Larsen & Toubro, which recently took over midsize IT firm Mindtree in India’s first hostile takeover in years, said it would announce a new CEO for the company by the end of this week.
But analysts told Moneycontrol that the incoming CEO will have to hit the ground running if the candidate is to ensure the company transitions well under the new owner and management.
“The challenges for the new management can be categorised into three parts – clients, employees and minority investors,” Pareekh Jain, Founder, Pareekh Consulting, said.
One, Mindtree’s clients will look for assurance and a sense of continuity from the new management.
Outgoing Mindtree CEO Rostow Ravanan told mediapersons during the Q4 results that the takeover battle did have an impact on business due to client concerns.
Two, the new CEO will have to also have to outline a clear vision for investors. Mindtree shares have plunged from about Rs 950 a few months back to about Rs 700 now.
The company’s performance in Q1 was disappointing with 41 percent decline in net profit.
Mindtree has been among the faster-growing midcap IT companies over the past few years. Analysts say that besides the overall economic environment being soft for the IT business, the company will also have to content with the disruption caused by the transition.
“It will be at least a year or two before the company will be able to go back to the high double-digit growth it has been seeing in the recent quarters,” an analyst said.
L&T already own two technology companies -- L&T Infotech and L&T Technology Services – and investors will expect the parent firm to outline its vision on how it plans to operate the three companies under its fold.
Three, several employees Moneycontrol spoke to said Mindtree had a very unique culture.
The company employs about 20,000 people. The company refers to them as “Mindtree Minds”.
“Mindtree is the only company I have worked for since 2013 and I have no plans of leaving just for its unique culture,” Samitha S (name changed), an employee, said. “But now I am worried if L&T and the new CEO will retain its culture.”
Latha Murugesh (name changed) has been working with Mindtree for about a year. “Of all the IT companies I have worked with, Mindtree has been the best so far. There is no hierarchy here and open office culture here is refreshing.”
She pointed out that employees were free to just walk to up (Mindtree co-founder) Krishnakumar Natarajan or (outgoing CEO) Rustow Ravanan. “You don’t see this in all organisations. It made us feel a part of the company.”
With the much-admired CEO Ravanan leaving, employees are worried if the openness will continue.
Given the concerns, it becomes important that L&T’s choice is CEO is correct.
Two former Cognizant executives Rajeev Mehta and Debashis Chatterjee, and former Mindtree CEO and co-founder, Anjan Lahiri are said to be in the running.
A technology analyst pointed out that Mehta is unlikely to be selected as the CEO as he was reportedly hired by L&T earlier this year to oversee all three IT firms of the conglomerate.
Mehta stepped down as the President of Cognizant after serving the company for two decades in April. An IT veteran, the analyst said that Mehta will be the right candidate for the combined entity rather than just Mindtree.
"Even if he was appointed, it would be for a short time, till the three entities, Mindtree, L&T Infotech and L&T Technology Services, are merged," the analyst said.
According to the analyst, the more likely choices are Chatterjee and Lahiri. “Between Chatterjee and Lahiri, the latter would be the perfect choice since he would know the pulse of the company and its employees, being the co-founder.”
Chatterjee was the executive vice president and president, global delivery, in Cognizant before he quit in May after serving the company for 23 years.
Lahiri, after moving on from Mindtree in 2013, served as the CEO of Bengaluru-based tech firm Sasken till 2014 and then as CEO of Birlasoft, which he recently quit.