Mindtree proposes three board positions for L & T



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MUMBAI: Engineering giant Larsen and Toubro Ltd appeared to be gaining control of Mindtree Ltd. despite strong resistance from the four founding promoters of the software services company.

The Bengaluru-based company proposed on Thursday to appoint three senior L & T executives as non-executive directors.

The appointments, which are subject to approval by Mindtree's shareholders at the company's annual general meeting on July 16, include names of SN Subrahmanyan, CEO and CEO of L & T, Jayant Damodar Patil, full-time director and vice president senior executive of L & T corporate defense and Ramamurthi Shankar Raman, chief financial officer of L & T.

While announcing the latest appointments to the board, Mindtree said that Subroto Bagchi, who retires by rotation at AGM on July 16, decided not to opt for a new directorial appointment. Bagchi, who is one of the company's four founding two decades, currently serves as non-executive non-executive director of Mindtree.

The latest appointments follow a recent demand from L & T, urging Mindtree to distribute at least three seats on the board since L & T emerged as the largest individual shareholder with more than 30% stake.

Mindtree's four promoters, including N. Krishnakumar, N. S. Parthasarathy and Rostow Ravanan, together with their families, hold a total of 13.32%.

In the last two months, L & T acquired for the first time a 20.32% stake held jointly by the founder of Coffee Coffee Day (CCD), V. G. Siddhartha, and two companies affiliated to the CCD. He later bought more shares of Open Market's Mindtree to increase his stake to 28.90%. Subsequently, on Monday, L & T launched its planned open offer to acquire an additional 31% stake in Mindtree's shareholders (I.e.980 per share.

L & T has the option to purchase a total of 15% of Mindtree shares in the open market. If L & T meets all of its stock purchase targets, the engineering conglomerate will end up holding 66.32% of Mindtree's value at least (I.e.10,800 crore, along with management control.

"Last week, L & T wrote to Mindtree's board calling for the appointment of at least three directors on the board of L & T, since L & T now holds nearly a third of Mindtree. As of Wednesday, L & T holds close to 32% at Mindtree after being able to buy a stake in the open offer in progress, "said one familiar with the matter.

The nomination proposal comes four days after L & T launched its open offering, which, once completed, will mark the first hostile takeover of the Indian IT industry. The open offer will close on June 28.

In addition to the three L & T executives, Mindtree also proposed on Thursday the appointment of two other independent directors. Currently, 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 legal director of L & T, Wadhwa is a former foreign minister.

According to a Times of India report on Tuesday, Mindtree's founders, along with the largest institutional investor, Nalanda Capital, have called for a better deal from L & T after the hostile takeover. Nalanda Capital owns 10.61% inMindtree.

According to the report, the founders and Nalanda previously said that L & T's existing offering underestimates Mindtree's intrinsic merger and acquisition value.

Mindtree's board of independent directors, however, has suggested to the company's shareholders that L & T's offer "appears to be fair and reasonable."

Mindtree's shares closed up 0.22% (I.e.973.70 BSE, with a performance lower than the 1.25% of the Sensex reference index.

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