L&T will not revise the open offer price for Mindtree from Rs 980 per share, said sources aware of the development, ruling out market speculation of a revision in the offer price following a dividend payout by Mindtree.
Mindtree’s committee of independent directors has just two days left before the deadline on May 10 to advise stakeholders on whether to accept L&T's open offer or not.
There have been differing views on the offer price for Mindtree by the engineering behemoth. One of the sources Moneycontrol spoke to, pointed out that the fair value of the Mindtree stock as per earnings consensus estimate is Rs 858 per share, as against the Rs 980 per share offered by L&T. This value is derived based on how Mindtree stocks traded over the last five years.
"So, the offer is already at a significant premium to the fair value," the source added.
However, another expert said five years are not enough to arrive at a fair value. He reasoned that there are several factors one takes into account, as a stock's value five years ago is different from how it is valued now and in the future.
Amit Tandon of Institutional Investor Advisory Services said, "There is no right or wrong way to calculate a fair value price. If a shareholder considers it is fair, they can tender the share if not they can just hold it."
Mindtree shares were trading at Rs 984 till 15.27 at BSE on May 8.
In India’s first-ever hostile takeover bid, L&T bought 20.32 percent from VG Siddhartha and his coffee enterprise for over Rs 3,000 crore on March 18, 2019. The company said it will buy an additional 46 percent through the open market purchase of 15 percent shares and 31 percent through an open offer. This puts the total value of the acquisition at Rs 10,700 crore.
On May 6, L&T bought shares worth about Rs 113 crore of Mindtree through open market transactions. According to the bulk deal data available with the NSE, L&T bought over 11.52 lakh shares, or 0.75 percent, worth Rs 112.91 crore with the average price being Rs 979.94 per scrip.
L&T is confident of increasing its stake to 26 percent in Mindtree well before open offer begins on May 14. The open offer ends on May 27.
“L&T, this week, will buy 6 percent in Mindtree at one go from the open market, which will make L&T's holding cross the crucial 26 percent,” the sources added.
In the case where L&T is unable to reach a total of the proposed 66.3 percent holding in Mindtree through open market and open offer, sources said, “L&T will continue to carry out creeping purchases over time from the market until its holding in Mindtree reaches at least 51 percent.”
During the annual results announcement, Mindtree had announced a total dividend of Rs 27 per share to mark twin milestones of the company’s 20th anniversary and crossing $1 billion in revenue. This is the highest ever dividend payout in Mindtree’s history. However, the special dividend is subjected to shareholders approval.
Analysts have said it is well within the regulations and unlikely to impact the ongoing hostile takeover bid by L&T.
Mindtree currently has around Rs. 256.2 crore as its cash and cash equivalents and Rs 3,141.9 crore in reserves and surplus. The dividend will be paid out of this money.
According to reports, L&T is entitled to receive a dividend of close to Rs 102 crore even if it manages to buy 26 percent share in Mindtree.
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