L&T Infotech and Mindtree to merge to create large-scale IT company

Larsen & Toubro Ltd. announced a merger between two of its publicly traded software firms L&T Infotech Ltd. and Mindtree Ltd. The merger could help unlock potential scale and fight for mega deal wins with other IT giants.

On Friday, L&T Infotech shares closed down 3.69%, while that of Mindtree fell 3.79% in weak Mumbai trade. After the merger, L&T will hold 68.73% of L&T Infotech.

“This merger represents our continued commitment to grow the IT services business in line with our strategic vision. The highly complementary businesses of LTI and Mindtree will make this integration a ‘win-win’ proposition for our customers, investors, shareholders, and employees,” LTI chief A M Naik said.

Further, L&T Infotech informed the exchanges that its Managing Director and Chief Executive Officer Sanjay Jalona and Mindtree CEO Debashis Chatterjee will head the combined entity.

Upon the scheme becoming effective, all shareholders of Mindtree will be issued shares of L&T Infotech 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 NSE and BSE.

For now, the companies will continue to function independently. A steering committee will be set up to oversee the transition till the merger process is complete.

"The name of the combined entity will be “LTIMindtree” leveraging the advantages of both the brands and creating value for all the stakeholders," according to an exchange filing.

The proposed integration will see Mindtree and LTI join strengths to create an efficient and scaled up IT services provider exceeding $3.5 billion.

The merger comes as software companies are seeing surging demand from businesses embracing the digitization that accelerated during Covid-19. Large IT outsourcing firms are also expanding into areas such as cybersecurity, automation and machine-learning support, moving beyond lower-margin traditional back-room services.

"This (merger) will help us emerge as a partner of choice for large-scale tech transformations and create a distinctive employee value proposition,” said LTI Vice-Chairman S N Subrahmanyan.

Larsen acquired control of Mindtree in 2019. The conglomerate holds about a 61% stake in the company, which has a market value of $8.3 billion, and has around 74% of L&T Infotech, which has a market capitalization of $13.6 billion.

Mindtree's recently reported fourth-quarter net income rose 49% to ₹473 crore, while L&T Infotech posted a 17% rise in net profit at ₹637 crore.

The deal is expected to close in 9-12 months.