L&T becomes majority shareholder in Mindtree with 60% stake; infra major all set to take control of IT firm

After a year-long effort, engineering giant Larsen and Toubro (L&T) acquired a controlling stake in Mindtree—the Bengaluru-based Information Technology (IT) company, through a hostile bid by raising its stake to 60 percent. According to Mint, Mumbai-based L&T purchased an additional 31 percent stake for Rs 4,988.82 crore through an open offer as large investors rushed to sell their holdings. Last week,  L&T had announced its Rs 5,030-crore open offer to acquire an additional 31 percent stake in the mid-tier IT company after nearly a month’s delay. The offer to purchase 50.9 million shares of Mindtree from public shareholders was subscribed 1.2 times on Wednesday, the report said, quoting people with direct knowledge of the matter.

L&T’s hostile bid to acquire a controlling stake in Mindtree is the first in India’s software services industry and is rare in India’s corporate sector, where unsolicited suitors are usually deterred by founders with large shareholding.

Meanwhile, it was reported that Mindtree chief executive officer (CEO) Rostow Ravanan may resign in the coming weeks with L&T becoming a majority shareholder in the mid-sized IT company, according to PTI. L&T had initiated a hostile takeover of Mindtree in March and since then expanded its shareholding to a majority stake with large investors like Nalanda, selling their shares in the ongoing open offer. [caption id=“attachment_6285691” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] Mindtree founders had tried to resist the bid and had tried rallying support from Singapore-based Nalanda Capital and others. One of the sources said Mindtree founders had supported Ravanan’s continuation to ensure business continuity but given the developments over the past few weeks, Ravanan will be expected to step down from his role in the coming weeks. Another source said the founders, which include Subroto Bagchi, NS Parthasarathy and Krishnakumar Natarajan (who together hold about 13 percent), may look at selling their shares as well in the open offer that concludes on 28 June. Mindtree co-founder Subroto Bagchi did not offer being considered for re-appointment to the board. The IT firm remained silent on how it plans to accommodate the three new L&T representatives. On Tuesday, it was reported that Singapore-based Nalanda Capital sold its entire 10.61 percent stake in Mindtree to L&T, paving the way for the construction major to increase its stake to over 51 percent in the Bengaluru-based IT firm. Last Thursday, L&T had secured three board positions at Mindtree, giving it a firm control over the company. Mindtree had said L&T CEO and MD SN Subrahmanyan would join its board as a non-executive director with effect from 16 July. The nomination and remuneration committee and the board of directors of Mindtree have also approved and recommended the appointments of Jayant Damodar Patil and Ramamurthi Shankar Raman as non-executive directors, subject to shareholders’ approval at Mindtree’s annual general meeting (AGM) on 16 July, a BSE filing said. In March this year, L&T had made an offer to buy up to 66 percent stake in the Mindtree for around Rs 10,800 crore.

L&T has entered into a deal to buy Cafe Coffee Day owner V G Siddhartha’s 20.32 percent stake in Mindtree and has also placed an order with brokers to pick up another 15 percent of the company shares from the open market. Since then, L&T has steadily increased its holding in the Bengaluru-based tech firm.

The open offer with an offer price of Rs 980 per share, opened on 17 June and is slated to close on 28 June. If the offer of 5.13 crore shares is subscribed fully, the engineering behemoth will end up with a 66.32 percent holding in Mindtree.