Indian engineering and services conglomerate, Larsen & Toubro (L&T) has announced the merger of its two listed information and communication technology (ICT) companies, Mindtree and Larsen & Toubro Infotech Limited (LTI), to form an IT services provider, LTIMindtree, with a turnover exceeding US$3.5 billion.
The transaction is subject to shareholder and regulatory approvals.
With a market capitalisation of US$18.1 billion, the merged entity would have a bigger scale and expertise which do not overlap, according to analysts following the deal.
Mindtree’s chairman, A M Naik, said the merger will create India’s fifth-largest IT company, and “represents our continued commitment to growing the IT services business in line with our strategic vision”.
He added that the “highly complementary businesses” of Mindtree and LTI will make this integration a “win-win” proposition for customers, investors, shareholders, and employees.
Naik added that both Mindtree and LTI have delivered market-leading financial performance and created value for shareholders.
“Given that recent industry shifts (for example, prominence of large deals, preference for end-to-end offerings) are benefitting at-scale players, the two companies have decided that the time is appropriate to combine the strengths of both organisations to better serve the customers,” he added.
Analysts expect significant scale benefits from the merger of the two companies due to their complementary strengths resulting in a stronger portfolio of offerings across verticals.
While IT solutions for consumer packaged goods, manufacturing, retail, communication, media and technology sectors are the focus areas of Mindtree, LTI’s biggest verticals are banking and financial services (BFS) and insurance, accounting for 32.5 percent and 13.8 percent of revenue in fiscal 2022 respectively, according to the analysts.
Enhanced customer engagement and delivery models through the industrialisation of delivery and streamlined value-enabling processes are expected to result in improvement in large deal capabilities.
“These opportunities will create a more distinctive employee value proposition and stronger partnerships with ecosystem players,” Naik said.
Upon the scheme becoming effective, all shareholders of Mindtree will be issued shares of LTI at the ratio of 73 shares of LTI for every 100 shares of Mindtree.
The new shares of LTI so issued will be traded on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
Larsen & Toubro Limited will hold 68.73 percent of LTI after the merger.
For now, the companies will continue to function independently.
A steering committee will be constituted to oversee the transition till the merger process is complete.
