Mindtree founders may sell entire stake to NEC Corp., private equity firm
Mindtree promoters, led by founders Subroto Bagchi, K. Natarajan and N.S. Parthasarthy, own 13.35% stake valued at ₹ 2,087.15 crore at current share price
Mumbai: Japan’s NEC Corp. and a large global private equity fund are in initial talks to acquire a controlling stake in Mindtree Ltd from its founders, two people directly aware of the development said.
The founders of the software services provider are in talks to sell their entire stake in the company, the people said on condition of anonymity. Together, Mindtree’s promoters own 13.35% stake valued at ₹ 2,087.15 crore at current stock price. The rest of the company remains with the public, according to Mindtree’s latest exchange filings.
For mid-sized companies such as Mindtree, having the backing of a strong parent will help it win bigger deals in the age of Artificial Intelligence, automation of processes and digital services at a time traditional IT services are being increasingly commoditized.
“Globally, IT industry is seeing rapid transformation and large investors are often better placed than founders to integrate product offerings,” said Bimal Raj, partner, Singhi Advisors, a Mumbai-based investment bank.
A Mindtree spokesperson declined to comment as the firm is in a so-called silent period before its quarterly results are announced.
“There is, however, no certainty of a deal,” said one of the two people, requesting anonymity. “The promoters have been in exploratory talks with several potential suitors for over a year now.”
The promoter group of the company includes its co-founders Subroto Bagchi, K. Natarajan and N.S. Parthasarathy and Mindtree CEO Rostow Ravanan.
In a related development, CNBC-TV18 reported on 1 June that V.G. Siddhartha, founder of Café Coffee Day, is considering selling a 5%-10% stake in Mindtree. Siddhartha had stepped down as an independent director from the company’s board in March.
“Promoters of IT companies are realizing that this is possibly the best time to exit and maximize value and allow professional management backed by large investors to take over the operations,” said Ajit Deshmukh, head of investment banking, Equirus Capital.
NEC Corp. has hired Bank of America Merrill Lynch (BofAML) as an adviser for the transaction, according to one of the two people cited above. An email sent to NEC Corp. remained unanswered till press time. A BofAML spokesperson declined to comment.
Founded in 1999 by a group of IT professionals, Mindtree employs around 18,000 engineers. Its FY18 revenue was at $846 million. The company’s key product and service offerings include mobile applications, cloud computing, digital transformation and data analytics.
NEC Corp., which is a key contender for Mindtree, had recently announced the establishment of NEC Laboratories India, a technology research and development facility in Mumbai, as part of its global expansion plans.
There have been a number of exits by promoter entities in India’s IT space in recent years. In 2013, private equity firm Baring Asia acquired Hexaware Technologies from its founder-promoter Atul Nisar for $465 million.
In 2010, Nasdaq-listed IGATE acquired Patni Computer Systems in a $1-billion deal from its promoters, the Patni family.
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