Mindtree Ltd and Larsen & Toubro Infotech Ltd (LTI), two technology companies in the Larsen & Toubro group, have decided to merge, creating India’s fifth largest IT firm, with a combined market valuation of Rs 136,000 crore.
Shareholders of Mindtree will be shares issued of L&T Infotech at the ratio of 73 shares of LTI for every 100 shares of Mindtree. “The boards of Mindtree and LTI at their respective meetings held today approved a composite scheme of amalgamation of both these independently listed IT services companies under the Larsen & Toubro group,” LTI and Mindtree said in an exchange filing.
In another development, L&T Infotech said Sanjay Jalona has resigned from the position of Chief Executive Officer & Managing Director of the company “due to personal reasons”.
“The proposed integration will see Mindtree and LTI join strengths to create an efficient and scaled up IT services provider exceeding $3.5 billion,” L&T said. The new shares of LTI so issued will be traded on the NSE and the BSE. Parent firm Larsen & Toubro Ltd will hold 68.73 per cent of LTI after the merger. For now, the companies will continue to function independently, L&T said.
Shares of Mindtree, which has a market capitalization of Rs 55,627 crore, plunged by 3.88 per cent to Rs 3,374.65 on the BSE on Friday.
L&T Infotech shares fell 3.64 per cent to Rs 4,593.10 on Friday. It has a market capitalization of Rs 80,518 crore.
“Given that recent industry shifts (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 organizations to better serve the customers ,” LTI and Mindtree said. “Significant scale benefits are anticipated through Mindtree and LTI’s complementary strengths resulting in a stronger portfolio of offerings across verticals. Enhanced customer engagement and delivery model through industrialization of delivery and streamlined value-enabling processes is expected to result in improvement in large deal capabilities,” L&T said.
A Steering Committee will be constituted to oversee the transition until the merger process is complete, L&T said. The name of the combined entity will be “LTIMindtree” leveraging the advantages of both the brands and creating value for all the stakeholders.
Mindtree reported a revenue of Rs 10,525 crore and a net profit of Rs 1,653 crore for the fiscal ended March 2022. L&T Infotech posted a revenue of Rs 14,406 crore and a net profit of Rs 2,261 crore for FY22.
AM Naik, Chairman, Mindtree, said, “This merger represents our continued commitment to grow the IT services business in line with our strategic vision. The highly complementary businesses of Mindtree and LTI will make this integration a ‘win-win’ proposition for our customers, investors, shareholders, and employees.”
L&T Ltd acquired Mindtree in 2019 through a hostile takeover move after acquiring 20.4 per cent stake from coffee baron VG Sidhartha and others, and later making a public offer to buy more shares from the public.
SN Subrahmanyan, Vice Chairman, Mindtree, said, “We are confident that the proposed merger will help us build on the combined strengths of both these organizations to unlock synergies through scale, cross-vertical expertise, and talent pool. This will help us emerge as a partner of choice for large-scale tech transformations and create a distinctive employee value proposition.”