L&T may attempt a hostile takeover of Mindtree at Rs 950-1,000/share

larsen & Toubro

Larsen & Toubro (L&T) is likely to acquire 20 percent stake owned by Cafe Coffee Day founder VG Siddhartha’s stake in Mindtree, media reports suggest.

CNBC-TV18 reports that L&T Infotech is not involved in the Mindtree deal. Earlier, Moneycontrol had reported that L&T Infotech has been a front-runner in the race to acquire a 20.4 percent stake in the midcap IT company.

Mint reported that the deal could trigger a hostile takeover bid by L&T, forcing the engineering behemoth to make an open offer to increase its stake to 51 percent. CNBC-TV18 reports the share sale could occur in the Rs 950-1,000 price band.

Siddhartha is the single largest stakeholder in Mindtree. Other promoters hold around 13.32 percent. Chairman Krishnakumar Natarajan holds 3.72 percent, Co-Founder Subroto Bagchi controls 3.1 percent, NS Parthasarathy and the current CEO Rostow Ravanan hold 1.43 percent and 0.71 percent, respectively.

The move could result in Mindtree’s current management losing control of the company. Moneycontrol could not independently verify the reports.

Siddhartha was one of Mindtree’s founding investors, purchasing 6 percent stake in 1999. Over the years, he raised his holding and bought out former Chairman, Ashok Soota, who left the company in 2011.

Sources told Mint that Siddhartha has pledged almost his entire holding in Mindtree to several domestic and foreign lenders, raising close to Rs 3,000 crore. “He (Siddhartha) is, however, behind schedule on repayments for several of these loan facilities taken by pledging shares. If he is unable to regularise the accounts, it could lead to invocation of the share pledge by the lenders,” a source added.

CNBC-TV18 reported that Siddhartha is in talks with these 18 lenders for a No Objection Certificate (NOC).
“L&T is closely working with the lenders and Siddhartha to work out a solution and has offered a letter of comfort for a two-month moratorium on invocation of share pledges by the lenders. It is seeking a moratorium because it hopes to obtain anti-trust approvals in key markets such as India, Europe and the US, where both Mindtree and L&T Infotech (a unit of L&T) are currently present. Invocation of the share pledge by lenders would dampen L&T’s chances of taking control of Mindtree,” the Mint report quoted another source as saying.

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