Baring Private Equity Asia Ltd is reportedly eyeing a controlling stake in Bengaluru-based software services firm Mindtree after emerging the frontrunner to buy the equity that Café Coffee Day founder VG Siddhartha and affiliate investors.
However, Mindtree promoters are still undecided whether to concede a controlling stake to a private equity firm or to a long-term strategic partner, management sources indicate.
While Mindtree's promoters are interested in a strategic partner's entry into the board so as that firm would benefit in the long term, the lure of the higher investment potential of a private equity firm is also strong, the sources say. Baring is looking to acquire Mindtree shares at the six-month weighted average price of about Rs 960 per share.
Media reports say Baring has forged ahead of Japan's NEC Corp, KKR Equities and Advent International in the bid to buy Sidharatha's stake in Mindtree along with the stake under his control valued at Rs3,300 crore.
"Baring PE Asia is very keen to buy a majority stake in Mindtree if such a purchase comes with board control," Business Standard quoted a source as saying.
The poor near-term outlook for mid-sized information technology firms may ultimately influence the promoters' decision, market sources believe.
The major promoters of Mindtree include Krishnakumar N, who has a 3.72 percent stake, Subroto Bagchi with 3.11 percent stake, NS Parthasarathy (1.43 percent) and Rostow Ravanan (0.71 percent).
There has been no response to news reports from Baring PE Asia or Mindtree management.
A report in Mint said that Mindtree's largest investor and Coffee Day founder Siddhartha, along with two firms he controls and a few other large shareholders were selling their stakes in Mindtree.
Sources point out the priority for the Mindtree board would be to try to keep management control while inducting the Baring representative on the board. Only if this failed would it cede control.
Though Siddhartha, Coffee Day Enterprises, and Coffee Day Trading Ltd together hold only about 21 percent stake, he and his coffee ventures control about 26 percent equity in Mindtree.