LTI, Mindtree shares dive today, L&T chairman to address media

Shares of two Larsen & Toubro (L&T) technology companies witnessed selling pressure on Friday as expectations for a merger announcement escalated today. These two IT firms are Mindtree and Larsen & Toubro Infotech (LTI). 

The merger speculation between the two companies have taken rounds since last month. 

At around 2.16 pm, LTI was trading at ₹4630 apiece down by ₹136.55 or 2.86% on BSE. The shares have dived to an intraday low of ₹4486.30 apiece.

At the same time, Mindtree shares traded at ₹3401.00 apiece lower by ₹109.90 or 3.13$ on BSE. The shares slipped to the day's low of ₹3280 apiece.

As a PTI report, L&T chairman A M Naik has a press conference scheduled for today at around 4 pm.

Buzz is that L&T which holds a controlling stake in both the companies - is likely to consider a merger between LTI and Mindtree.

Currently, L&T holds 61% in Mindtree and a 74% stake in LTI. In 2019, L&T Group had taken over Mindtree.

Last month, a Bloomberg report has stated that the two companies have minimal overlap in businesses or clients, and a tie-up would give them better pricing power and lower costs. The board of Mindtree and LTI is likely to consider share swap ratios for the merger.

Earlier, IIFL in its note stated that as per media reports, the boards of L&T Infotech (LTI) and Mindtree (MTCL) may consider merging both the companies soon. While both have clarified that the reports are speculative, the potential merger has been deemed an eventuality since Mindtree's acquisition by L&T (conglomerate parent) in March 2019.

IIFL explained that both companies have complementary capabilities, verticals and client exposures. Adding it said, "We believe this may not be a bad time for initiating the merger process, as both companies now have a similar growth and margin profile, with a strong FY23 outlook."

Highlighting about swap ratio scenario for the merger, IIFL's note stated that while swap ratios are not known, however, L&T owns around 74% in LTI and 61% in Mindtree, even as LTI is trading at 10% premium to Mindtree. In a merger of this proportion, managing leadership transition is the biggest risk; however, the brokerage believes this would have already been part of the planning since Mindtree acquisition.

Both the companies have announced their financial performance for the quarter and year ended March 31, 2022.

In Q4FY22, Mindtree's net profit stood at ₹473.1 crore up by 49.1% yoy, while revenue stood at ₹2,897.4 crore rising by 37.4% yoy. In dollar terms, revenue stood at $383.8 million up by 33.2% yoy and 4.8% qoq.

Meanwhile, in Q4FY22, LTI posted a net profit of ₹637.5 crore up by 16.8% yoy and 4.1% qoq. While revenue jumped by 31.6% yoy and 4% qoq to ₹4,301.6 crore. The constant currency revenue growth stood at 29% yoy and 3.6% qoq.