The exodus of Mindtree executives has dented earnings and now shareholders are running for the hills — over to AM Naik

• After Larsen and Toubro’s (L&T) hostile takeover of Mindtree, the company’s leading executives have resigned and it’s taking a toll on the company’s growth trajectory.
• Mindtree’s quarterly results show a 41% yearly dip in net profits and a 53% drop in quarterly net profits.
• Macquarie has revised the rating on Mindtree’s stock to ‘underperform’ expecting earnings per share to drop by at least 21%.
• All eyes are on AM Naik, the company’s newly appointed non-executive chairman, to turn things around.

The dramatic takeover of India’s IT consulting firm, Mindtree, by Larsen and Toubro (L&T) had its leading executives walking away and the company’s growth has taken a big hit.

As the L&T veteran and a marquee business leader in India, AM Naik, takes over as the non-executive Chairman of Mindtree, all eyes are on him to revive the firm’s fortunes.

Last night, Mindtree reported a 41% dip in its year-on-year net profits from ₹158 crores last year to ₹93 crore this quarter. Its quarterly net profits showed an even larger drop of 53% from ₹198 crore last year.

The share price of Mindtree was down nearly 5.5% at 10:20 am on Thursday.

Mindtree’s revenue for the current quarter shows an 11% increase in comparison to last year’s first quarter from ₹1,640 crore to ₹1,834 crore. But quarter-to-quarter, the revenue growth is flat.

Macquarie, an Australian financial services company, cut the rating on Mindtree’s stock to ‘Underperform’ estimating a drop of 21.6% to 24.8% in earnings per share largely due to executives leaving the company while the business slowed down amidst the takeover drama.

Hostility and fear

In March last year, L&T — an infrastructure and construction company — instigated a hostile takeover of Mindtree by acquiring 20.4% stake in the company by buying shares from V.G. Siddhartha, the man behind the Cafe Coffee Day franchise in India.

And, on June 27 this year, L&T had 61% of the company’s controlling shares. This is reportedly the first time that a company has successfully completed a hostile takeover in India’s IT space.

The IT firms’s chief executive officer (CEO), chairman and vice chairman had to file their resignations. Subroto Bagchi, Mindtree’s co-founder, is also set to retire at the end of the month and hasn’t asked to be reappointed to the company’s board.

The stock of Mindtree has lost over a quarter of its value in the last three months as the drama played out.

See also:
L&T takes over Mindtree in Indian IT’s first-ever hostile acquisition

L&T Infotech and Mindtree will remain separate and the open offer will be at ₹980

Mindtree takeover battle: L&T deals the first blow buying coffee baron VG Siddhartha's stake