L&T, Mindtree may see second round of sparring over shareholder meet

Multiple sources said the idea of holding an EGM seemed inducting an L&T representative into the Mindtree board

L&T and Mindtree seem to be heading towards another round of showdown as the engineering major is considering a shareholders’ meeting after becoming the single-largest investor in the IT services firm following its acquisition of 20 per cent from Coffee Day founder V G Siddhartha on Tuesday.

While sources in the know said the agenda for the extraordinary general meeting (EGM) was likely to be “governance and inclusion”, L&T may seek board representation in the proposed meeting.

L&T, which concluded purchasing 20.4 per cent from Siddhartha this week for Rs 3,300 crore, has placed orders to buy an additional 15 per cent from the open market and is likely to cross the 26 per cent shareholding threshold within a week.

Multiple sources said the idea of holding an EGM seemed inducting an L&T representative to the Mindtree board.

However, given the unsolicited nature of L&T's takeover bid, industry experts added L&T had to provide fact-based evidence on issues of “governance and inclusion” for convincing the Mindtree board about the requirement of such an EGM. 

“As the single-largest shareholder, L&T can request the board to have an EGM. But it has to convince the board that such a meet is essential on valid grounds, failing which it may reject the proposal,” said a person familiar with the development. Detailed emails sent to L&T, Mindtree and the chairperson of the Committee of Independent Directors at Mindtree, Apurva Purohit, remained unanswered till the time of going to press.

According to the Companies Act, any shareholder with 10 per cent of paid-up share capital of a company can move a requisition to the board to call an EGM.

After receiving the requisition, the board shall proceed to call a meeting, which has to be held within 45 days of the date of requisition. In case the board fails to act within the timeframe, the shareholder can by itself call such a meeting.

Even a shareholder with 10 per cent can request including agenda items at the general meeting of the company.

“Given the fact that L&T is a large shareholder, if it asks for an EGM, the Mindtree board may not say no at this stage. But, we have to see what is on the agenda (of the meeting in case it happens),” said Amit Tandon, founder and managing director of corporate governance and proxy advisory firm IiAS.

“L&T will seek board representation in Mindtree when the time comes. It may be in the EGM as governance is a broad spectrum under which the company would like to have its nominee on the board,” Tandon added.

Some other industry experts said once L&T reached the 26 per cent level, passing some resolutions in the annual general meeting (AGM) of Mindtree would require its approval.

“There are certain resolutions that require two-thirds (around 67 per cent) and three-fourths (75 per cent) of shareholders’ approval. So, any shareholder with 26 per cent can block resolutions that require three-fourths of the shareholders’ approval,” said Navin K Rungta, co-founder of eLagaan, a company that helps start-ups in various compliance matters.

L&T is pursuing a controlling stake of 66 per cent in the Bengaluru-headquartered IT services firm for around Rs 10,700 crore. However, the unsolicited takeover attempt is being opposed by Mindtree's founders, who are seeking more clarity on L&T's plan.

Currently, Mindtree's panel of independent directors is evaluating L&T's open offer proposal and will give its recommendations by May 10. The open offer will begin on May 14 and close on May 27.