Sonata Software jumps 19% after NCLT nod in 2026

Stock jumps on tribunal approval

Shares of Sonata Software rose sharply on Tuesday after investors reacted to the National Company Law Tribunal (NCLT), Chennai Bench, approving the merger of its wholly owned subsidiary, Encore IT Services Solutions Pvt Ltd, with the parent company. The stock climbed as much as 19.09% in intraday trade. Gains later moderated but the counter remained firmly in the green through midday.

At 12:24 pm, Sonata Software was trading at Rs 306.05, up Rs 45.70 or 17.55%. Another data point from the session showed the stock up 18.56% at Rs 308.85 at 11:47 IST, when it was also cited as the biggest gainer in the BSE’s ‘A’ group. The price action tracked the market’s focus on the formal corporate action and what it could mean for operational consolidation.

What the NCLT ordered and why it matters

The NCLT’s Chennai Bench approved the scheme of amalgamation between Encore IT Services and Sonata Software. In the order, the tribunal noted that the scheme “seems to be prima facie not in any way detrimental to the interest of the members of the companies,” while granting its sanction.

The order was passed on June 5, 2026, and was made public on June 11, 2026. The scheme confirms an appointed date for amalgamation as April 1, 2024. These dates are important for legal and accounting alignment, though the scheme does not become operative solely because the tribunal has sanctioned it.

How the merger will be executed

Under the arrangement, Encore IT Services, which is wholly owned by Sonata Software, will be dissolved without undergoing the process of winding up. The equity shares held by Sonata Software in Encore will be cancelled once the scheme becomes effective.

Because the transferor entity is wholly owned, the scheme also indicates that no new shares will be issued. That means existing Sonata Software shareholders are not expected to face dilution on account of the amalgamation mechanics described in the scheme.

Effective date depends on RoC filing

Sonata Software said the scheme is not automatically effective on the date of the NCLT order. The company stated that the arrangement will become effective only after it files a certified copy of the tribunal order with the Registrar of Companies (RoC).

Until that filing is completed, the effective date of the amalgamation remains pending. Investors typically watch this step closely because it is the formal action that operationalises a tribunal-sanctioned scheme under Indian corporate law.

Strategic rationale: simplify structure and cut costs

The merger scheme describes the amalgamation as a move to simplify the group’s corporate structure, reduce administrative and compliance costs, and improve operational efficiency. The companies have also described the consolidation as a way to streamline operations, eliminate multiple legal entities, rationalise costs, and enable more effective management under a single entity structure.

Encore IT Services operates in digital transformation, cloud computing, and software development services. Sonata Software focuses on AI-led digital transformation, cloud and data modernisation, and enterprise technology solutions. The overlap in service lines is part of the context for why the group is pursuing a single-entity structure.

Tax liabilities disclosed under the scheme

The documentation referenced that Sonata Software will assume certain statutory liabilities post-amalgamation, including tax arrears linked to Encore IT Services Solutions. The total tax demand cited for the transferor entity was ₹2.51 crore.

The tax demands referenced include ₹1.04 crore for Assessment Year (AY) 2021-22 and ₹1.45 crore for AY 2022-23, described as stemming from transfer pricing adjustments. A smaller demand of ₹0.02 crore for AY 2024-25 was linked to ICDS adjustments, for which a rectified return was filed. Appeals were stated to have been filed with the CIT(A), and the company is seeking a stay on these demands.

Trading volume and return context

Trading activity in the stock rose alongside the price move. On the BSE, 8.5 lakh shares were traded in the counter so far during the session referenced, compared with an average daily volume of 63,730 shares over the past month.

The article text also listed historical stock return snapshots for Sonata Software across multiple time horizons. Those figures provide context on how the stock has performed around the event, even though the merger approval itself is the immediate catalyst cited for the day’s rally.

Key facts at a glance

Historical returns cited in the text

Market impact: what investors are reacting to

The immediate market reaction appears linked to the formal legal sanction for consolidation, rather than a change in Sonata Software’s product positioning. For investors, the key operational element is the proposed simplification of structure and the removal of an additional legal entity through dissolution of Encore without winding up.

The disclosures also clarify that the scheme’s effectiveness is conditional on the certified order being filed with the RoC. Alongside the consolidation narrative, investors may track the ₹2.51 crore tax demand referenced for the transferor entity, including the status of appeals and any stay on demands.

Analysis: why this corporate action is closely watched

Amalgamations of wholly owned subsidiaries are often designed to reduce administrative overheads and tighten operational control. In this case, the stated objective is to streamline operations and improve efficiency by consolidating business management within a single entity.

Another feature investors tend to focus on is capital structure impact. The scheme indicates that no new shares will be issued because Encore is wholly owned, implying no dilution for existing shareholders based on the described mechanics. Separately, the timeline matters because the NCLT order alone does not complete the process, keeping attention on the RoC filing as the next procedural trigger.

Other compliance notes mentioned

The text also referred to a trading window closure for Sonata Software under SEBI insider trading regulations. It said the window was closed from April 1, 2026, until 48 hours after the Q4 FY2025-26 results are announced.

While the trading window disclosure is not directly part of the merger approval, it is a compliance detail that can shape near-term trading behaviour for insiders and connected persons.

Conclusion

Sonata Software’s intraday surge of up to 19.09% followed the NCLT Chennai Bench’s approval of the amalgamation of Encore IT Services Solutions into the parent, with the subsidiary set to be dissolved without winding up. The scheme’s next key milestone is the filing of the certified tribunal order with the RoC, after which the amalgamation becomes effective, while investors also track the status of the tax-demand appeals disclosed under the arrangement.