‘We want Mindtree to be Mindtree… take the company forward as it is’

What we can bring is board oversight and industry connect, and leverage relationships, says L&T MD and CEO

A day after acquiring 20.32% stake in information technology (IT) company Mindtree from V.G. Siddhartha for ₹3,269 crore, S.N. Subrahmanyan, MD and CEO of L&T, talks about plans for the Bengaluru-based firm. Edited excerpts:

L&T, which itself was a hostile takeover target in the early 1990s’ is now making a hostile bid to take over Mindtree. Your thoughts.

We are not involved in any hostile takeover. Nor have we advertised or spoken about any mergers or acquisitions. It was one of Mindtree’s major share holders, Cafe Coffe Day owner Mr. Siddhartha, whom through a mutual friend met me first; and over a cup of tea, asked if L&T will be interested in his stake in Mindtree.

I didn’t show much interest. He kept meeting me again and again, 4-5 times both in Chennai and in Mumbai. When he came for the fifth time, I asked him, Sir, we have not shown any interest, why are asking us to do this? He gave an answer which the present founders of Mindtree should understand very well. He said, ‘SNS, I have invested in this company 19 years back, I have been part of its growth and had done everything possible to be there and done everything possible to support the management.

‘I moved out of the board right now, I don’t feel like wanting to be parked, I want to sell my shareholding. If you are not interested, I am going to sell it anyway to somebody and I don’t know who it will be. I am not asking you for a big price. I am asking you for whatever is the correct price. I am not going to bargain with you. Whatever you or Mr. Naik say, I will take it and walk away and I am positive about it.’

When I asked ‘Why us,’ he said, ‘From governance, ethics, history, vulnerability, principles point of view, you are a safe person, where I feel that whatever I have invested and kept, you will take it forward in the same manner..’ So, it was he who persuaded us.

Now you are at 20.4% at Mindtree, what next?

Our principle is that we are not investors, we are involved people. Once we have 20.4%, we have to move forward at least to 26% and once we reach 26%, we have no choice but to make an open offer.

If their (Mindtree) management doesn’t understand this and thinks that we are hostile, then I think there is something wrong. They better understand that what I have done is with my ‘Dil and Pyar’ and I am very clear about it.

But why didn’t Mr. Siddhartha sell his stake to Mindtree promoters ?

If their shareholder moves away and they come on TV and say that we don’t even know that shareholder is selling, it’s not the right thing because the shareholder fully informed them that he is moving away. The shareholder also asked them if they want to buy. Obviously, he knows that they can’t buy because nobody had that kind of money. If they can’t get along with their shareholder, it’s not my fault. The fact is also that, we took an involved decision based upon facts and persuasion of a majority shareholders.

What if Mindtree promoters call for a compromise, accept the offer on condition that they be allowed to continue in their current roles?

Yes, we want Mindtree to be Mindtree. We want to take the company forward as is it. We offered the present chairman Mr. Krishnakumar, ‘Sir, you please kindly continue as a chairman.’ Have we told the management that we are hostile? Have we told the management that we want a board seat? Have we told the management ‘We want you to move out’? Nothing. Frankly, I am not able to understand because nowhere have we attempted to say that we want you to move out or we want to change management. What we can bring is a board oversight and industry connects and leverage relationships So, please look at it positively, we are your benefactor and what we are doing is with ‘Dil and Pyar’.

What if they don’t agree to your offer of Dil se and Pyar se? Will you be aggressive?

Finally, we are a 21% shareholder, we will move to 26% or 30% and are attempting to get 60%. You can’t ignore a major shareholder. We are there as your shareholder and what you did to Siddhartha, you can’t do that to me.

You have to take cognisance that there is a shareholder that has come. I hope, over time, the emotionalism goes away and better sense prevails and they will start talking to us and we can take it forward. Emotions naturally come when you are a founder.

Can we say L&T is shifting gears, from engineering and construction space into IT?

We are predominantly still EPC and projects at about 75%, another 5% would be manufacturing and defence and the rest would be services like LTI, LTS, L&TF and L&T reality. EPC, projects and construction give us 6% on good days and 5% on bad days.

We have done it to the best of our ability. Most of the investment that needs to be done in this space has been done in boilers, turbines, ship building etc. Now, our job as management is to get maximum returns out of it.

There is surplus money in the profit and loss account as we are doing well and generate cash. We need to do something with the cash, it belongs to the shareholders.

So when you look at the portfolio today, there is nothing much that we can invest in manufacturing or the other side except the regular capex. IT is a reasonable space to invest because it’s less risky, 15-16% PAT.

So, when this opportunity came, we got convinced and went ahead with it. We missed retail and telecom, may be God has been kind that we didn’t get into that.

You also missed the IT bus initially. Lost Satyam to the Mahindras…

I won’t say that with the kind of concentration we have. I think $2 billion is a reasonable sales to have. We have done well but we could have done better, that’s a case for all our business. Satyam was a story, I will not be able to comment as I was not involved in it that time.

Business has nothing to do with emotions; bottomline is all that matters. Do you subscribe to this view?

Business is all about emotions, passions and results. Without emotions and passions, results don’t come. At L&T, we are all employees. Indirectly and directly we own 19% of the firm; 14% through the employees’ trust and 5% as stock options with various employees. Some of the largest, biggest and longest and most astounding structures are constructed by L&T.

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