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Mindtree spurns a dubious lover in L&T, but do not rule out an arranged marriage between them

Madhavan Narayanan
The SEBI and ministry of corporate affairs must proactively come to the aid of small shareholders who stand to benefit immensely from the L&T; offer as the counteroffer from Mindtree — buyback of shares — cannot match L&T;’s offer.

The place is romantically named Global Village. As someone who was present at the inauguration of Mindtree's aesthetically landscaped campus on the Mysore Road in Bangalore in 2005, I can imagine what it must mean to the founders of the IT services company as they face an unsolicited Rs 10,800-crore takeover bid from construction-led conglomerate Larsen & Toubro Group.

The man who helped build that campus as an early investor with real estate interests, Cafe Coffee Day czar VG Siddhartha, seems to have literally pulled the ground from beneath the feet of its founders, who pride themselves as first-generation entrepreneurs now seeking special support from the government to thwart what they think is a hostile bid, even as L&T's CEO SN Subrahmanyan speaks of "dil" and "pyar" (heart and affection).

Valentine's Day was a month ago. This one looks more like a Balakot attack at first play.

Siddhartha may be named after the founder of Buddhism, but it turned out he is not exactly a renunciate as he sold his 20.3 percent chunk in the company to L&T, triggering an offer to minority shareholders of the company founded by alumni walking out of billionaire Azim Premji's imposing Wipro stable two decades ago. They now realise that a free entrepreneur could well be a horse up for trade in the unforgiving world of shareholder capitalism. They may want to commiserate with Flipkart co-founder Sachin Bansal, who became a sulking billionaire last year after US giant Walmart acquired the online retailer founded in Mindtree's own Bangalore.

Investment is eventually not about sentiment, much as Mindtree's founders may wish otherwise. But there is another kind of sentiment that perhaps matters more -- and that is of partners, customers and above all, nearly 20,000 employees spread across 17 countries. Here is where their strengths lie, if at all. Mindtree's own co-founder, Ashok Soota, had walked out of Mindtree in 2011 to start his own IT firm, Happiest Minds.

Both companies are founded on the strength of employee happiness, enthusiasm and creativity as guiding ideals. Just as well. In the software industry, there is a saying that assets can walk out of the offices at 5 pm. Code geeks and engineering nerds are often kept happy by things other than money, and getting the best out of them is art different from the simple ways of lucre that L&T's managers may be used to.

But there is a beautiful irony in the fact that L&T is not a family-run company either. It has its own culture and ethos in which managers have autonomy and talented engineers can move up the corporate ladder without sighting glass ceilings and promoter power.

A decade ago, when Tech Mahindra bailed out the former Satyam Computer Services after its founder Ramalinga Raju admitted to India's biggest corporate fraud, employees had reasons to cheer because it was a rescue. The staff morale went up. L&T failed as a suitor for Satyam. In Mindtree, like a spurned lover insisting on marriage, L&T is facing a far more sensitive situation.

In the undefined lexicon of the technology industry, employee morale pips shareholder supremacy because future earnings depend more on human capital than the one that is written on cheques.

However, the onus is on Mindtree's co-founders to prove that they are not being viewed by thousands of their junior colleagues the way they themselves viewed Azim Premji when they quit Wipro. One of techie's progressive entrepreneur could be another's overbearing boss.

Many questions loom: Are the projects Mindtree working on scalable in a manner that doesn't need extra capital? What if L&T assures a work culture surpassing, if not matching, Mindtree's? Are employee stock options under the current dispensation good enough to give the bulk of Mindtree's employees a sense of positive ownership? If L&T takes its intended 66 percent stakes, won't that leave employees as marginal stakeholders?

There are no easy answers, but it is time for Mindtree's founders to realise that L&T, if you know its history, was as entrepreneurially progressive as itself and had fended off in 1989/90 a takeover attempt by Reliance Industries by extending arguments similar to what is in Bangalore's air this spring. AM Naik, the current non-executive chairman of L&T, was then in the thick of the action.

There is a fig leaf for reconciliation in signals that Mindtree's founders are ready to talk to Naik. If their current posturing is aimed at extracting better terms for employees and stockholders including the founders, we may yet see that this is not a case of spurned love but one of a handsome dowry. Watch this space. After all, this is the land of arranged marriages in which love is often found after elders bless a relationship.

(The writer is a senior journalist and commentator. He tweets as @madversity)

Also See: L&T hostile bid: Mindtree finds 'some irregularities' in Café Coffee Day promoter VG Siddhartha's disclosures

L&T hostile bid: Why infrastructure giant could not build a great technology business on its own, ask Mindtree promoters

L&T's hostile bid to takeover Mindtree: Facing flak, engineering conglomerate says deal triggered by VG Siddhartha

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