Shares of Sonata Software surged as much as 19.09% in intraday trade on Tuesday after investors reacted positively to the Chennai bench of the National Company Law Tribunal's (NCLT) approval of the merger of its wholly owned subsidiary, Encore IT Services Solutions Pvt Ltd, with the company.

The stock later trimmed some gains and was trading at Rs 306.05, up Rs 45.70 or 17.55%, at 12:24 pm. Earlier in the session, it had climbed as much as 19.09%.

The rally comes after the NCLT's Chennai bench, through an order dated June 11, approved the scheme of amalgamation between Encore IT Services and Sonata Software.

"The scheme of amalgamation... seems to be prima facie not in any way detrimental to the interest of the members of the companies," the tribunal said in its order, while approving the merger.

As part of the scheme, Encore IT Services, a wholly owned subsidiary of Sonata Software, will stand dissolved without undergoing the process of winding up.

The equity shares held by Sonata Software in Encore will be cancelled upon the scheme becoming effective.

According to the merger scheme, the amalgamation is aimed at simplifying the group's corporate structure, reducing administrative and compliance costs, and improving operational efficiency.

The companies said the consolidation would help streamline operations, eliminate multiple legal entities, rationalise costs and enable more effective management of the business under a single entity structure.

Encore IT Services operates in digital transformation, cloud computing and software development services, while Sonata Software focuses on AI-led digital transformation, cloud and data modernisation, and enterprise technology solutions.