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Mindtree and L&T Infotech Merger: A Story of Scale


There is history behind this merger. Known as India’s first hostile takeover bid in the IT sector, Larsen & Toubro (L&T) acquired a 60% stake in Mindtree in July 2019, despite the opposition of Mindtree’s founders and board members.

LTIMindtree will be the sixth largest India-headquartered IT services vendor

Since then, a merger of both these firms has been on the cards. And on May 6, 2022, L&T decided to merge Mindtree and L&T Infotech (LTI) into a new entity, LTIMindtree, to create India’s sixth largest IT services company by revenue. L&T offers 73 LTI shares for 100 Mindtree shares. The company will own 68.7% of LTIMindtree, with the merger set to be completed in the next three to four quarters. LTIMIndtree will have combined FY22 revenues of $3,513m, a 17.8% EBIT margin, and 81.7k employees. Mindtree’s current MD & CEO, Debashis Chatterjee, will head LTIMindtree. The LTI CEO, Sanjay Jalona, has quit citing personal reasons.

LTI and Mindtree have complementary client bases: LTI’s two largest verticals are BFSI (47% of revenues) and manufacturing (16%). Mindtree is primarily present in communications, media & technology (43%) and CPG, retail, and manufacturing (24%). The merged company will have a more balanced client base dominated by BFSI (35%), communications, media & technology (25%), and manufacturing, CPG, retail & healthcare (26%). The company will derive 69% of its revenues from the Americas, which is a strength considering the current macro conditions. It is primarily active in IT services, with limited BPO and ER&D presence.

Scale and revenue synergies

The merger is about scale and revenue synergies. LTIMindtree hopes to secure deals over $100m, to which it does not currently have access. The company’s new scale should also help secure solid relationships with cloud vendors and hyperscalers. The impact on personnel should be relatively limited but will affect middle management to some extent. LTIMindtree will gain further visibility in the labor market and accelerate recruitment in a tight labor market. The two companies are already attractive employers: in calendar 2021, the combined LTI and Mindtree hired a net 20k personnel, close to Tech Mahindra’s 23.2k.

Digital is next

This is not the end of the story for LTIMindtree. Cross-selling to each other’s client base is, of course, a priority. Also, the company will have net cash of ~$1bn after the stock-based merger. NelsonHall expects LTIMindtree to accelerate its digital, cloud, and security investments and continue its deployment of digital centers, IP, and platforms. We also think the company will increase its business consulting presence to address digital transformation projects earlier in the life cycle. Also, L&T has a majority stake in L&T Technology Services (LTTS). LTTS is a high-growth E&RD service vendor with an attractive portfolio. By merging it, LTIMindtree would join India’s top five with significant ER&D capabilities.

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