Tax Department Stops VG Siddhartha’s Plans To Sell Stake In Mindtree
Pedestrians walk past a Cafe Coffee Day coffee shop operated by Coffee Day Enterprises Ltd. (Photographer: Dhiraj Singh/Bloomberg)

Tax Department Stops VG Siddhartha’s Plans To Sell Stake In Mindtree

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The income tax department attached some of the shares held by VG Siddhartha and Coffee Day Enterprises Ltd. in Mindtree Ltd., a move that may halt them from selling their stake in the IT firm.

The step has been taken to recover a tax demand from the two, Mindtree said in a filing without disclosing further details. The development comes when Siddhartha—who owns about 21 percent stake in Mindtree through various entities—is said to be in advanced talks to divest his stake in the company.

Mindtree said in its filing to the BSE that the I-T department in Bengaluru has issued a “provisional attachment u/s 281B of Income Tax or prohibitory orders Act, 1961 for tax demand likely to be raised by the I-T Department on...shareholders of the company—Coffee Day Enterprises Ltd and V G Siddhartha”.

The attachment, according to the filing, also “prohibited for transfer or charge” of 22.2 lakh equity shares of Coffee Day Enterprises Ltd., and 52.7 lakh shares held by Siddhartha. “The order would be applicable for six months from the date of the order on Friday.”

E-mails sent to Mindtree seeking details didn’t elicit any response. At the end of the December quarter, Siddhartha held 54.69 lakh shares (3.3 percent), while Coffee Day Enterprises Ltd. had more than 1.74 crore shares (10.63 percent). Another entity, Coffee Day Trading Ltd., holds over 1.05 crore shares (6.45 percent).

Mindtree’s promoters, including Subroto Bagchi, Krishnakumar Natarajan, NS Parthasarathy, and Rostow Ravanan, together hold roughly 13 percent stake in the company.

Coffee Day Enterprises said in a statement that “the company and the promoters has filed the revised returns and there is no tax liability payable by VG Siddhartha and the company as per the revised return”.

Siddhartha, who invested in Mindtree in 1999, is reportedly in advanced talks with L&T Infotech and private equity firm KKR to sell his stake in the mid-sized IT services company.

There have been speculations that such a sale could trigger a hostile takeover, even as its founders are said to be making all-out efforts to counter them.

Both Siddhartha and Mindtree founders haven’t made specific comments on the issue. During the third quarter earnings call recently, the management skirted questions on the speculations saying it remains committed to delivering growth for the company.

“...this is something that is not in our control. Shareholders make their own decisions on when they want to buy, how much they want to buy, when they want to sell, etc. It is outside our purview in that sense,” Ravanan, who is also the chief executive officer and managing director, had said.

We can make sure that things go right at Mindtree, we take care of people, customers and continue to deliver industry leading growth. So, the stake sale is not something that we have a view on or would like to make a comment.
Rostow Ravanan, CEO and MD, Mindtree Ltd., During The Company’s Q3 Earnings

Mindtree, in the December-ended quarter, posted a 35.1 percent rise in consolidated net profit to Rs 191.2 crore, and 29.7 percent jump in revenue to Rs 1,787.2 crore over the year-ago period. It also exuded confidence that its January-March numbers would be better over the previous quarter.

Also read: Q3 Results: Mindtree’s Profit Declines But Meets Estimates

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