Mindtree one of several options for us: L&T executive chairman A M Naik

L&T Group Executive Chairman A M Naik on Monday said the engineering major was looking at acquiring a stake in Mindtree but the Bengaluru-headquartered firm was one of the many options the firm was evaluating as an acquisition target.

In an interview to a private TV channel, Naik indicated the company might close a deal with one of these companies over the next couple of months. 

“We have not made up our mind (with regard to the acquisition of Mindtree). Obviously, (if there are) any good propositions in the market, we will be interested. But Mindtree is not the only one. There are a number of other companies available,” Naik said.

Naik said he could not give a timeline for closing a deal. “Over two-three months, we are looking at something or the other to pinch.”

V G Siddhartha, the founder of Coffee Day Group and the single-largest investor of Mindtree, is in talks with clutch of entities including private equity and technology firms to offload his 21 per cent stake in the IT company.

However, investors including L&T Infotech are looking at taking more than 26 per cent in Mindtree, which will ensure them a board seat apart from the option of making an open offer. 

As the founders are not ready to shed their 13.32 per cent and are also resisting proposals of any rival technology firm coming on board, the situation has turned tricky with possibilities of management change or hostile takeover in coming days. 

Earlier, reports suggested the board of L&T had passed an enabling resolution to buy 21 per cent from Siddhartha. The company is reportedly offering Rs 950-1,000 per share to Siddhartha, but this could not be independently verified. 

According to reports of brokerage firms, the acquisition of Mindtree by L&T Infotech will dilute the client concentration risks with the emergence of a bigger entity in the domestic IT services space. 

Analysts are of the opinion that in case Mindtree is acquired by L&T Infotech, the former’s client profile would supplement the growth of the latter. Also, engineering services offers of Mindtree could be merged with L&T Technology Services (LTTS) for a better product portfolio. Sources said even though the Income-Tax Department had provisionally attached 4.5 per cent of Siddhartha’s stake in Mindtree, L&T could acquire the rest of his holding in the initial phase. Once Siddhartha releases his remaining shares, they will be acquired subsequently.

“L&T could open an escrow account, from which money would be paid to Siddhartha in tranches. If the buyer is willing, this kind of structuring can solve the issue arising out of provisional attachment of Siddhartha’s stake,” a Bengaluru-based tax expert said. 

The I-T department on Saturday imposed restrictions on transferring 4.5 per cent stake held by Siddhartha and Coffee Day in Mindtree for six months, citing possible tax demands on him. A total of 7.49 million shares worth around Rs 665 crore faced this prohibitory order for six months starting January 25, 2019. 

Coffee Day has clarified it will take action to release these shares in a few days.