L&T-Mindtree takeover battle: Subroto Bagchi may offload stake this week

After the exit of Nalanda Capital, Mindtree may see one of its co-founders exiting the company. Subroto Bagchi is likely to offload his stake in the information technology (IT) services firm this week, said sources in the know.
 
Bagchi is the one of the most vocal opponent of L&T’s takeover bid of Mindtree. While attempts to reach Bagchi were not successful, sources in the know said that after most big investors’ exit, offloading of stakes by founders seemed to be the next logical step.
 
On Monday, Nalanda Capital sold its entire 10.6 per cent stake in the IT company to L&T for around Rs 1,708 crore. Sources said Arohi Asset Management and Amansa Capital had also tendered their shares in the ongoing open offer.

 

Last week, the Mindtree board had approved the appointment of three L&T nominees that included the Mumbai-based firm’s Chief Executive Officer (CEO) & Managing Director S N Subrahmanyan and its Chief Financial Officer (CFO) Ramamurthi Shankar Raman. In that reshuffle, Bagchi had opted out of reappointment.
 
This week, he has again been appointed chairman of Odisha Skill Development Authority; the same post he had resigned from to shift to Bengaluru to salvage the company from raiders. “Founders’ exit seems imminent now, with L&T within striking distance of a controlling stake,” said a source.
 
As of June 25, L&T’s stake in the company has reached 47.75 per cent. According to the data available on the BSE, foreign institutional investors have tendered 24.26 million shares of the company in the open offer, which closes on June 28.

 
The major foreign institutional investors (FIIs) in the company included Singapore-based entities Nalanda Capital, Amansa Holdings, and Arohi Asset Management. Vanguard, WGI Emerging Markets Fund, and Ontario Teachers’ Pension Plan were the other major FIIs. “Amansa has also tendered its shares. Some promoter shares, too, have been tendered,” said a fund manager.
 
Among domestic investors, mutual funds (MFs) have participated heavily in the open offer. The exchange data showed MFs tendering 4.5 million shares in the open offer.
 
“Some MFs are tendering their shares as they see limited upside for Mindtree’s shares in the medium term. They might decide to regain entry at a later stage. With uncertainty around the company’s structure and board composition, the stock is likely to remain subdued,” said a fund manager.

 
However, for investors looking to hold on to their shares, experts say L&T’s ability to integrate Mindtree without much disruption would be crucial. 
 
“Existing Mindtree investors would want continuity of the top management of the company. Both the CEO and the CFO have performed well. It would be important that both Mindtree and L&T ensure there is smooth transition, especially in the first year. Any dissent should get settled at the board level and not have a spillover effect,” said the chief investment officer of a fund house, which is yet to take a call on the open offer.