It's pyaar, not war: L&T CEO Subrahmanyan on move to acquire Mindtree
"There are certain emotions and trepidation involved, but business is business. Emotions do play a part, but emotionalities have to be overcome as we go forward. What we are trying to do, is with, if I can use the word ‘pyaar’ , and we will continue to look at it as something we are doing from our ‘dil’. And we will continue to look at it with the same manner and purpose," he said at a presser on Tuesday.
Mindtree founders have dug in heels against the bid, calling it a “grave threat”. They said they will remain committed to defending what they termed their “unique organisation.”
Subrahmanyan said VG Siddharatha of Mindtree approached the firm a few months back to look at his 20 percent stake in the company. "L&T’s immediate reaction was neutral, but we continued our dialogue with him. From our point of view, the move made a lot of sense from our IT portfolio point of view. We also had dialogue with the Mindtree management."
He said Mindtree would be run as an independent company with L&T's investment, the firm will provide customer connect and support.
Larsen & Toubro is making an aggressive attempt to acquire the IT services company, almost a decade after it had lost the race to acquire scam-struck Satyam Computers. This acquisition could give L&T the scale that it has long desired. But acquiring the desired holding in the company may not be easy.
“I think it fits into the larger plan,” chairman of L&T Group, AM Naik told ET, when asked if Mindtree was a right fit for L&T. The engineering conglomerate signed a deal with Café Coffee Day founder VG Siddhartha to buy his 21% stake in Mindtree, and announced plans to make an open offer for an additional 31% in the IT company. The company could potentially spend $1 billion to acquire controlling stake in Mindtree, in what is being seen as a hostile takeover that would be a first in India’s IT industry.
L&T has the appetite for the acquisition and a balance sheet to support it. Mindtree would add scale to its business and escalate its stature in the industry. L&T Infotech, which mainly has a presence in the manufacturing vertical, will get a strong presence in BFSI through Mindtree and benefit from a diversified customer base.
L&T has cash and cash equivalents of over Rs 8,000 crore, and has decided to be ‘asset light’, which means low capital expenditure in its traditional infrastructure business. The company has been exploring options to generate value for shareholders after the Securities & Exchange Board of India rejected its plan for Rs 9,000-crore buyback.
“The ambition is backed by money; there is not much that can stop L&T. The experience of resisting hostile takeovers in the past will only help strategize better,” an industry executive said. L&T Infotech, which was the brainchild of Naik who has spent over five decades with the company, has not been able to build scale to match the big boys of the IT industry.