KKR & Co., the private equity firm has launched a bid worth Rs. 3,100 Crore for VG. Siddhartha’s 20.4% share in the coffee outlet chain Café Coffee Day and the IT firm Mindtree Ltd. The private equity firm has fought it out with another giant, L&T Infotech Ltd and has emerged as the highest bidder yet. The company looks hell-bent on acquiring a controlling stake in Mindtree. As KKR has not only offered a higher amount than their former bid but have also relaxed their terms and clauses that were included in the previous deal. This mindless pursuit of Mindtree has caused its share to rise by 0.57% to Rs. 903.10.
The deal is still in the works as the current promoters of Mindtree hold a collective share of 13.32% in the firm. Further, they do not look keen on letting go of their share, so it has been agreed upon between the two parties that KKR will not propose to buy any additional stake in the company in the near future. Despite this, it is believed that KKR would look to buy another 5% share in Mindtree from public shareholders to gain complete control of the company.
The promoters of the company Krishnakumar N. holds a 3.72% stake; Subroto Bagchi, has 3.11%. N.S. Parthasarathy has 1.43%; and Rostow Ravanan, holds a 0.71% stake in Mindtree. The promoters are established players in this domain and being the co-founders they are aware of the nuances of the company.
KKR & Co. is a major private equity firm in the country and has operations worldwide too. It was started in 1976 by Henry Kravis and George Roberts. Over the years it has become a global investment firm in multiple investment classes. By December 31, 2018 the firm had assets worth $195 billion under its control.
The company has progressed over the years and has proved to be beneficial for its investors and shareholders. This is evident in the gross IRR of 18.8% it has generated since its inception. As a private equity firm KKR has managed to acquired stakes in highly successful companies like the Japanese electronics giant Hitachi, New Zealand’s GoDaddy and SBI’s Life Insurance branch as well. Being pursued by a giant like KKR puts Mindtree’s worth into perspective.
WHY HAS MINDTREE GARNERED SO MUCH ATTENTION?
Mindtree has shown consistent growth over the years which is evident in its net sales turnover growing from Rs. 3031.60 Crores in 2014 to Rs. 5325 Crores in 2018. The share price has also shown a tremendous increase from Rs.167 per share to Rs.910 per share in a span of 10 years from 2009 to 2019. Another advantage with Mindtree is that its major share of market is in America and Europe. Any company that acquires Mindtree would get a gateway to the markets of those two continents.
Mindtree is a diverse company which has ventured into four markets namely media, manufacturing & retail, banking & finance and travel & hospitality. This offers the company a wide range of markets to play into and the business is evenly spread between these four markets which helps them. As Change in any one market is not going to show any lopsided effect on the company.
This race to acquire Mindtree has caused its promoters to choose from one of the two options. They could either sell out their shares which they seem reluctant to do. The order option is to mobilize enough funds to regain the controlling share themselves. With Mindtree being such an attractive prospect, it remains to be seen what new developments are going to occur in the days to come. The only thing that can be said for now is that Mindtree is going to go through a big change one way or the other. The shareholders, management and the promoters of the company are in for a tumultuous few weeks