Why is top investor Nalanda against L&T?

What is spurring Nalanda Capital founder and feted investment manager Pulak Chandan Prasad to fight a lonely battle with Larsen & Toubro?


Prasad, a former McKinsey and Warburg Pincus head, who made a big killing in the early days of private equity investing in India, is rallying some Mindtree investors for a pyrrhic victory: Make L&T pay a better price for the midtier IT services company, after resisting the hostile takeover appears to be a lost cause.


Prasad’s Nalanda, managing public market assets worth about $2 billion, is campaigning to keep its investment model intact, people familiar with the matter said. Nalanda builds big stakes of 8-10% in mid-cap companies — the largest institutional investor usually — with a tacit understanding to support the promoters and management in the long term.

But L&T’s $1.6-billion hostile acquisition of Mindtree could potentially undermine Prasad’s investment thesis. Nalanda (with about 10.6%) became the only investor to publicly endorse the besieged management soon after the unsolicited bid was announced in March this year.

Prasad, like the Mindtree founders, who together own around 13%, believes L&T’s offer price of Rs 980 apiece underplays the intrinsic M&A value of the Bengaluru-headquartered company. Nalanda has contacted some of the global investors who back funds (like Arohi and Amansa) that invest in Indian stocks, urging them to hold Mindtree for better value.

Nalanda’s resolute work comes even as the fund is sitting on handsome gains after building the Mindtree stake at an average price of Rs 260 apiece about 10 years ago.

Prasad has remained stoic despite some of India Inc’s savvy dealmakers attempting a thaw in his frosty ties with one of the country’s largest conglomerates. Nobody needs to tell the veteran investor to put his money where his mouth is, said sources, who added, “Prasad, with a penchant for holding on to firm opinions, is working on insulating his thesis.”

Emailed queries sent to Prasad on Thursday did not elicit a response till the time of going to the press.

Nalanda wants to prove that its model of being a longterm bulwark investor remains effective in Indian midcaps. The standoff with L&T is possibly the first time Nalanda’s investment game and unique ties with portfolio firms unfold in public glare.

The low-profile Nalanda’s strident voice comes at a time when the investing community has been watching how its bet on Kirloskar Oil Engines — which recently made a surprising entry into the troubled NBFC sector — plays out.

Nalanda entered Kirloskar 11 years ago and has 9.6% in the company that manufactures and services diesel engines, agri pumps and generating sets. Shares of Kirloskar, also roiled by a family feud, have lost nearly 38% in nine months and more than halved after touching a lifetime high of Rs 406 two years ago.

L&T, nearing 30% stake in Mindtree, has baulked at offering a higher price, and is scheduled to launch an open offer to Mindtree shareholders on June 17. Prasad, meanwhile, is in combat mode to extend Nalanda’s profitable streak on the bourses.