VG Siddhartha made a profit of Rs 2,858 cr from his Mindtree stake sale to L&T

VG Siddhartha has earned a profit of close to Rs 2,858 crores from the sale of all his stake in Mindtree to L&T. Siddhartha who is the founder of CCD (Cafe Coffee Day) had started investing in Mindtree over a decade ago and gradually accumulated 20.41 per cent stake in Mindtree until 2019. On March 18, 2019 Larsen and Toubro (L&T) bought his entire stake for a price not exceeding Rs 3,269 crores.

Over a period of eight years, Siddhartha bought his stake in Mindtree at a price close to Rs 435.79 crores. He sold 2.5 lakh shares at the price of Rs 122.33 in 2012 amounting to Rs 25.52 crore, followed by a minor sale of 250 shares in 2018 at a price of Rs 864 per share which amounted to Rs 2.16 lakh. After these deductions, the effective cost of investment that VG Siddhartha incurred while buying all his stake in Mindtree comes to around Rs 410.25 crores. The consideration paid by Larson & Toubro to acquire CCD founder's stake as per BSE filing is Rs 3,269 crores. This implies that VG Siddhartha made a profit of Rs 2,858.74 crores by selling his stake in Mindtree.

L&T bought the stake from VG Siddhartha to gain a minimum 51 per cent in Mindtree which would give the infrastructure giant control over the IT firm. L&T is aggressively targeting all available stake to acquire Mindtree.

Apart from the profits on sale of Rs 2,858.74 crores, the CCD founder has also earned close to Rs 180 crores just through dividends from Mindtree in the last decade.

As per the latest shareholding pattern of Mindtree, VG Siddhartha and CCD entities held 20.41 per cent or 3.35 crore shares of Mindtree. As per a CCD notification on BSE (Bombay Stock Exchange), the sale price for the entire stake will not exceed Rs 3,269 crores. This implies Rs 975 was being offered per share to the CCD founder.

To sum it up, VG Siddhartha bought shares in Mindtree for anywhere between Rs 87-529 over a period of eight years and sold it at a price close to Rs 975.

Timeline of VG Siddhartha's investments in Mindtree

• The investment trail of Coffee Day Enterprises can be traced back to 2011. Coffee Day Resort held 6.95 per cent stake or 28 lakh shares in Mindtree. These shares were bought at a price close to Rs 87 per share. The total cost of buying these shares were close to Rs 24.36 crores. This initial investment by CCD founder returned a massive return on investment (ROI) of 1,020 per cent.

• In March 2012, Siddhartha increased his stake to 11.26 per cent (or 45.65 lakh shares) in Mindtree which were acquired at a price of Rs 122.33. In June 2012, he increased his stake further by 3.27 per cent (or 13.47 lakh) shares and owned 14.53 per cent in Mindtree.

• In 2014, Mindtree issued bonus shares in the ratio of 1:1. After the issuance of bonus shares VG Siddhartha sold a minor part of his holding and earned close to Rs 25.5 crores.

• In 2016, mindtree issued bonus shares again in the ratio of 1:1. This time the entire stake of VG Siddhartha remained intact and no buying or selling occurred.

• In 2017, CCD founder further increased his stake by 0.23 per cent (4.41 lakh shares) in Mindtree. These additional shares were acquired at a price close to Rs 529 per share. After this substantial acquisition, the stake of VG Siddhartha stood at 19.94 per cent.

• In 2018, as per the latest available quarterly shareholding pattern of Mindtree, VG Siddhartha held 20.41 per cent stake. Of which 3.33 per cent (54.69 lakh shares) was directly held in his name, 10.63 per cent (1.74 crore shares) was in the name of Coffee Day Enterprises and further 6.45 per cent (1.05 crore shares) was held by Coffee Day Trading Limited.

Following the stake sale, CCD said: "The proceeds would be used to pare down the Coffee Day Group's debt. This divestment supports the Company's business strategy to devote more time to its flagship coffee business." CCD's net debt stood at Rs 3,323.8 crores as on March 31,2018.

VG Siddhartha said: "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. "

The transaction is expected to close in the first quarter of FY 2020 and is subject to customary closing conditions, including regulatory approvals being received.