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Tax dept bars V G Siddhartha from selling Mindtree stake, attaches shares

A total of 7.49 million shares held by Siddhartha and Coffee Day Enterprises will face this prohibitory order for next six months starting from January 25

Debasis Mohapatra  |  Bengaluru 

Income Tax, tax
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The has imposed restrictions on the transfer of shares by and his holding company in for a period of six months, citing possible future tax demand on him.

The order has come at a time when Siddhartha is in talks with several suitors, including and technology companies, to offload his 21 per cent stake in

"Provisional attachment (of shares) has been imposed on the following shareholders of the company- and V G Siddhartha- for likely tax demand by the Income Tax department," said in an exchange filing.

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According to the regulatory filing, a total of 7.49 million shares held by Siddhartha and will face this prohibitory order for next six months starting from January 25, 2019. While the number of shares on which restriction has been imposed constitutes 4.56 per cent of Mindtree's total share base, it is valued at Rs 665 crore at the closing price on Friday last week.

Siddhartha-owned had previously faced income tax raids on its premises in September 2017 and reports suggested that documents showing Rs 650 crore of concealed income were seized during the search operations.

While the nature of future tax demand could not be immediately ascertained, analysts said that such restrictions could delay or even potentially derail Siddhartha’s stake sale plans. Investors might sense contingent risk from future litigations, analysts added.

However, Siddhartha and his holding company could challenge the order of in appellate tribunal, pleading against such prohibition.

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Currently, Siddhartha is in talks with various PE investors and technology firms to sell his 21 per cent stake in Mindtree, triggering concerns of management change or a hostile takeover as founders are not willing to shed their stakes.

An acquisition of the founders’ stakes- currently at 13.32 per cent- assumes significance as the acquirer needs to hold more than 25 per cent to have board representation and to reach the trigger point for an open offer.

Analysts said the stake sale plans of Siddhartha is likely to receive a setback now as he will only have around 16.5 per cent stake to offload post this prohibitory order.

First Published: Sat, January 26 2019. 17:08 IST