Mindtree's special dividend could strip firm of Rs 320 cr ahead of L&T takeover

Bengaluru: Ahead of a potential takeover of the company by L&T, Mindtree's board on Wednesday proposed to pay a handsome Rs 320 crore special dividend to its shareholders including promoters, saying the move was in line with the firm's capital allocation policy and did not go against corporate governance norms.

The company has declared an interim dividend of Rs 3 per share that will be paid before May 10. It will pay Rs 4 a share in final dividend and another Rs 20 in special dividend -- a proposal subject to shareholders' nod at the firm's annual general meeting (AGM) in June or July.

By then, Larsen and Toubro (L&T) could hold significant stake in the city-based company. Last month, L&T had acquired Cafe Coffee Day owner VG Siddhartha's 20.32 per cent stake in Mindtree, and placed an order with brokers to pick up another 15 per cent shares from the open market.

This triggered an open offer under which the infrastructure major will acquire an additional 31 per cent stake at Rs 980 a share. The open offer is slated to begin on May 14 and close on May 27.

Earlier this month, the independent directors' committee formed by Mindtree to look into the "unsolicited open offer" by L&T had roped in ICICI Securities and Khaitan and Co as independent advisers.

Strongly defending the board's decision to recommend a 200 per cent special dividend (Rs 20 per share), Mindtree CEO and Managing Director Rostow Ravanan said shareholders' nod for the proposal will be sought in June-July -- after L&T's open offer ends on May 27.

"It (special dividend) does not take off anything whatsoever from our governance processes. This special dividend is to commemorate and celebrate Mindtree's achievements and the special dividend is anyway subject to shareholders' approval at the forthcoming AGM," Ravanan asserted.

Given that company has about 16 crore shares, the special dividend at Rs 20 a share alone translates to a cash outgo of about Rs 320 crore. Along with interim dividend, the total payout will swell to about Rs 368 crore.

Asked if Mindtree anticipated any objection from L&T on its latest move, Ravanan said: "I have absolutely no idea."

"When the AGM is held, all shareholders will get a chance to vote. But given the fact that it is an important milestone in the life of the company, and that it is in line with our policy of being shareholder-friendly and returning excess cash back to shareholders, this is absolutely in line with capital allocation policy," he said, terming the special dividend as "extremely equitable".

In a statement earlier Wednesday, Mindtree said the special dividend has been recommended to "celebrate the twin achievements of exceeding USD 1 billion annual revenue milestone and 20th anniversary of the company".

"Mindtree has delivered exceptional performance for both the fourth quarter and the full fiscal year as we cross the historic USD 1 billion milestone," Mindtree CEO and Managing Director Rostow Ravanan said in the statement.

The mid-sized IT firm Wednesday reported an 8.9 per cent growth in consolidated net profit at Rs 198.4 crore for the March 2019 quarter.

Mindtree's FY19 net profit grew 32.2 per cent to Rs 754.1 crore, while revenue was up 28.5 per cent to Rs 7,021.5 crore from the previous fiscal.