With founders of Mindtree not willing to sell their stakes, the firm's single largest investor, V G Siddhartha, is likely to offload his stake in the stock exchanges through bulk deals.
According to sources in the know, these shares could be sold to private equity players at a discount. Currently, PE firms such as KKR, Advent, Apax and Carlyle are evaluating the option of buying out the stake of Siddhartha, who is also Café Coffee Day's founder.
Though feelers have been sent to founders who hold around 13 per cent stake in Mindtree, sources said they are unwilling to sell out as the company is likely to touch $1-billion revenue mark this financial year. “There is also a remote possibility of another technology company buying into Mindtree at this point of time, as unlike financial investors, it won’t like to be a minority investor in the company," another person familiar with the development said. "PE players will come in without having a board seat, as they can take it as a financial investment at a right valuation."
Siddhartha, who first invested in Mindtree in 1999, holds 21 per cent in the IT services firm through his various entities. Apart from his personal holding of 3.6 per cent, he also holds 10.64 per cent through Coffee Day Enterprises and 6.45 per cent through Coffee Day Trading. Since Siddhartha’s exit from the company as an independent director in March, market is abuzz of an impending stake sale by him.
Siddhartha could not be reached for comments on the development. Attempts to get comments from the company were also futile.
Currently, founders, including Mindtree's Chief Executive Officer Rostow Ravanan and Executive Chairman Krishnakumar Natarajan, own 13.34 per cent in the firm.
"If no strategic investor comes in, bulk sale in the exchanges at a discount looks like a feasible option," an analyst with a Mumbai-based brokerage firm said. "Given that the share price has already corrected around 23 per cent in the past three months, it has to be seen at what rate discounting will happen."
From a peak of Rs 1,183 in September, Mindtree’s stock price has corrected by around 28 per cent to close at Rs 850 at the end of trading session on Thursday. With such sharp correction, sources said that PE players would definitely pitch for a sharper discount, as whoever comes will not have any board representation.
"Hostile takeover is not possible because it is not a product company. In a services firm, you need the same set of people to run the business," an outsourcing advisor with a global research firm said. “In IT firms like Mindtree, where promoters are part of the top management, picking controlling stake without taking into confidence the founders, can be disastrous.”
Mindtree has already posted revenue of $488 million in the first half of this financial year. In the quarter ended September, digital services accounted for around 50 per cent of Mindtree’s overall revenues of $246.4 million.