I-T dept attaches shares held by V G Siddhartha, Coffee Day in Mindtree

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The Income Tax Department has attached a portion of shares held by V G Siddhartha and Coffee Day Enterprises Ltd in IT firm Mindtree over a potential tax demand -- a development that could impact the potential stake sale by the Cafe Coffee Day founder in the Bengaluru-based company.

Siddhartha, who owns about 21 per cent stake in Mindtree, is said to be in advanced discussions with various entities to sell his shares in the IT company.

In a BSE filing on Saturday, Mindtree informed that the I-T department in Bengaluru has issued a "provisional attachment u/s 281B of Income Tax or prohibitory orders Act, 1961 for tax demand likely to be raised by the I-T Department on...shareholders of the company - Coffee Day Enterprises Ltd and V G Siddhartha".

It added that the attachment also "prohibited for transfer or charge" of 22.2 lakh equity shares of Coffee Day Enterprises Ltd, and 52.7 lakh shares held by Siddhartha.

The order would be applicable for six months from the date of the order i.e. January 25, 2019, it said.

At the end of December 2018 quarter, Siddhartha held 54.69 lakh shares (3.3 per cent stake) in Mindtree, while Coffee Day Enterprises Ltd had more than 1.74 crore shares (10.63 per cent stake). Another entity, Coffee Day Trading Ltd holds over 1.05 crore shares (6.45 per cent holding).

Mindtree's promoters, which include Subroto Bagchi, Krishnakumar Natarajan, NS Parthasarathy, and Rostow Ravanan, together hold roughly 13 per cent stake in the company.

According to reports, Siddhartha is in advanced talks with L&T Infotech (LTI) and private equity firm KKR to sell his stake in the mid-sized IT services company. Also, there have also been speculations that such a sale by Sidhhartha could trigger a hostile takeover at the company, even as the founders are said to be making all-out efforts to counter any such developments.

Both Siddhartha and Mindtree founders have not made any specific comments on the issue so far.

During the Q3 earnings call recently, the management skirted questions on the speculations saying it remains committed to delivering growth for the company.

"...this is something that is not in our control. Shareholders make their own decisions on when they want to buy, how much they want to buy, when they want to sell etc. It is outside our purview in that sense," Ravanan, who is also the CEO and managing director, had said.

Ravanan had further said: "We can make sure that things go right at Mindtree, we take care of people, customers and continue to deliver industry leading growth, so the stake sale is not something that we have a view on or would like to make a comment".

Mindtree, in the December 2018 quarter, had posted 35.1 per cent rise in consolidated net profit, and 29.7 per cent jump in revenues at Rs 1,787.2 crore over the year-ago period. It had also exuded confidence that its January-March numbers will be better than the just-concluded quarter.