The board of Mindtree
will meet today to deliberate on whether to proceed with the share buyback proposal.
The founders of Mindtree, who together own 13.32 percent in the company, are trying to fend off a Rs 10,800-crore hostile takeover bid from
L&T, India’s largest engineering company, by buying back shares from public shareholders.
Rostow Ravanan, MD & CEO of Mindtree, spoke to CNBC-TV18 about what they plan to achieve at today's board meet and cultural differences that are likely to emerge if the L&T deal goes through.
Here's the edited transcript of the interview that was conducted on March 25:
Q: We are all looking at the crucial board meeting on Tuesday which is a follow up to last week’s board meeting and we have reported on CNBC-TV18 that there will be an independent directors committee at the board meeting tomorrow and we also understand that many of the independent directors are more positive about the L&T deal than the promoters are, what is your opinion on where they stand right now?
A: While we are always busy, I am never too busy not to talk to CNBC-TV18. With respect to the independent directors, they are completely aligned with our approach. The board as a whole has endorsed the stand that we have taken and all the steps that we have taken. The independent directors have a statutory obligation so they will fulfil that obligation as and when that appropriate time comes. But the entire leadership team and the entire board is completely aligned with this approach, so any reports that indicate any kind of differences within the board is completely, totally false.
Q: You have reiterated even during your press conference last week that you continue to enjoy support from institutional investors. You have only specifically named Nalanda Capital which holds about 10 percent stake or so. Why have you not named the others? Do you see others backing you as well?
A: Absolutely, the question at that time was posed to me saying what does Nalanda Capital think and I guess it could have been asked by that particular journalist because they are like you said they are our larger shareholders. So we said yes, we have spoken to them and they are in line with our way of thinking and no difference of opinion from their side. But many of our large investors have exactly that same view. They have recognised that Mindtree is a high performing organisation, great management team and they have also recognised that financial performance is a function both of strategy and culture and therefore any disturbance to either strategy or culture will then lead to differences in performance and that is why all our shareholders have endorsed the Mindtree management team.
Q: You said you named Nalanda because it was specifically asked about it. Let me also name a few others, you have Amansa Holdings, you have Arohi Asset Management, UTI MF and several others what is their stand on this deal?
A: Completely aligned with our approach. No difference of opinion amongst any of our large shareholders.
Q: You are positive on support from all your large institutional investors?
Q: All of you have said time and again that there is going to be cultural differences and value destruction if this deal goes through. Could you highlight what exactly is your main concern about what the difference in culture is?
A: Without passing any kind of judgment with respect to other cultures, all we are saying for us our culture is unique and our culture is an important ingredient for the success that we have delivered to our all stakeholders there and therefore we would like to leave this equation undisturbed.
Q: So basically nothing that employees have expressed concern on or clients have expressed concern on specifically about this?
A: There has been an outpouring of support for the Mindtree leadership team and just look at all the comments that have come on twitter using #MindtreeMatters, that plus the feedback we are getting during our internal town hall meetings, our emails that I send and feedback that I get etc. so form our people perspective there is a strong recognition for Mindtree and there is a lot of support again like I said for the current leadership team because we have delivered strong performance from our people across all the countries that we are operating. Similarly, from clients as well there is very strong support for the leadership team and for the successes we have delivered to our clients.
Q: L&T continues to say that this is not a hostile takeover, they say that Mindtree will continue to remain an independent entity. Has this been communicated to you categorically or have you sought any such assurance from them on this?
A: We have not sought anything from anybody. But if somebody gives us something, obviously we will take a look at it. One of the reasons why we are successful as a leadership team as we are very data-driven in all our decisions. So somebody presents data to us, we will no doubt take a look at the data and then make our decisions on that.
However, as of now, no such data has been given beyond the statements in the media and maybe in a lighter way I can say that all the comments that are written about us and when I know how divorced they are from our reality, therefore then I am unable to take any real seriousness for the comments that are attributed to L&T in the media because all those statements have only come to us through the media because I don’t believe all the things that are written about Mindtree, I don’t want to believe anything else that they have said as well. But we have not reached out to them, they have not reached out to us, nothing has come to us directly.
Q: So you haven’t heard directly from them on how the integration will go?
A: Nothing from them till now.
Q: If L&T does manage to take a controlling stake which doesn’t seem to be very difficult given that they have already taken 20 percent, what will be the management’s decision then once they come on board?
A: I have no way of commenting on the first part of your statement of how easy or difficult it is for L&T to take a controlling stake and I don’t even want to comment on what is a controlling stake because different people have different views on what percentage of stake formulates a controlling stake there. So let some of these things play itself out. They have bought a certain block and they have announced a certain plan. Let us see how all of that pans out in reality in the market place and then we will take a call at that stage there.
Q: After the board meeting last week, the company had put out a statement saying that despite detailed discussions there couldn’t be any decision taken on the share buyback. What is the status, I know you cannot reveal everything but what is the status, do you think it will go through and will you now require 75 percent shareholder approval?
A: Like I said, since the board meeting is getting reconvened tomorrow, so it is only at the end of the board meeting will I be able to say what does the board want. Maybe the board wants some buyback to go through, maybe the board wants to wait, maybe the board wants to do this some other time, so it will be inappropriate for me to make any sort of predictions on what the board meeting will result in tomorrow but however the board decides, we will completely go in the implementation path thereafter and we are confident that if we do things that are right for stakeholder value creation, we will get the support of all our shareholders as well. But we cannot predict anything. Let the board meeting happen tomorrow and then let us decide on that basis.
Q: During your Q3 results, you said you are on a one billion dollar run rate, you had a great Q3 as well, but I think the last few months have been quite tumultuous, was business going as usual and have you touched that one billion figure?
A: We will formally announce results on April 17, 2019. So I will have to keep you in suspense till then. If I make any comments on Q4 results right now, I will be breaking the law and I definitely don’t want to do that.
All I can tell you is the leadership team at Mindtree is very broad and very deep. Therefore, they are ensuring that we deliver all the results that we need for our clients, for our book close process etc.
This issue has not distracted us in any manner over the last few weeks. So all of us collectively are doing whatever we can even within the board for example, members are focusing on this issue. I spend a minimal amount of time, the majority of my time is with clients and people. The operating leadership team is completely focused on the business, we are not getting distracted by this.
Q: So no impact on the business, business is going as usual?
A: Exactly. So whatever we have to do on a day-to-day basis to take care of clients and people, that is not getting impacted because of this.
Q: I know it has just been a week since L&T made that open offer but have you seen any kind of attrition, any signs of attrition or any concerns from clients who may be holding back on renewing contracts or so on, anything on those lines so far?
A: Firstly, L&T has not announced an open offer. L&T has just announced – they have signed an agreement with Coffee Day group to buy that 20 percent. That itself is subject to regulatory approval. So that itself will close only in due course whenever those approvals are received. They have intended to buy another 15 percent and want to launch an open offer by 31 percent all of which is way ahead in the future. So nothing has happened as of yesterday. As of yesterday, my shareholder register continues to be Coffee Day group and all their entities. So nothing has changed at the moment for us.
No change to client perceptions at the moment because we have been in touch with our clients continuously. So many people have shown their interest and their support for us, some people have had questions. We have been engaging with our clients and answering those questions there. So it is business as usual for us at the moment.
Q: You said last week that Mindtree will reach out to as many people as possible to get support from the industry. You mentioned even the government, NASSCOM and so on, what kind of support have you received so far, who all have you reached out to on this?
A: I think the general industry perception is completely aligned with our view that our business is a very strong people-oriented business and unsolicited bid - if you don’t want to use the word hostile – upsets that equation. Therefore, in our business, there is a discouragement for unsolicited bids at the moment. That is the kind of feedback we have got from multiple stakeholders there. Many people have given us support, given us ideas and obviously, we are taking that on board and planning our actions accordingly.
A: I can tell you that we never approached anybody then or now. So, to that extent, this is not a deal that Mindtree sought. Our shareholder had his own challenges or issues whatever priorities so he went and did a deal based on those priorities. We were not a party to that transaction and neither then nor now.
Q: L&T last week had said that there was a similar deal about a four years ago and they had actually said that Mindtree management had approached them and it didn’t go through. But last week you said that it was Mindtree which has rejected the offer, could you give us some clarity on what happened four years ago and with respect to what is happening now?