Even more surprising is that the four promoters of Mindtree Ltd, led by chairman Krishnakumar Natarajan and chief executive Rostow Ravanan, repeatedly expressed their reservations to Siddhartha about him selling the shares to India’s largest engineering and construction company.
Siddhartha, who first invested about $8 million when Mindtree was founded in 1999, and, in the ensuing two decades, went along happily with the decisions made by the other promoters, found the lenders unwilling to roll over his considerable debt of about ₹3,000 crore.
With repayment deadlines fast approaching, he needed to monetize his holding in Mindtree at the earliest. At least a dozen PE players (read about them here and here), sovereign funds and long-term funds were only too happy to buy his stake worth ₹3,000 crore, a senior executive of Mindtree said on condition of anonymity.
The catch was that Siddhartha’s shares had already been pledged to the banks, and, for any sale to take place, the potential buyer needed to pay for the unpledging of the shares before buying them or at least agreeing to an arrangement wherein the shares stayed with the banks even while the transaction to sell them was underway.
In an emailed reply to specific queries on the issue, Siddhartha said: “I would like to state clearly that the shares that are held by me and my companies in Mindtree have been pledged with a single lender for ease of selling the same post all prerequisite approvals are obtained. As a matter of policy we have not and do not intend to sell fully or partly any shares in the subject company or seek a loan against such security from the interested purchaser till all regulatory approvals are obtained."
As most of them were large multinational firms, their charter itself would have prevented them from doing so.
To be sure, Mint has learnt that just two weeks before the announcement by L&T—the last week of February—a global PE firm was very close to finalizing the deal with Siddhartha, following a series of meetings. Mindtree’s other promoters had even agreed to its terms, including a position on the board.
Only 10 months back, in May last year, Siddhartha told Mint that he remained committed to Mindtree, as he expected the company to more than double its revenue to $2 billion by 2023. Natarajan, in a separate interview then, went a step further and said Siddhartha’s 20% in Mindtree and the promoters’ 13.2% equity should be seen as “one" or “33.8%" because “Siddhartha won’t do anything that even marginally puts Mindtree at risk". “That we are very, very comfortable with," said Natarajan.
The deal with the PE firm likely fell through because it wasn’t willing to get into the complicated mechanics of the transaction. Enter L&T, and while the details of the pre-deal transactions between L&T and Siddhartha are not known, it is safe to assume that the latter was agreeable to the more complex transaction.
An email sent to L&T seeking comment went unanswered.
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