Ashok Soota, former chairman and co-founder of IT consultancy services firm MindTree Ltd, has sold over half of his 11.10 per cent stake in the firm to entrepreneur VG Siddhartha’s group holding company Coffee Day Resorts Private Limited. Siddhartha, who has promoted India’s largest café chain Café Coffee Day (CCD), will see his group’s shareholding inching up to 12.35 per cent in MindTree, making him the single largest shareholder.
Siddhartha, who was the first investor in MindTree, along with venture capital firm such as Walden International, already holds 6.12 per cent stake through Global Technology Ventures Ltd. With another 5.75 per cent buy, this will now amount to over 12.35 per cent. Coffee Day Resorts, which also holds groups businesses in areas like infrastructure and financial services, raised $200 million in private equity funding last year from New Silk Route, Standard Chartered Private Equity and buyout major Kohlberg Kravis Roberts.
According to market data, Soota has sold 2.2 million shares at Rs 428 each, putting the deal size at Rs 94.16 crore. Siddhartha seems to be paying a premium for the stake, buying it at 18.6 per cent premium to MindTree’s closing price of Rs 361 per share on June 29.
The shares of MindTree closed at Rs 391 on June 30, up 8.31 per cent. The share price had reached an intra-day high of Rs 426.6.
“It is true that Ashok Soota has sold a portion of his stake in MindTree to one of the group entities of Siddhartha,” said a MindTree spokesperson. “The move indicates that the original investor has abiding faith in the fundamentals of the company and the future,” the spokesperson added in an e-mailed statement.
Soota had quit MindTree in April this year and launched his own start-up called Happiest Minds Technologies Pvt Ltd. The start-up focuses on IT services, research & development, software product engineering, remote infra, testing and consulting. The firm aims to be the fastest IT services company from India to reach $100 million in revenue mark and will also work on newer technologies such as cloud, mobility and social CRM. Reports had earlier suggested that Soota was in talks with venture capital investors for his firm.
Before founding MindTree, Soota was president of Wipro Infotech for 15 years, helping grow its IT business from $2 million in 1984 to $500 million in 1999. With this stake sale, Soota’s stake will come down from 11.10 per cent to 5.59 per cent.
It remains to be seen if Soota offloads his remaining stake. “What Ashok does with the rest of his stake in MindTree is his personal decision. We have no additional comments on this,” said the MindTree spokesperson. Soota was one of the nine co-founders of MindTree; notable among others were Subroto Bagchi and Krishnakumar Natarajan.
MindTree’s consolidated revenues grew by 16.4 per cent in FY11 to Rs 1,509 crore but profit after tax decreased by 52.7 per cent to Rs 101.6 crore. The fall in PAT was due to currency fluctuation, with company booking Rs 111.3 crore gain in FY10 on Rupee appreciation (as against Rs 13.6 crore in FY11).
While Walden International, one of the early investors, holds 9.9 per cent stake in the firm, another major shareholder is Singapore-based Nalanda India Fund, with 9.88 per cent stake.
MindTree had raised its first round of funding in 2000, when Global Technology Ventures and Walden International co-invested in the $9.5 million deal. It raised another $15-$16 million in 2001 from Capital International’s PE arm and Franklin Templeton, along with its existing investors. While Walden has made a partial exit over the last few years, Capital’s PE arm completely exited in 2009. Private equity firms Nalanda Capital and SAIF Partners (exited at 2x in one year) also bought into post-2008.