five-year compounded annual growth rate of 6.56 percent.
In 2020, Majesco was still growing as an insurtech—technology innovations in insurance—company with more than 200 global customers, according to its annual report in 2020. It was innovating with solutions based on cloud and using data to leverage the opportunities.
It had begun transitioning from a services business to a product company, specialising in cloud-based solutions. In fact, Majesco was ready for a new suitor in the year of the pandemic.
On July 20, 2020, Majesco agreed to sell its US arm to a private equity firm Thoma Bravo for $594 million. Post deal, Thoma Bravo would take Majesco US private. The valuation represented a premium of 74 percent above its average closing price in the 30-trading day period ended July 17, 2020.
Majesco's valuation jumped even higher after it received another proposal from an unaffiliated third party to buy its business.
On August 8, 2020, Majesco signed an amended agreement with Thoma Bravo, which agreed to buy it for $729 million. The deal concluded in September 2020.
“Majesco India (the listed company in India) holds 74.07 percent stake in the US entity (Majesco US). Hence, based on the stake, the company will now receive cash of $513.8 million,” ICICI Direct said, in a research report dated August 10, 2020.
In Indian rupees, considering capital tax gain and cash on the balance sheet, this meant Majesco India got about Rs 3,144.7 crore, analysts said in the note. The US entity now owned all of Majesco's global operations. And all the subsidiaries, including Europe, belonged to Thomas Bravo.
Still, Majesco was listed on Indian stock exchanges. In an earnings call on August 14, 2020, Farid Kazani—then Majesco's Managing Director—said the company would distribute the cash it got to its shareholders.
“The ultimate process will be in doing the compulsory delisting and dissolution,” Kazani said, referring to Majesco's Indian entity. But “there are other ways to structure it, so that it effectively puts more money in the hands of the shareholder.”
Majesco's shareholders received the money from the deal through share-buyback and dividend. It bought back 74,70,540 shares for Rs 631 crore on December 18. Its board approved the dividend of Rs 974, which was about 195 times the face value of its share.
The company had said in a stock exchange filing that the balance cash reserves, estimated at Rs 103 crore were to be distributed, depending on approval from company’s board and regulators.
Majesco also owned real-estate assets—a seven-storey building with 120,000 square feet—in Mahape in Navi Mumbai, Maharashtra, according to its management in an earnings call. Majesco planned to sell this, Kazani told The Economic Times.
But, this did not go as planned.
In March this year, property developers Aurum Platz IT acquired the promoter’s stake of 14.78 percent in Majesco. It extended an open offer to shareholders to acquire 26 percent more stake in the company. As of June 2021, Aurum Platz IT has 34.57 percent stake in the company.
“Majesco is an excellent strategic fit to transform the real estate value chain,” Ashish Deora, CEO of Aurum Group, said in Majesco's latest annual report. Aurum says it's a technology-driven real estate company in the Mumbai Metropolitan Region.
Technology will make it efficient to build, create, monetise, maintain capital in real estate, Deora said.
Majesco had found a new core business. Aurum wants to leverage technology in real estate, which is going through a “paradigm shift”, with digital solutions for project management, supply chain, marketing, sales and asset management, it said in its annual report.
“Our vision entails building an integrated real estate ecosystem that can be automated with the API framework, while supporting its integrated contact-centre capabilities,” Deora said. The company is partnering with technology companies that offer products and services in real estate in the country.
“The plan is to integrate their products and solutions within our ecosystem,” said Deora. In July, the Aurum Group took the first step in that direction. It acquired 51 percent equity stake in a Pune-based startup called K2V2 Technologies, in line with its strategy to build a digital ecosystem for real estate.
Aurum Group will pay Rs 40 crore in cash to K2V2. The startup builds CRM technology, services and enterprise solutions for the real estate industry in India.
K2V2 is the market leader in real estate CRM (customer relationship management) software. It generated Rs 12.68 crore of revenue in FY 2021, up 11 percent over the previous year.
In one year, Majesco had evolved from an insurtech business to Aurum Proptech.