Mindtree’s campus in bengaluru. (Photo: BloombergQuint)
7 years ago
Mar 19, 2019
L&T Chairman AM Naik assured Mindtree coming under the L&T Group will be beneficial for all shareholders. “Strategically, we want to expand our services business,” Naik told BloombergQuint in an interview.
L&T has mounted India IT's first ever "hostile takeover". Is this the example that L&T wants to set?
Why can't you build a technology business, without decimating another organisation?
Our customers choose us for our unique culture, they may take business elsewhere. Then, you would have demolished shareholder value for both companies. Is that the right thing to do?
Our people have signed up for a mission, not just a salary. Take their mission away, and they will go. What would you be left with?
If companies like you behave with extreme hostility to first generation entrepreneurs, what message are you giving to startups in the country?
L&T's balance sheet has about Rs 15,000-16,000 crore cash, which is being invested in temporary treasury products, earning post tax returns of 5 percent.
Mindtree transaction does not dilute return on equity; as it will be RoE neutral to begin with.
Once synergies play out, the transaction will become RoE accretive
Markets and developments will decide when, if at all, Mindtree and L&T Infotech can be combined, not some preconceived speculative timeline, L&T’s Chief Finance Officer R Shankar Raman said while responding to BloombergQuint’s query at the conference.
Both companies are about a $1 billion each, at this stage there's mininal scope for conflict, and we see enough headroom for growth.
Even the few clients that are common, both companies are working at different ends; if anything there will be synergies.
When they reach $5 billion each, they could possibly start to look at each other's turf.
Doing anything on an artificial timeline, will destroy shareholder value.
One of the primary reasons we decided to keep the entities separate is to protect interests of minority shareholders.
The Rs 980 per share offer price was arrived at by taking the six-month weighted average price and adding a premium to it, the L&T President said.
L&T will buy the 20.3 stake in Mindtree from Siddhartha for Rs 980 per share, totalling Rs 3,269 crore, according to its statement filed with stock exchanges. L&T also intends to purchase an additional stake of upto 15 percent from the open market, at upto Rs 980 per share, the statement said.
L&T has also announced an open offer to shareholders of Mindtree to acquire another 31 percent at Rs 980 per share.
L&T is making the investment through its core company and not its information tech company since it would have had to leverage L&T Infotech to do so, the company president said.
L&T Infotech is predominant in banking, whereas Mindtree focuses on areas like retail and hospitality, he said. “Our intent is to keep both of them separate.”
L&T's fundamental approach is to keep businesses as verticals, allowing CEOs to bring in high focus, clarity & objectivity
L&T Infotech is run independently, is one of the best performing IT companies.
L&T Tech is again run as independently as possible.
L&T Infotech is predominant in banking, insurance etc, whereas Mindtree focuses on areas like retail and hospitality.
Culural value systems are broadly the same, but both have different backgrounds.
There are certain emotions and trepidation involved, but business is business. Emotions do play a part, but emotionalities have to be overcome as we go forward. What we are trying to do, is with, if I can use the word ‘pyaar’ , and we will continue to look at it as something we are doing from our ‘dil’. And we will continue to look at it with the same manner and purpose.
VG Siddharatha approached us a few months back to look at his 20 percent stake in Mindtree. L&T’s immediate reaction was neutral, but we continued our dialogue with him. From our point of view, the move made a lot of sense from our IT portfolio point of view. We also had dialogue with the Mindtree management.
Independent directors of Mindtree Ltd. must provide objective guidance to shareholders of the the Bengaluru-based technology firm on whether L&T’s open offer is in the company’s long-term interest, proxy advisory firm Institutional Investor Advisory Services India Ltd. said in a note.
Investors may not be in the position to understand all the nuances, the note said, adding that if the company's leadership and key staff leave the company with key clients upon a takeover, it may be damaging.
The advisory firm said that given the nuances of these issues, the independent directors are best placed to articulate stand on the several soft issues that characterise this transaction.
"It is not necessary that Mindtree’s independent directors tow the line with the company’s promoters,” IiAS said.
Mindtree has four Independent Directors - Akshay Bhargava, Apurva Purohit, Bijou Kurien and Milind Sarwate - on its board.
