New Delhi: A recent report said it sees limited downside to diversified conglomerate Larsen and Toubro’s (L&T) valuation in its hostile bid to take controlling stake in leading IT services firm Mindtree. L&T has signed a binding agreement to acquire 20.32 per cent of Mindtree shares at a price of Rs 980 per share from the largest shareholder and CEO of Cafe Coffee Day (CCD) founder V.G. Siddhartha. “We find limited downside to L&T’s valuation as the sum of the parts analysis (SOTP) is impacted by only 0.7 per cent even if we value Mindtree at a 20 per cent discount to the acquisition price,” said JM Financial in a report.
According to the report, given L&T’s cash balance of Rs 160 billion (as of December 2018), “this deal can be comfortably funded through internal accruals.” L&T now plans to up its stake in Mindtree to 66.32 per cent for a total outlay of Rs 107.3 billion through the open offer & open market.