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Mindtree mulling over share buyback proposal amid market speculations regarding exit of largest stakeholder

Amid market speculation of L&T (Larsen & Toubro) seeking to acquire the stake of largest stakeholder in multinational IT firm- Mindtree, the IT company said on Friday that it might consider a share buyback proposal in its next board meeting scheduled on 20th March.

Although, Mindtree didn’t provided any further specifics such as size of the buyback proposal but as per close sources it could be around ₹1,000 crore. Engineering giant L&T also didn’t commented on the recent developments.

However, in January, A M Naik, executive chairman of the L&T group, confirmed that the L&T was looking at acquiring a stake in Mindtree.

Industry experts and analysts however, have said that a share buyback proposal when a large stakeholder is considering selling his stake is unprecedented and could create problems for any rival technology firm to come on board.

“Looks like there’s a big disconnect between the single-largest shareholder and the management. No company announces a buyback when a large shareholder is trying to sell his stake. As the price goes up, the transaction will be revisited by the interested party. It will now be costlier for any entity to take control of the company,” said V Balakrishnan, former Infosys board member and chairman of Exfinity Venture Partners.

Cafe Coffee Day founder V G Siddhartha’s who owns 21% stake in Mindtree is in the final stage of discussions with many entities including L&T. But with Mindtree founders’ reluctance to sell their stake of 13.32%, the situation has turned tricky.

Earlier, in 2017 Mindtree conducted share buyback of worth ₹270 crore, now it seems to be preparing itself against a hostile takeover. A successful share buyback proposal increases the share prices along with stake of the stakeholders which the current management might use to reward shareholders in a bid to win their loyalty.

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