Mindtree September quarter net profit down 34.6% YoY to Rs 135 cr

IT firm Mindtree on Wednesday reported a 34.6 per cent decline (YoY) in consolidated net profit at Rs 135 crore for the September quarter.
The company had posted a net profit of Rs 206.3 crore in the same period last year, Mindtree said in a regulatory filing.

The Bengaluru-based company saw its revenue grow 9.1 per cent to Rs 1,914.3 crore in the quarter under review from Rs 1,755.4 crore in the year-ago period, it added.
In dollar terms, the net profit declined 34.1 per cent to $19.2 million, while revenue increased 10 per cent to $271 million in the said quarter over the year-ago period.
In constant currency terms (eliminating currency fluctuation from financial performance), revenue was up 3.2 per cent sequentially and 11.1 per cent year-on-year (YoY).
Mindtree's second quarter performance of double digit (YoY) revenue growth reflects the company's client centricity, employees' winning spirit and innovation, Mindtree CEO Debashis Chatterjee said.
"We stay committed in strengthening our execution to invest in growth and drive shareholder value," he added.
In July this year, Mindtree, in a regulatory filing, had said that Larsen and Toubro (L&T) had "acquired control" of the company with a 60.06 per cent stake and had been categorised as promoter.
At the end of the September quarter, the company's active client base stood at 343. It had 21,267 employees at the end of the second quarter with trailing 12-months attrition at 16.5 per cent.
Its digital business grew 18.8 per cent y-o-y, and the company recorded a 13.3 per cent (YoY) growth in total contract value in the quarter under review.

Mindtree founders have no plan to stay back, says CEO Rostow Ravanan

Mindtree co-founders who resigned from the Bengaluru-based company’s board and executive responsibilities have no plan to stay back, said Rostow Ravanan, outgoing chief executive officer (CEO) and managing director (MD).
Ravanan is also a co-founder of the mid-tier information technology (IT) services company. He said the board has already accepted their resignations, and the timing of their exit was being worked out.

“We are sticking to our plan of this thing (exit). Our resignations have already been accepted and the actual timing is being worked out with the board now. But, (there is) no change in our plans,” said Ravanan. “We want to be responsible to Mindtree and we are waiting for the board to give us a final date of release.”
In an interview on Thursday, L&T Group’s Chairman A M Naik had said he had a meeting with Mindtree’s co-founders and they had assured him of their support to improve their company’s performance. He did not provide any timeline about when they would exit.
On Wednesday, the company had announced the appointment of Naik as the non-executive chairman after the engineering firm secured three board positions — L&T’s CEO S N Subrahmanyan, its Chief Financial Officer (CFO) Ramamurthi Shankar Raman and Senior Executive Vice-President of defence business Jayant Damodar Patil.
Earlier this month, Mindtree’s Executive Chairman Krishnakumar Natarajan, Executive Vice-Chairman and Chief Operating Officer (COO) N S Parthasarathy, and MD & CEO Ravanan had put in their papers both as members of the board and as well as employees of the company. Subroto Bagchi, another co-founder of Mindtree, had opted out of his reappointment on the board.
ALSO READ: Mindtree plunges 10% as Q1 profit halves; stock hits fresh 52-week low
These exits were prompted after L&T received the “promoter” tag on acquiring 60 per cent stake in the company.
On his future plans, Ravanan said he had a number of exciting ideas.
After the exit of the co-founders, the share price of Mindtree has lost more than a quarter of its value in the past fortnight and touched a 52-week low of Rs 661.35 intra-day before closing at Rs 670.55 on Friday, down around 3 per cent on the NSE.
The IT services firm has also missed Street estimates across the board in the first quarter of current financial year. While it reported 41 per cent dip in its net profit year on year to Rs 92.7 crore, its operating margin fell 520 basis points sequentially to 10 per cent in April-June period.
The firm’s attrition also touched a seven-quarter high of 15.1 per cent owing to the uncertainties arising out of the transition.
“Mindtree has a higher exposure to discretionary spending, which have short durations and requires strong communication with the clients, making continuity important,” said Prabhudas Lilladher in a research report, adding: “We believe managing people aspects and cultural integration is critical.”

Crucial Mindtree AGM on Tuesday; three senior-level executives resign

As Mindtree prepares for its crucial annual general meeting (AGM) on Tuesday, the company is likely to face a volley of questions from the shareholders on its future strategy under the new promoter L&T.
The board of the Bengaluru-headquartered firm is also expected to douse the investors’ concerns about business continuity and staff attrition. Among others, the recent appointment of three nominees of L&T into Mindtree board will also come for shareholders’ approval, apart from the contentious issue of giving special dividends. The company had earlier announced to dole out 200 per cent special dividends to its shareholders in April this year, a move which was not seen favourably by L&T that time.

Meanwhile, informed sources said that at least three senior-level executives of the mid-tier information technology services firm had put in their papers.
They include Gaurav Johri, senior vice-president, chief strategy officer and head-APAC, Anoop George, assistant vice-president and head of Asia Pacific region, and Ajay Mittal, deputy CIO.
Emails sent to Mindtree remained unanswered till the time of going to press.

Mindtree co-founders resign from board, company as L&T takes control

Three co-founders who made Mindtree one of India's most storied entrepreneurial ventures quit on Friday after the IT company was acquired by engineering giant L&T.
Executive chairman Krishnakumar Natarajan, executive vice chairman & chief operating officer (COO) N S Parthasarathy, and managing director & chief executive officer Rostow Ravanan submitted their resignations as board members as well as employees of the company. Earlier, Subroto Bagchi, another cofounder of Mindtree, had opted out of his re-appointment on the board.

"They will stay as board members till July 17 and as employees in line with their employment contracts to ensure a smooth transition," a Mindtree filing said. The founders have also asked the firm to declassify them as promoters. The company will announce a new leadership team in due course, it added.
On Wednesday, L&T has been categorised as 'promoter' of the IT major after acquisition of a 60.06 per cent stake in the company. Earlier, the Mindtree board approved the appointment of three of L&T nominees to the board -- the infrastructure major's CEO & MD S N Subrahmanyan and chief financial officer (CFO) Ramamurthi Shankar Raman.
Sources said that though L&T was keen on the continuation of Krishnakumar Natarajan as the non-executive chairman to oversee the transition, he exited since the engineering firm wanted its own man as the CEO. Natarajan said, "Mindtree has delivered exceptional performance for all its stakeholders over the last two decades. We are grateful to all our customers, Mindtree Minds and external stakeholders for their steadfast support throughout our journey".
Meanwhile, L&T has started a head hunt to fill the leadership positions at Mindtree, with names of at least three external candidates and one internal candidate doing the rounds.
Leading the race is former Cognizant president Rajeev Mehta. He is likely to head L&T's overall portfolio of IT companies. Mehta, who left Cognizant in May this year as part of a big shake-up of top-level management, is expected to help the $18-billion construction and engineering major to oversee the integration process of Mindtree with other IT companies in L&T's portfolio.
Apart from Mehta, the former CEO of Birlasoft, also a co-founder, former CEO of the IT services business of Mindtree Anjan Lahiri, and former president of global delivery at Cognizant Debashis Chatterjee are also being considered. Among internal candidates, Parthasarathi Chatterjee, who heads L&T's oil and gas business, is seen as a probable candidate.
Mindtree was founded by 10 IT professionals in 1999. It was the fastest IT services company to cross $100 million in annual revenues, in the sixth year of its operations. The company, whose initial public offering (IPO) had been oversubscribed more than 100 times in 2007, crossed the $1-billion-revenue mark in the pervious financial year.

L&T has 'acquired control' of the company with 60.06% stake: Mindtree

IT firm Mindtree on Wednesday said Larsen and Toubro (L&T) has "acquired control" of the company with a 60.06 per cent stake and has been categorised as promoter.
The development is significant as the Mindtree founders had initially resisted the hostile takeover bid and had also tried to rally support of large investors in the initial weeks of the drama.

"We wish to inform that Larsen & Toubro Limited has acquired equity shares to an extent 60.06 per cent of the total shareholding of the company and has acquired control and is categorised as promoter pursuant to SEBI...Regulations, 2018," Mindtree said in a BSE filing.
Construction major L&T held 9.87 crore equity shares in Mindtree as on July 2 following its recently-concluded open offer, according to the filing by the Bengaluru-based tech firm.
L&T had Tuesday said it has made payments to shareholders who tendered their shares successfully in the open offer, which closed on June 28.
In a deal that had marked India's first-ever hostile takeover bid in the IT space, L&T had bought 20.32 per cent shares in Mindtree from V G Siddhartha and his coffee enterprise for over Rs 3,000 crore in March, and then shored up its holding with more shares from the open market and a subsequent open offer for additional 31 per cent stake.

L&T announces open offer for 51.3 mn shares of Mindtree at Rs 980 a share

Infrastructure major Larsen and Toubro on Friday announced an open offer for 51.3 million shares or 31 per cent stake of mid-tier IT company Mindtree at Rs 980 per share, according to a regulatory filing.
L&T will have to shell out Rs 5,029.8 crore for the planned open offer for the Bengaluru-based company.

"Larsen and Toubro makes a cash offer of Rs 980 per fully paid up equity share of the face value of Rs 10 each, to acquire up to 5,13,25,371 equity shares representing 31 per cent of the voting share capital...to the shareholders of Mindtree Ltd," said the letter of offer communicated to the BSE by Mindtree Ltd.
The open offer price is higher than Mindtree's closing price of Rs 970.45 at BSE on Friday.
The tendering for open offer will commence on June 17 and close on June 28.

In March, L&T had mounted a hostile takeover bid on Mindtree when it entered into a deal to buy Cafe Coffee Day owner V G Siddhartha's 20.32 per cent stake in Mindtree and also placed an order with brokers to pick up another 15 per cent of the company shares from the open market.
Subsequent to these deals, L&T is required to make an open offer to buy additional stake. In all, the infrastructure major is eyeing up to 66 per cent stake in Mindtree for around Rs 10,800 crore. As of June 6, its holding in Mindtree stood at 28.90 per cent.
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Mindtree Q4 net up 8.9% at Rs 198.4 cr; declares special dividend of 200%

Mid-sized IT firm Mindtree on Wednesday said its consolidated net profit grew 8.9 per cent to Rs 198.4 crore for the March 2019 quarter, from Rs 182.2 crore in the year-ago period.
The Bengaluru-based company's revenue also increased by 25.6 per cent to Rs 1,839.4 crore in the said quarter, as compared to Rs 1,464 crore in the year-ago period, Mindtree said in a regulatory filing.

Mindtree, which is facing a hostile takeover bid by infrastructure giant L&T, said its board has also declared an interim dividend of Rs 3 per equity share, and recommended a special dividend of 200 per cent (Rs 20 a share) to "celebrate the twin achievements of exceeding $1 billion annual revenue milestone and 20th anniversary of the company" subject to shareholders' nod.
"Mindtree has delivered exceptional performance for both the fourth quarter and the full fiscal year as we cross the historic $1 billion milestone. Over the course of two decades our strategy of being expertise-led and backed by a unique culture continues to help us attract world class people and create customer successes," Mindtree CEO and Managing Director Rostow Ravanan said.
He added that the company is "well-poised to continue delivering industry leading returns for all our stakeholders, the best is yet to come".
Mindtree's FY'19 net profit grew 32.2 per cent to Rs 754.1 crore, while revenue was up 28.5 per cent to Rs 7,021.5 crore from the previous fiscal.

Mindtree to step up fight against L&T's open offer; board to meet on Mar 26

As the battle for takeover of Mindtree intensifies, the board of the Bengaluru-based tech company is preparing to hold its own against L&T’s open offer.
Mindtree plans to recommend to its investors not to subscribe to the open offer, citing low offer price, among key reasons. This matter, along with the possibility of a buyback, was learnt to be discussed during Wednesday’s board meet. But a final call is expected to be taken in the next meeting, scheduled for March 26.

People close to the Mindtree management said the founders of the mid-tier IT firm were exploring several other options, including coming out with a counter open offer, with the backing of a financial investor, to thwart L&T’s takeover bid.
After sealing a deal to purchase V G Siddhartha's 20.32 per cent stake on Monday, L&T has placed orders to buy a further 15 per cent stake from the open market, besides making an open offer to buy an additional 31 per cent stake.
However, the Mindtree founders felt the deal was value-destructive, given the offer price of Rs 980 was at least 20 per cent less than the all-time high of Rs 1,183.
“The open offer price shows the value destruction that has happened due to L&T’s bid. At this price, the board is planning to recommend shareholders not to tender their shares,” said a person with direct knowledge of the matter.
“While V G Siddhartha had his reasons for selling his stake at this price (Rs 980/share), minority shareholders and foreign portfolio investors (FPIs) are under no such compulsion," the person added.
chart According to Securities and Exchange Board of India regulations, in case of an open offer, the board of directors of the target company has to form a committee of independent directors to provide reasoned recommendations on the open offer to shareholders.
“After L&T makes an open offer, the independent directors of Mindtree could say this is not the fair price. They could add that the fair price is 20 per cent more than what is now (Rs 980) based on data,” said an IT industry veteran who has managed finance in previous stints, adding: “So, the independent directors have a crucial role, given the management is conflicted in this case on account of their consistent opposition to the deal.”
L&T made a takeover bid on Monday, with a multipronged strategy to buy around 67 per cent controlling stake in the IT services firm, for close to Rs 10,733 crore. While the L&T management feels its bid to acquire controlling stake in Mindtree should not be seen as a ‘hostile’ attempt, the Mindtree management strongly argued against the deal, saying the acquisition was not in the interest of its stakeholders.
ALSO READ: Was offered bags of money to give Mindtree away, CEO Subroto tells staff
The IT services firm also deferred its decision on the proposed buyback plan in Wednesday’s board meet, without citing any reason. “The party has just begun. We have to wait and see as there are many counter measures the founders may take,” the person cited above added.
chart Meanwhile, people in the know said that after making the first move, the L&T management is confident of acquiring a controlling stake. However, the top management of the Mumbai-based firm was concerned over the perception battle, which they believe is in favour of Mindtree’s promoters.
ALSO READ: It's emotion versus 'logic' in the L&T-Mindtree takeover battle
“Senior leaders of L&T Technology Services and L&T Infotech — in India as well as abroad — are reaching out to all external stakeholders including industry analysts and clients, explaining their stance,” said one of the people, adding: “The argument is that L&T itself is a professionally-managed entity and is not in any way harming the Bengaluru-based firm, and both could benefit from the deal due to the synergy and scale.”

Mindtree board defers decision on share buyback plan amid L&T takeover bid

Bengaluru-headquartered information technology (IT) firm Mindtree’s board on Wednesday was unable to take a decision on its proposed buyback plan to stave off a takeover bid by Larsen & Toubro (L&T). The decision might be taken at a later meeting.
“The board considered the proposed buyback of equity shares on Wednesday. Following detailed discussions, the meeting has been adjourned to a future date,” the company said in an exchange filing.
“No decision has been taken in relation to the proposed buyback of equity shares,” it added.
Mindtree Chief Executive Officer Rostow Ravanan on Tuesday had said the open offer was still possible with the approval of 75 per cent of shareholders. “Procedurally, it is possible, but it has to cross certain regulatory thresholds,” he said.
ALSO READ: Many sides to Mindtree-L&T situation as long-drawn battle imminent
After terming L&T’s attempts to take a controlling stake in the company as hostile and value-destructive on Tuesday, founders of Mindtree remained tight-lipped on Wednesday.
Sources in the company said while the board deliberated on the open offer, apart from the proposed buyback, it did not come to any conclusion on a concrete action.
L&T on Monday mounted a hostile takeover bid for Mindtree, with a multipronged strategy to buy 67 per cent controlling stake in the firm for about Rs 10,733 crore.

ALSO READ: After L&T's takeover bid, Mindtree may still go ahead with buyback plan
While it has entered into an agreement with Mindtree’s single-largest investor, V G Siddhartha, to purchase his entire 20.32 per cent stake for Rs 3,269 crore, it is also eyeing an additional 46 per cent through the market and the open-offer route.
While the L&T management was of the view that the company’s bid to acquire controlling stake in Mindtree should not be seen as a hostile attempt, the management of the Bengaluru-headquartered firm strongly argued against the deal, saying that the acquisition was not in the interest of Mindtree stakeholders.
Sources familiar with the development said while the top management of L&T is confident of the deal going through, they are more concerned about the “battle of perception” and the efforts to paint the firm as a corporate raider.

Build tech business of your own: Mindtree promoters reject L&T takeover bid

Mindtree employees will quit if engineering giant L&T’s hostile takeover bid hurts their "sense of mission", said the IT company’s promoters on Tuesday.
"You are a company with turnover of Rs 120,000 crore, you are 18 times the size of Mindtree.
Why can't you build a great technology business with your resources and capability without disseminating another organisation?" Mindtree co-founder Krishnakumar Natarajan asked.
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Mindtree promoters have staunchly opposed L&T's bid to acquire the company, describing it a grave threat and value destructive to shareholders.
ALSO READ: What message is being sent to start-ups: Mindtree promoters to L&T
"This is a people business.
'Mindtree Minds' have signed up for a mission not just a salary.Take their mission away and they will go...what will you be left with," Natarajan said.
In the country's first hostile takeover bid in the IT sector, infrastructure giant Larsen & Toubro Monday made an offer to buy up to 66 per cent stake in Mindtree for around Rs 10,800 crore.
L&T has entered into a deal to buy Cafe Coffee Day owner V G Siddhartha's 20.32 per cent stake in Mindtree and has also placed an order with brokers to pick up another 15 per cent of the company shares from the open market.
Subsequent to these deals, L&T would make an open offer to buy additional 31 per cent stake through an open offer, it said in a late evening statement.
ALSO READ: L&T's takeover bid unprecedented, vow to oppose it, say Mindtree promoters
All three acquisitions are being done at Rs 980 per share, a premium of 1.8 per cent over Monday's closing price of Mindtree on the BSE.
Mindtree closed on the BSE at Rs 962.50a piece.
L&T would pay Siddhartha Rs 3,269 crore and Rs 5,030 crore for the open offer, as per filings made by L&T and Mindtree.
The company would shell out around Rs 2,500 crore for acquiring the additional 15 per cent stake. Together, the outgo would be around Rs 10,800 crore, according to a rough calculation.
As far as buyback is concerned, the company board would deliberate on it tomorrow within the framework of the existing laws, Company CEO RostowRavanan said.

ALSO READ: L&T CEO calls Mindtree takeover 'pyaar, not war'; says Siddhartha made move
"As far as buyback is concerned, the board will deliberate on the buyback or the open offer tomorrow within the framework of the laws.
Obviously there are laws - what the board can do and cannot do under the circumstances," he said.
Asked to comment on L&T Group Executive Chairman A M Naik that some Mindtree promoters want to exit, Ravanan said, "It is completely false.
All the management team are supporting the company." Natarajan said L&T has decided to mount first ever hostile in the 50-year-old unblemished Indian IT industry.
"If you persist in whatever you are doing, you will be forever be remembered for this. Is this how you want to set an example?" he asked.
ALSO READ: Mindtree independent directors should guide shareholders, says IiAS
He said Mindtree customers have selected it for its unique culture and warned that clients will "stall all future business and even take their business elsewhere".
"In the process you would have demolished shareholders value for both the companies. Is this the right thing to do?" Natarajan said.
Asked about the options for the company to fend off L&T takeover, Natarajan said there are various options and the company remains hundred per cent committed to its long-term vision of building an independent company.
Replying to a query, he said the independent directors will set up a committee and evaluate the open offer made by L&T.
ALSO READ: L&T may spend over $1 billion in a bid to buy Mindtree: Report
"Nevertheless, what I would like to state is our 52 week high was Rs 1,183 and the deal was done at Rs 980. That only reflects the value of transaction," he said.
L&T, earlier in the day, had said in a statement that it would make an open offer to buy additional 31 per cent stake through an open offer.
Replying to a query, Natarajan said Mindtrees' stand is the same as it was there for years earlier.
Asked if Siddharth's disclosure on pledging his shares in 2018 complied with SEBI rules, Ravanan said there were some irregularities in Siddharth's disclosure at that point of time which the company's board and audit committee dealt with as per the rules prevailing then.
"If additional information becomes available to the company whether any of the disclosures were incorrect or anything needs to be done, the company would decide accordingly," he added.
Mindtree promoters question L&T
Why can't you build a great technology business with your resources and capability without disseminating another organisation?" says Mindtree co-founder Krishnakumar Natarajan
'Mindtree Minds' have signed up for a mission not just a salary.Take their mission away and they will go...what will you be left with,"
"If you persist in whatever you are doing, you will be forever be remembered for this. Is this how you want to set an example?"
"In the process you would have demolished shareholders value for both the companies. Is this the right thing to do?"

Mindtree takes share buyback route to fend off L&T; size may be Rs 1,000 cr

Mindtree will consider a share buyback proposal in its next board meeting on March 20, the company said on Friday, amid reports that Larsen & Toubro’s (L&T’s) board had cleared a proposal to buy Cafe Coffee Day founder V G Siddhartha’s 21 per cent stake in the mid-size information technology services firm. While Mindtree didn't provide any details on the size of buyback, sources in the know said it could be to the tune of Rs 1,000 crore.
L&T said it didn’t comment on market speculation.

Analysts and IT industry executives said a share buyback when one of the largest shareholders was planning to offload his stake was unprecedented and could create hurdles for any rival technology firm to come on board.
“Looks like there’s a big disconnect between the single-largest shareholder and the management. No company announces a buyback when a large shareholder is trying to sell his stake,” said V Balakrishnan, former Infosys board member and chairman of Exfinity Venture Partners. “As the price goes up, the transaction will be revisited by the interested party. It will now be costlier for any entity to take control of the company.”
Siddhartha is in an advanced stage of discussions with a clutch of entities, including private equity players and L&T, to offload his stake in the IT firm. But with Mindtree founders’ reluctance to shed their stake of 13.32 per cent, the situation has turned tricky.
Mindtree takes share buyback route to fend off L&T; size may be Rs 1,000 cr In January, A M Naik, executive chairman of the L&T group, had confirmed that the engineering major was looking at acquiring a stake in Mindtree.
Mindtree, which had conducted a share repurchase worth Rs 270 crore in 2017, seems to be preparing itself to fight a hostile takeover. Since instruments like buyback usually push up share prices apart from reducing the float, many analysts said the current management might be trying to reward shareholders in a bid to win their loyalty.
ALSO READ: Mindtree will buck the trend of IT consolidation, says CEO Rostow Ravanan
“This buyback might be an attempt to get shareholders on the management's side. It will be useful in the case of an open offer, where shareholders have to choose between the current management and a new one," said Pareekh Jain of Pareekh Consulting. "From whichever angle you see, it seems like a classic boardroom battle is about to begin."
Another source close to the development said, "It is prudent policy to reward shareholders who have put faith in the current management for a long time. Also, Mindtree has a track record of giving good amounts of dividends to shareholders. The founders of the IT firm are very serious about retaining control and they will go to any extent.”