Engineering giant Larsen and Toubro Ltd seemed to be comfortably gaining control of Mindtree Ltd. despite vociferous resistance from the four founder promoters of the software services firm.
The Bengaluru-based company on Thursday proposed to appoint three top executives of L&T as non-executive directors.
The appointments, which are subject to approval from shareholders of Mindtree at the company’s annual general meeting on 16 July, include names of S. N. Subrahmanyan, CEO and managing director of L&T, Jayant Damodar Patil, whole time director and senior executive vice-president of L&T’s defence business and Ramamurthi Shankar Raman, chief financial officer of L&T.
While announcing the latest board-level appointments, Mindtree said Subroto Bagchi, who retires by rotation at the 16 July AGM, has decided not to opt for re-appointment as a director. Bagchi, who is one of the four founders of the two-decade-old company, currently serves as a non-executive non-independent director at Mindtree.
The latest appointments follow a recent demand from L&T, asking Mindtree to allot at least three board seats since L&T has emerged as the single largest shareholder with more than 30% stake.
Mindtree’s four promoters which include N. Krishnakumar , N. S. Parthasarathy and Rostow Ravanan, along with their families, hold a total of 13.32%.
In the past two months, L&T first acquired a 20.32% stake held jointly by Café Coffee Day (CCD) founder V. G. Siddhartha and two CCD affiliate firms. It later bought more shares of Mindtree from the open market to raise its holding to 28.90%. Subsequently, on Monday, L&T launched its planned open offer to acquire an additional 31% stake in Mindtree from public shareholders at ₹980 per share.
L&T has the option to buy a total of 15% Mindtree shares from the open market. If L&T achieves all its share purchase targets, the engineering conglomerate will end up holding 66.32% in Mindtree worth at least ₹10,800 crore, along with management control.
“Last week, L&T wrote to the Mindtree board asking it to appoint at least three directors on the board from L&T, since L&T now holds almost one-third stake in Mindtree. As of Wednesday, L&T holds close to 32% in Mindtree after being able to buy a stake in the ongoing open offer," said a person familiar with the matter.
The appointment proposal comes four days after L&T launched its open offer, which, once completed, will mark the first-ever hostile takeover in the Indian IT industry. The open offer will close on 28 June.
Besides the three L&T executives, Mindtree also proposed on Thursday the appointments of two additional independent directors. At present, the company has four independent directors. Prasanna Rangacharya Mysore and Deepa Gopalan Wadhwa have now been proposed as new independent directors.
While Prasanna is a former chief legal officer of L&T, Wadhwa is a former ministry of external affairs official.
According to a Times of India report on Tuesday, Mindtree founders, along with the largest institutional investor Nalanda Capital, have been asking for a better deal from L&T following the hostile acquisition. Nalanda Capital holds 10.61% inMindtree.
According to the report, the founders and Nalanda had earlier said L&T’s existing offer undervalues the intrinsic merger and acquisition value of Mindtree.
Mindtree’s independent directors committee, however, has suggested to the company’s shareholders that L&T’s offer “appears to be fair and reasonable".
Shares of Mindtree closed up 0.22% at ₹973.70 apiece on the BSE, underperforming a 1.25% rise in the benchmark Sensex.