Engineering conglomerate Larsen & Toubro's (L&T) delay in finding a replacement for the outgoing chief executive officer of new acquisition Mindtree is worsening uncertainty about the future of Bengaluru-based mid-sized IT services firm. The uncertainty has affected the morale of the company employees with the second-rung leadership seeking clarity on the company's future.
L&T leadership has clarified it will maintain a hands-off approach to Mindtree even as two former executives of rival Cognizant Technology Solutions are reportedly the frontrunners to replace Rostow Ravanan.
Debashis Chatterjee, who quit as president and head of global delivery of Cognizant in May, and Rajeev Mehta, who joined L&T in April former president of Cognizant, have been the frontrunners for the Mindtree top job, according to a report in the Economic Times.
L&T said that it would announce a new leadership team for Mindtree after the software services firm's chairman Krishnakumar Natarajan, vice-chairman NS Parthasarathy, and Ravanan, who are also cofounders, quit after they lost control of the company. They, however, remain shareholders.
The developments have battered the Mindtree stock, which hit a 52-week low on Tuesday falling as low as Rs 735. Around noon it was trading at Rs 762. After opening at 772. The share closed on Monday down 10.43 percent after dropping 14 percent in intra-day trade while the benchmark Nifty of the National Stock Exchange (NSE) dropped 2 percent.
"The overhang of residual shares is too high. Nalanda Capital still has 1.7 percent shares left after it tendered its holding in the open offer," the report quotes Shriram Subramaniam, founder of proxy advisory firm InGovern, as saying. "Arohi is left with a small shareholding, which they want to sell. The promoters' shares are still unsold," Subramaniam said.
L&T, which got a toehold in Mindtree by buying the 23 percent stake controlled by Café Coffee Day founder VG Sidharth, picked up shares at Rs 980 in an open offer. The engineering giant now controls more than 60 percent in the Bengaluru-based company.
Nalanda Capital, a long-term investor in Mindtree with a 10.6 percent stake, that sided with its founders when they objected to L&T's takeover, sold its shares in the open offer after markets regulator, the Securities and Exchange Board of India (Sebi), warned the Singapore-based public market fund against acting in concert with Mindtree founders.
L&T, which holds 60.06 percent in Mindtree, is unlikely to increase its holding following the proposal in the Union budget 2019 that Finance Minister Nirmala Sitharaman proposed on raising the current threshold of public shareholding to 35 percent from 25 percent. L&T, which has an information technology subsidiary L&T Infotech, has said Mindtree would be run as a separate entity and would not be merged with its own technology units.
"Continuity will be the key theme in the management transition... No position is sought to be disturbed at Mindtree, and no changes are contemplated right now. There will be a new CEO for Mindtree, the announcement about which will be done in due course," L&T CEO SN Subrahmanyan told news agency PTI.