Synopsis: This article traces how Café Coffee Day founder V.G. Siddhartha’s long-standing investment in Mindtree, driven by mounting financial stress, became the trigger for L&T’s hostile takeover. It explains L&T’s diversification strategy, Mindtree’s attractiveness, the failed private equity route, and how Siddhartha’s stake sale reshaped one of India’s most iconic IT companies.
What looked like a sudden and aggressive takeover was actually set in motion much earlier, shaped by business compulsions rather than confrontation. Behind the headlines was a long-term shareholder and a conglomerate searching for its next growth engine. As these pressures quietly converged, control of one of India’s most admired IT companies began to slip, leaving one question at the centre of it all: how did the CCD founder become the unexpected catalyst in L&T’s takeover of Mindtree?
L&T’s Need for Diversification Beyond Infrastructure
Larsen & Toubro has traditionally focused on infrastructure and industrial projects that are capital-intensive and involve long execution timelines. Such businesses typically take years before investments translate into cash flows, exposing the company to cyclical and execution risks. Recognising these limitations, L&T’s management sought to diversify into businesses that could provide more stable and recurring revenue streams.
As part of this strategy, L&T set up L&T Finance Ltd in 1994 as a non-banking financial company offering asset finance, infrastructure finance, and corporate lending. This arm complemented L&T’s core activities by lending to sectors it understood well. In 1996, L&T further expanded its diversification efforts by establishing L&T Infotech (LTI), entering the fast-growing software services industry. From the outset, LTI largely served clients in banking, infrastructure, and oil and gas, mirroring L&T’s existing sector exposure. Over time, both the finance and IT businesses continued to be influenced by the same economic cycles as infrastructure, leaving L&T still in need of true sectoral diversification.
Mindtree was founded in 1999 in Bangalore by a group of experienced IT professionals, including Subroto Bagchi, Krishnakumar Natarajan, Rostow Ravanan, N.S. Parthasarathy, Ashok Soota, Scott Staples, Anjan Lahiri, Kalyankumar Banerjee, S. Janakiraman, and Kamran Ozair. The founders, many of whom had previously worked at Wipro, Lucent, or Cambridge Technology Partners, built the company with a strong emphasis on professional management and employee-friendly practices. Mindtree went public in 2006.
Between its listing and 2018, the company delivered annual revenue growth of 23 percent and net profit growth of 22 percent. It operated with no debt on its balance sheet and was widely regarded as a strong long-term business. Mindtree’s client exposure to retail, media, and other consumer-facing sectors further differentiated it from traditional infrastructure-linked IT firms, making it an attractive acquisition target for L&T.
For L&T, acquiring Mindtree offered a clear path to diversification beyond infrastructure-driven cycles. Mindtree’s strong financial performance, debt-free balance sheet, and exposure to consumer-oriented sectors aligned well with L&T’s long-term objectives. Unlike LTI, whose client base overlapped significantly with L&T’s traditional domains, Mindtree provided access to new sectors and revenue streams, making it a compelling strategic fit.
VG Siddhartha: The Strategic Investor Behind Mindtree
According to an article from Mint, V.G. Siddhartha, the founder of Café Coffee Day, had invested approximately USD 8 million in Mindtree at the time of its founding in 1999. For nearly two decades, he remained a largely passive investor, supporting the company’s promoters and aligning with their decisions. His stake, amounting to around 20 percent, was seen by Mindtree’s management as friendly capital that effectively strengthened promoter control.
As late as May of 2018, Siddhartha publicly stated his commitment to Mindtree and expressed confidence that the company would more than double its revenue to USD 2 billion by 2023. Mindtree co-founder Krishnakumar Natarajan also indicated that Siddhartha’s holding and the promoters’ stake together should be viewed as a combined 33.8 percent, reinforcing the perception that his shares were aligned with management interests.
Timeline of VG Siddhartha’s Mindtree Investments
The Coffee Day founder’s investment journey in Mindtree began in 2011. At that time, Coffee Day Resort acquired 28 lakh shares, representing 6.95 percent of the company, at a cost of approximately Rs. 87 per share, for a total investment of around Rs. 24.36 crore. This initial investment eventually delivered a remarkable return on investment of 1,020 percent.
In March 2012, Siddhartha increased his stake to 11.26 percent, acquiring 45.65 lakh shares at Rs. 122.33 each. Just three months later, in June 2012, he bought an additional 13.47 lakh shares (3.27 percent), bringing his total holding to 14.53 percent.
Mindtree issued bonus shares in a 1:1 ratio in 2014. After this issuance, Siddhartha sold a small portion of his stake, earning approximately Rs. 25.5 crore. A similar bonus share issuance in 2016 left his entire holding intact, with no transactions taking place.
In 2017, Siddhartha added another 4.41 lakh shares (0.23 percent) at a price of about Rs. 529 per share, increasing his total stake to 19.94 percent. By 2018, according to the quarterly shareholding pattern, he held 20.41 percent. This comprised 3.33 percent (54.69 lakh shares) directly in his name, 10.63 percent (1.74 crore shares) under Coffee Day Enterprises, and 6.45 percent (1.05 crore shares) through Coffee Day Trading Limited.
Financial Stress and the Attempted Stake Sale
Despite his long-term commitment to Mindtree, Siddhartha came under increasing financial pressure when lenders were unwilling to roll over his debt of roughly Rs. 3,000 crore. With repayment deadlines approaching, he sought to monetise his Mindtree stake. Several private equity firms, sovereign funds, and long-term investors expressed interest, valuing the stake between Rs. 3,100 crore and Rs. 3,300 crore.
However, a major hurdle was that Siddhartha’s shares were pledged with banks. Any buyer would have needed to either fund the unpledging upfront or structure the transaction such that the shares remained with lenders during the sale. Siddhartha clarified in a Mint email that the shares were pledged with a single lender to simplify the eventual sale and that he had no intention of selling before obtaining all regulatory approvals.
Nearly a dozen investors engaged with Siddhartha and Mindtree’s management to understand the opportunity. Despite strong interest, the complex share-pledge mechanics prevented a deal from being executed. Private equity buyers were reluctant to assume the additional risks, even though Mindtree’s promoters preferred a financial investor.
L&T Steps In and the Hostile Takeover Begins
Larsen & Toubro eventually agreed to purchase Siddhartha’s stake at Rs. 980 per share, slightly higher than a prior Rs. 975 offer preferred by Mindtree’s promoters. While the exact pre-deal mechanics between L&T and Siddhartha remain undisclosed, L&T was willing to navigate the complexities that other buyers avoided.
By acquiring Siddhartha’s shares, L&T gained a significant foothold in Mindtree and aggressively sought additional shares to reach 51 percent ownership, granting it control over the company. This move effectively made Mindtree vulnerable to a hostile takeover, despite the founders’ and management’s resistance.
The Financial Outcome for the CCD Founder
The transaction proved extremely profitable for Siddhartha. Over eight years, he sold 2.5 lakh shares in 2012 at an average price of Rs. 122.33, earning Rs. 25.52 crore, and 250 shares in 2018 at Rs. 864 per share, totalling Rs. 2.16 lakh. After these deductions, the effective cost of his overall investment in Mindtree was approximately Rs. 410.25 crore. L&T paid Rs. 3,269 crore for the remaining stake, yielding a profit of Rs. 2,858.74 crore. In addition, Siddhartha earned roughly Rs. 180 crore in dividends from Mindtree over the decade.
Following the eventual sale of his stake to L&T, Coffee Day Enterprises clarified that the proceeds would be used to reduce the group’s debt and allow the company to focus on its core coffee business. As of March 31, 2018, CCD’s net debt stood at Rs. 3,323.8 crore. Siddhartha stated, “This business restructuring allows us to sharpen our portfolio focus and devote more time towards the strategy for our coffee business. We remain committed towards achieving overall growth in our business by focusing on execution and increasing shareholder value.”
In hindsight, the Mindtree takeover was less about aggression and more about circumstance. V.G. Siddhartha was not looking to exit a successful investment by choice, nor was L&T chasing control for the sake of it. One was dealing with mounting financial pressure, while the other was searching for a business that could genuinely change the risk profile of its group.
Their paths crossed at a moment when alternatives had quietly run out. What followed reshaped Mindtree’s future, altered the balance of India’s IT sector, and turned a once-friendly shareholding into the spark for the country’s first large hostile takeover in technology. It stands as a reminder that in corporate India, landmark events are often driven not by boardroom battles, but by timing, capital constraints, and decisions made long before the headlines arrive.
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