Mindtree independent directors say L&T open offer is ‘fair and reasonable’

Five days before engineering major Larsen & Toubro (L&T)'s open offer for IT firm Mindtree begins, the latter's independent directors have termed its Rs 980 per share price as fair and reasonable.

The view contrasts that of Mindtree founders and promoters, who opposed the bid saying the offer price undervalued the Bengaluru-based firm. The independent directors’ panel, which expressed the view on the open offer that aims to acquire a 31% stake in Mindtree, consisted of chairperson Apurva Purohit, Milind Shripad Sarwate, Bijou Kurien and Akshaya Bhargava.

The panel also said that the open offer, which will open on 17 June and close on 28 June, was in accordance with the regulations prescribed by the capital market regulator Securities and Exchange Board of India (SEBI), which had approved the offer in late May. The open offer is managed by Axis Capital and Citigroup India.

The panel constituted by the Mindtree board pointed out that the price of the IT firm’s shares was Rs 975.5 on NSE on 10 June, while the offer price stood at Rs 980.

The open offer is part of one of the most high-profile hostile takeover bids in Indian corporate history. The offer was scheduled to start last month but got delayed due to SEBI demanding a few clarifications from L&T.

Mumbai-based L&T has been steadily buying Mindtree shares from the open market even as the open offer got delayed by almost a month, with its current stake standing at 28.9%.

Late April, L&T had completed the purchase of almost 20% stake in the Bengaluru-based firm from its largest shareholder and India coffee baron VG Siddhartha and two of his entities at Rs 980 apiece for more than Rs 3,200 crore.

L&T had announced in March its intention to buy a 31% stake in Mindtree through an open offer after buying out a few large shareholders. L&T is looking to pick up another 15% from the open market as part of its plan is to hike its overall stake in the firm to 66%.

Mindtree had crossed $1 billion in annual revenue for the last financial year. It reported a 9% growth in net profit at Rs 198 crore for the January-March 2019 quarter. Net revenue for the quarter through March jumped 25.6% to Rs 1,839.4 crore.

L&T has two entities that cater to technology customers -- L&T Technology Services and L&T Infotech. Last month, the Competition Commission of India had approved L&T's proposal to take over Mindtree.