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L&T buys VG Siddhartha's 20% stake in Mindtree for $461 mn
Photo Credit: Reuters

Engineering and construction conglomerate Larsen & Toubro Ltd on Tuesday acquired a 20% stake in Bengaluru-based IT services firm Mindtree Ltd from Café Coffee Day founder VG Siddhartha. 

Siddhartha sold the stake to repay his debt even as he is embroiled with the Income Tax department, which had previously halted the sale process.

L&T had agreed to buy a fifth of Mindtree Ltd as part of its bid to take control of the software services company. However, Mindtree’s founders have vehemently opposed the deal.

On Tuesday, L&T bought a little over 32.77 million Mindtree shares for a total of Rs 3,211 crore ($461 million) from Siddhartha and Coffee Day Enterprises Ltd.

India's biggest engineering company has also made an open offer to buy up to 31% more of Mindtree from public shareholders for Rs 5,030 crore and placed an order with its broker Axis Capital Ltd to buy up to 15% stake from the secondary market for Rs 2,434 crore.

Overall, L&T may spend as much as Rs 10,733 crore ($1.56 billion) for the acquisition. Larsen, which has a software services business under unit L&T Infotech Ltd, has said previously that it has sufficient financial flexibility to fund the entire transaction through its existing resources.

“This acquisition is part of our strategy to deliver industry-leading IT services to our clients worldwide. It will help propel L&T’s technology portfolio into [the] top tier of Indian IT companies,” SN Subrahmanyan, L&T's CEO and managing director said at the time of announcing the hostile takeover.

On Tuesday, Mindtree's shares ended at Rs 981.30 apiece on the BSE, up 0.52% from previous close.

The Competition Commission of India (CCI) had approved L&T’s takeover proposal earlier this month.

Mindtree’s shareholding pattern is fairly fragmented. The promoter group owns only about 13.33% of the company while domestic mutual funds and foreign portfolio investors own close to 50%, stock-exchange data showed. India-focussed private equity firm Nalanda Capital is the biggest institutional shareholder of Mindtree, holding a 10.6% stake.

L&T says the acquisition is in line with its strategy of focusing on services and asset-light businesses to drive profitable growth. Mindtree will also add to L&T’s IT services platform with a focus on new-age digital and cloud solutions, and complements its technology services portfolio, the engineering company says.

Mindtree offers application development and maintenance, infrastructure management services, independent testing, package implementation, consulting and intellectual property products-related solutions.

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