Mindtree promoter VG Siddhartha’s huge debt pile might have forced his hand to sell his entire 21.32 per cent stake to L&T. He had borrowed over ₹3,000 crore pledging almost 95 per cent of his stake in Mindtree as collateral.
A top executive of Mindtree says that at one point of time, Siddhartha realised that if he didn’t offload his stake immediately, the valuation of his shares would go down considerably as the market hit by the crisis at IL&FS and DHFL was on a downward spiral. Hence, the rollover of the debt had become difficult. Siddhartha, who sold off his entire stake to L&T, was able to raise ₹3,269 crore out of which he made a profit of ₹2,858 crore.
Mindtree Chairman Krishnakumar Natarajan told BusinessLine that even if Siddhartha did not have any debts, it would have been difficult for him to stay back. “Once CCD (Cafe Coffee Day) got listed he was finding it difficult to spend the mandatory 10-12 days required for Mindtree and that made him step down,” he said. He, however, said that Siddhartha continued to strongly endorse his commitment to Mindtree. “But certain external events forced this situation.” Hence, he appointed a merchant banker to find a buyer for his stake.
On L&T’s bid
Natarajan, who is also one of the co-founders of the company, however, denied that Mindtree had approached L&T five years ago to take over the company. On the issue of whether L&T’s bid can be termed as hostile, he said it was important to focus on the rest of the shares held by the public and others which is what L&T is looking at. “Siddhartha can sell his 20 per cent but cannot sell control of the company.”
On whether Infosys Co-founder NR Narayana Murthy and Wipro Chairman Azim Premji had been approached, the Mindtree chairman said he will not be able to comment on that development but added that there was “an outstanding sense of solidarity and support from the industry and that was extremely comforting. At the end of the day, people may not want to take public positions. That does not mean that they are opposed to take a stand.” Even the institutions are firmly behind the Mindtree board, he added.
On buyback deal issue
The Mindtree chairman said the industry always prides itself on competing and collaborating and this has always been the ethos of the industry but a move like this would destroy that. “This needs to be viewed beyond a transaction. The board and the management clearly feel that this is not a value accretive deal.”
On the issue of the buyback deal being cancelled, he clarified that once the open offer was made, it was practically difficult to go ahead with the buyback as it needs a special resolution.
“The buyback was not an effort to stall L&T’s bid. The board has been discussing this for 3-4 months. SEBI guidelines suggest that at the current market price, we can buyback 2.98-3 per cent. It was based on the cash to be returned to the shareholders. After the open offer there were practical difficulties and it needed a special resolution. The board debated all this and decided that it was not worth the time and effort.”
He was quite clear that Mindtree had never underperformed so far.
“If you look at a JP Morgan report and over five-time periods, it indicates that we have been either number one or two which means we are doing something right. The next few years can be very strong for Mindtree. Our aspirational statement was $1 billion by 2014. We didn’t get there but such targets are aspirational. What is important is we have set high targets for ourselves,” he said.