In an unusual turn of events, Mindtree has called for a board meeting next week to consider share buyback amid the speculations about L&T Infotech taking over the company.
In its BSE filing on March 15, Mindtree said that the company board will meet next week to discuss share buyback. The company’s last buyback was in 2017 where it had announced the share buyback of 43.2 lakh shares Rs 270 crore.
This announcement is unusual considering that it has come at a time when there are reports of a hostile takeover by the Mumbai-based L&T Infotech, a frontrunner in buying the 20.4 percent stake of Mindtree’s largest shareholder and Café Coffee Day founder VG Siddhartha.
Media reports also suggest the company is in advanced stages of negotiation and might finalise the deal in the coming week. Neither Mindtree nor L&T Infotech has confirmed the same. However, this move to some extent reflects the management’s response to the takeover bid by the LTI and fear that it could potentially mean a merger between the two companies.
“Looks like there’s a big disconnect between the single-largest shareholder and the management. No company announces a buyback when a large shareholder is trying to sell his stake,” V Balakrishnan, former Infosys board member and chairman of Exfinity Venture Partners told Business Standard. “As the price goes up, the transaction will be revisited by the interested party. It will now be costlier for any entity to take control of the company,” he said.
According to analysts, the buyback might be an attempt to get shareholders on the management’s side in case there is an open offer.
The company’s promoters’ shares account for about 13.32 percent. Of the 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.
Media reports suggest that LT’s parent company L&T is looking to buy increase its stake to 51 percent through an open offer.