The founders of Mindtree are understood to be resisting giving away their stakes for possible key investors to acquire majority stake in the mid-sized IT company.
Reports about VG Siddhartha, a majority stakeholder in the company, planning to sell his 20.3 per cent claim in Mindtree first emerged nearly a year ago. There have been several suitors who are learnt to be keenly interested in picking up a majority stake in Mindtree even though the IT services company’s journey — which began 19 years ago towards the $1-billion-mark revenue — has been painfully slow. Its revenues now stand at $846 million as of FY18.
The Cafe Coffee Day founder, Siddhartha, is understood in talks with private equity (PE) firms to buy out his total stake in the company. It is learnt that KKRis already in talks with Siddhartha.
Interestingly, KKR was one of the early investors in Cafe Coffee Day and has pumped in $80 million through a structured equity solution.
Sources that BusinessLine spoke to, who are aware of the ongoing talks, said that Siddhartha is seeking a complete exit and is looking to sell his stake. Another source said that Siddhartha is also talking to some other investors which include Abu Dhabi Investment Authority (ADIA), an investment arm of the Government of Abu Dhabi.
Management claim
However, the prospective buyer is seeking management control and Siddhartha doesn’t have enough to seed control of the company. “It would need the consent from the founders or support from other shareholders for the deal to go through,” said the source. Krishnakumar Natarajan, in an emailed response said: “This is a speculative report. As a matter of policy, Mindtree does not comment on speculation.” Email sent to KKR India went unanswered.
Apart from a 3.6 per cent stake in Mindtree, Siddhartha holds 10.64 per cent through Coffee Day Enterprises and 6.45 per cent through Coffee Day Trading in MindTree.
Other claimants
While Siddhartha is the single largest investor, the mid-sized company was founded by Subroto Bagchi, NS Parthasarathy, Krishnakumar Natarajan and Rostow Ravanan, who all put together hold close to 13 per cent. Ravanan, in an earlier interaction with BusinessLine , had said Siddhartha is only an investor and is not involved in the day-to-day operations of the company.
“Tomorrow if the Board changes the management team, it is a separate story. At an operational, strategy side of things our management is very stable,” he said.
Siddhartha, an early investor in the company, bought stakes from Walden Capital and co-founder Ashok Soota when he exited Mindtree. Market watchers said that the valuation of Siddhartha’s stake has increased exponentially.
“Where is he going to get such a return if he exits,” one of the founders in the company remarked.