Mindtree independent directors should guide shareholders, says IiAS

Independent directors of Mindtree have a key role to play in the ongoing tussle between Larsen and Toubro (L&T) and Mindtree promoters to wrest control of the IT services company, said proxy advisory firms IiAS and InGovern.

“The independent directors of Mindtree must provide guidance to the company’s shareholders whether they should take up L&T’s open offer,” said IiAS in a note, adding that investors will not be in a position to understand all the nuances of the deal.

Nearly 87 per cent of Mindtree’s stocks are with public shareholders, which includes foreign portfolio investors (FPIs) and mutual funds (MFs). Cumulative FPI holding in the company is more than 40 per cent. Some of the top overseas shareholders of Mindtree include Nalanda, Amansa and Vanguard. Meanwhile, UTI MF and L&T MF are domestic fund houses holding more than 1 per cent stake.

“Investors have to see what the independent directors advise,” said Shriram Subramanian, managing director of InGovern. “It remains to be seen what L&T’s final shareholding in Mindtree will look like. Its intent is to get 66 per cent stake. Even if L&T ends up with 35-40 per, it would bring about changes in the board and management of the company. That could be a tough period for Mindtree,” he added.

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L&T has signed a share purchase agreement with Café Coffee Day (VG Siddhartha and Coffee Day Enterprises) to acquire 20.32 per cent in the company. L&T will pay Rs 3,269 crore at Rs 980 per share for the 20.32 per cent stake. Moreover, L&T will acquire another 15 per cent from the open market at a price not exceeding Rs 980 per share. The engineering and construction giant will then make an open offer to acquire additional 31 per cent at the same price. Through the three transactions, L&T is eyeing to establish control over Mindtree by acquiring up to 66 per cent stake.

“It is hard to say why Mindtree should resists L&T, which has demonstrated competence in the IT services business. If it was some other entity taking over, it would have been a different thing,” said Subramanian.

JN Gupta, managing director, Stakeholder Empowerment Services, said while the views of independent directors are the key in this case, they may not be able to present the complete picture.

“Independent directors will have half the story. They may not fully know L&T’s plan. So, their advice could be sketchy in that sense,” he added.


The promoters of Mindtree, who hold around 13 per cent stake in the company, have said L&T’s attempted hostile takeover bid was “a grave threat” to the organisation, which has been collectively built for over 20 years.”

IiAS said it is not necessary that the independent directors will echo the same sentiment as that of the promoters.

“It is not necessary that Mindtree’s independent directors will toe the line of the company’s promoters: they may have a different view,” it added.


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