Mindtree: L&T Open Offer – InGovern Recommendation

The detailed report is here: Mindtree-L&T Open Offer-InGovern Recommendation

The L&T open offer period is from June 17th to 28th 2019 for a price of Rs.980 per share. L&T has proposed to acquire 5,13,25,371 shares that forms 31% of the equity capital of Mindtree.

InGovern recommends that minority shareholders tender their shares in the open offer for the following reasons:

  • Valuations of Mindtree shares at Rs.980 per share is at 19x FY2019-20 earnings and higher than comparable listed Indian IT services companies, and higher than five-year average multiple of 16.7x of Mindtree shares.
  • Independent Directors Committee (IDC) of Mindtree has recommended to minority shareholders that Rs.980 is a fair and reasonable offer price.
  • Possibility of prolonged uncertainty on the Board as L&T nominated three directors and the incumbent three promoter directors could have a standoff.
  • Immediate possibility of a higher offer price from L&T is remote as it has already accumulated enough shares and can bide time to consolidate its shareholding through creeping acquisition route.
  • Stock had run up over 20% since the news of L&T as a possible candidate. Futures contract prices of Mindtree indicate a lower than Rs.950 traded price post the open offer.

Given the above, shareholders should tender their shares in the open offer by contacting their stockbrokers. Electronic tendering of shares is possible and the funds would be credited by L&T soon after the open offer closes on 28th June 2019.

The detailed report is here: Mindtree-L&T Open Offer-InGovern Recommendation