No immediate plans to divest stake from MindTree: Soota

Outgoing Executive Chairman of MindTree Limited, Ashok Soota, today clarified that he had no "immediate" plans to divest his stake in the company but would do so over due course of time.

Soota who tendered his resignation, effective from March 31, 2011, said in a joint statement, "I have no immediate plans for the divestment of my stake in MindTree"

"I will, in due course of time, divest my stake in a manner which will not jeopardize MindTree. The proceeds of the divestment will be used towards funding my new NGO and the new business venture, which I will soon announce."

Krishnakumar Natarajan, CEO & MD, MindTree Limited, a global IT Solutions and Product Engineering Services company, said, "After the resignation of Ashok Soota from MindTree, there has been speculation on the sale of his stake in MindTree, his future plans and impact, if any, on MindTree."

"We are confident that if Soota enters into areas competing with MindTree and some MindTree employees were to join him, the start-up operation would have no material impact on MindTree's business.

MindTree has built strong capabilities and excellent customer relationships, which will take MindTree of greater heights," he said.
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Soota can't poach MindTree clients, staff

Ashok Soota , who announced his decision to move out of MindTree and resign from his role as executive chairman, is bound by a non-compete agreement that prevents him from taking any MindTree client and employee with him, said a person with knowledge of the matter. Soota is starting a new venture and has asked the board to release him by March 31.

The veteran IT leader is held in high esteem and there were fears that after his departure, many employees and clients would also move out of MindTree to join him. Soota, who co-founded MindTree with nine others, is the single largest shareholder in the company with over 11% stake.

Investment bankers are closely watching the developments and awaiting the outcome of the board meeting to be held early this week to determine how the company will move forward. Company officials could not be reached for comment.

Some of the immediate concerns around Soota's departure is if the company will be able to contain the damage and reassure all stakeholders that it is business as usual. Else it could lose business and talent to rivals, who are stepping up hiring to meet increased demand after the downturn, and risk a possible implosion, said bankers. "A lot depends on how quickly the board acts. The earlier the better," said an analyst tracking the developments.

Financial investors, Walden and Nalanda, which hold around 10% each, and Global Technology Ventures with a 6.6% stake are the other large investors in the firm. Among the promoters, Bagchi and Krishnakumar hold around 5% each and S Janakiraman, president and group CEO of product engineering services holds around 2.5%. Bagchi, Krishnakumar and Janakiraman also play a more central role in the company's decision making.

MindTree says its vision & strategies in right direction

Mindtree has said that the firm has the right strategies and a credible management to take it on the right path, and that being innovative and flexible will help it win customers in a dynamic market place. The firm was responding to an article in ET dated January 21, which said that it faces an uncertain future due to strategic bets going wrong and slippages in performance.

The company’s executive chairman Ashok Soota and CEO and MD N Krishnakumar have said that MindTree is an 11-year young company, which has achieved a run rate of $340m in revenues . “You would appreciate that among the many IT services companies which started around the same time, very few of them exist today as independent companies or have completed an IPO. MindTree is one of the few exceptions.”

They add that at a revenue level, MindTree has a CAGR of 22%, 28% and 39% in the last three, five and ten years, respectively. “We have a strong organic growth engine and acquisitions have contributed only about 20% of our growth. All acquisitions have been well integrated and have strengthened our service offerings.

The article talks about “Bad Decisions and some wrong strategies” . MindTree does not wish to be a “me too” company. And this has built a differentiated , sustainable, next generation services company , which appeals to the younger workforce.

The letter added that the acquisition cost of Kyocera Wireless India was only $6m, and the acquisition in itself has yielded favorable results. The revenues from services to Kyocera Corporation since the time of acquisition till date have been $22m, with healthy margins.