Bangalore: Ashok Soota, 67, co-founder and executive chairman of MindTree Ltd, a leading mid-sized information technology (IT) firm, has resigned, citing “personal reasons”.
In a release, Soota said, “It is something I have thought about for a few months and arrived at a well-considered conclusion. I will finalize and announce my plans for a new business venture, shortly after my departure.”
Soota also sought to allay any concerns regarding financial issues in the release that announced his resignation.
The “transition will not pose any difficulties”, Soota said. “MindTree leaders are persons of the finest financial integrity and I am confident of their ability to achieve the company’s goals.” He didn’t elaborate.
An analyst at India Infoline Ltd said: “The employees of the company seem to be in a state of shock as Soota has directly announced his decision to the board.”
While Soota did not respond to calls, mails or SMSes, a spokeswoman for him said that he would be announcing a new venture in the IT business once he is relieved from his duties effective 31 March. “The new venture would be in the same (IT services) space, which is where he has the requisite expertise and spent most of his working life.” She also said that Soota holds an 11% stake in the company. The promoters collectively hold 32.46% in the company.
MindTree was started by Soota in August 1999, along with nine others, all of them from Wipro Ltd. Soota himself was the chief executive officer (CEO) of Wipro’s IT business, having taken it from $2 million (Rs 9 crore today) in 1984 to $500 million when he quit.
Along with the current vice-chairman Subroto Bagchi, CEO and managing director Krishnakumar Natarajan, chief financial officer Rostow Ravanan, president of product engineering services business S. Janakiraman and five others, Soota had co-founded MindTree with investments from Walden and Global Technology Ventures.
MindTree, which has a revenue run rate of $340 million, closed the quarter ended December with revenue of $85.25 million, net profit of $6.73 million and 9,671 employees. Its net profit in the third quarter was down 41.1% from the year ago primarily because of a $3.7 million restructuring cost at its wireless unit.
The company did not respond to a questionnaire on the reasons for Soota’s departure and a spokesperson said, “The board is in a meeting, which is likely to last late into the night. We will have an official response post that.”
A senior former employee of MindTree said there had been differences among the founders on strategy.
“Some of the founders were upset that unrealistic goals like reaching $1 billion by 2014 in revenue were publicly committed to,” he said. “With the current run rate, the company will have to triple in size to reach those ambitious targets.”
The person said that differences in operational styles had also emerged over the years.
“This resignation is not sudden. There have been festering issues, which is why an organizational rejig was done a couple of years back,” he said. “Bagchi came back from the US and KK (Krishnakumar) was made overall CEO to smoothen things out. Evidently, it has not worked. I won’t be surprised if there are some more senior departures joining Soota.”
The former employee did not want to be identified as he works for a competitor. Natarajan and Soota could not be reached for comment while Bagchi said he could comment only after the board meeting.
Another analyst, who did not want to be identified, said that though there wasn’t going to be much impact in the short term, Soota’s strategic vision would be missed and the market’s confidence in the company may go down. “I expect some impact on the stock,” the analyst said.
Soota’s announcement came after the trading hours. MindTree ended on Friday at Rs 515.45, down 3.47%, on a day when the exchange’s IT index closed down 0.96%.
Surabhi Aggarwal in New Delhi contributed to this story.