L&T
The logo of Larsen & Toubro Ltd. is displayed outside the company's headquarters in Mumbai, India | Kuni Takahashi/Bloomberg
Text Size:

Bengaluru/Mumbai: India is witnessing its first hostile takeover attempt of a software developer, a move the target says is a “grave threat” to its future.

Larsen & Toubro Ltd., Asia’s second-largest engineering firm by value, agreed to buy 20.3 per cent of Mindtree Ltd . for about Rs 32.7 billion ($480 million) and plans to acquire a controlling stake for as much as Rs 107.3 billion. V.G. Siddhartha, the largest shareholder in Mindtree through Coffee Day Enterprises and affiliated entities, agreed to sell the original stake for Rs 980 apiece.

Mindtree management, including its chief executive officer, say the company’s success lies in being able to build long-term relationships with clients and partners, ties they argue would be jeopardized by the Larsen’s acquisition. Proxy adviser Institutional Investor Advisory Services India Ltd. waded into the debate calling for Mindtree’s independent directors to guide investors on the merits of the offer.

“Hostile bids are uncommon in the professional services business since people are the key assets,” Kawaljeet Saluja and Satishkumar S, analysts with Kotak Institutional Equities wrote in a note to clients Tuesday. “These assets are not easy to manage in such situations.”

Mindtree, which counts United Technologies Corp. and Dutch phone company Royal KPN NV as its clients, had also attracted interest from private equity firms including Baring Private Equity Asia and KKR & Co., people familiar with the matter said previously.

“It is not necessary that Mindtree’s independent directors tow the line with the company’s promoters,” IiAS says in the note. If Mindtree’s leadership and key staff leave taking some clients with them upon the takeover, it could have damaging consequences for the business, IiAS said.

The software developer’s shares fell 1.7 per cent to Rs 946 at 12:21 p.m. in Mumbai. Larsen’s shares declined for a second day, dropping 2.2 per cent. The engineering company said it plans to keep Mindtree a listed entity and that the target’s services complement the business of its software unit, Larsen & Toubro Infotech Ltd.

We are deeply grateful to our readers & viewers for their time, trust and subscriptions.

Quality journalism is expensive and needs readers to pay for it. Your support will define our work and ThePrint’s future.

SUBSCRIBE NOW

“The attempted hostile takeover bid of Mindtree by Larsen & Toubro is a grave threat to the unique organization we have collectively built over 20 years,” according to a statement from the executives, which include CEO Rostow Ravanan and Executive Chairman Krishnakumar Natarajan. “We don’t see any strategic advantage in the transaction and strongly believe that the transaction will be value destructive for all shareholders.”

Mindtree last week said it will consider buying back shares, in a bid to deter any buyers. Co-founder Subroto Bagchi, who also signed Tuesday’s management statement, said in a tweet Sunday he’s returning to the company to protect it from being taken over.

Larsen’s Chief Executive Officer S.N. Subrahmanyan said the company “would go out of the way” to make a success of the investment. “Emotionalities have to be overcome going forward,” he said at a media briefing in Mumbai.


Also read: Padma Vibhushan for AM Naik who fought Ambani and Birla to lead L&T’s defence strides


 

Subscribe to our channels on YouTube & Telegram

News media is in a crisis & only you can fix it

You are reading this because you value good, intelligent and objective journalism. We thank you for your time and your trust.

You also know that the news media is facing an unprecedented crisis. It is likely that you are also hearing of the brutal layoffs and pay-cuts hitting the industry. There are many reasons why the media’s economics is broken. But a big one is that good people are not yet paying enough for good journalism.

We have a newsroom filled with talented young reporters. We also have the country’s most robust editing and fact-checking team, finest news photographers and video professionals. We are building India’s most ambitious and energetic news platform. And we aren’t even three yet.

At ThePrint, we invest in quality journalists. We pay them fairly and on time even in this difficult period. As you may have noticed, we do not flinch from spending whatever it takes to make sure our reporters reach where the story is. Our stellar coronavirus coverage is a good example. You can check some of it here.

This comes with a sizable cost. For us to continue bringing quality journalism, we need readers like you to pay for it. Because the advertising market is broken too.

If you think we deserve your support, do join us in this endeavour to strengthen fair, free, courageous, and questioning journalism, please click on the link below. Your support will define our journalism, and ThePrint’s future. It will take just a few seconds of your time.

Support Our Journalism

Share Your Views

LEAVE A REPLY

Please enter your comment!
Please enter your name here