Larsen & Toubro Infotech Ltd (LTI) received merger approval from the Mumbai and Bengaluru benches of the National Company Law Tribunal, with technology consulting and digital solutions firm Mindtree Ltd.

LTIMindtree has started operating as a single unit, according to the company.

As a part of the merger agreement, all Mindtree shareholders are expected to issue LTI shares in a ratio of 73 shares of LTI for every 100 shares of Mindtree. The parent, L&T, is said to hold 68.73 percent in the merged entity. The record date to determine the eligible shareholders of Mindtree for issue of equity shares of LTI has been fixed at 24 November.

“The merger positions L&T as the sixth largest IT company by revenue and market cap wise we are the fifth largest company," says A. M. Naik, group chairman of L&T, and chairman, LTIMindtree.

Naik further went on to say, “Historical performance and recent industry shifts indicate significant advantages of being a larger player in terms of better margin profile and higher participation in large deals, greater ability to stitch end-to-end offerings and drive significant value."

“The combined entity will build upon growth momentum, with differing capabilities and with greater access to new clients in complementary verticals and create enormous cross sell and up sell opportunities. It will deliver enhanced value to both new and existing clients through cross-pollination. LTIMindtree aims to drive double digit growth within five years at higher margins”, adds Naik.

“We have consistently given 14.5-15 percent PAT (profit after tax) and we think we will not only sustainably continue that but also try to improve on it," he says.

Naik expects the merger to result in cost savings of at least 1-1.5 percent. L&T also expects its IT business to contribute around 26 percent to the group’s total business by 2026, but the contribution to market capitalization of the group could be far higher, he says.

The group’s IT business, including LTI Mindtree and L&T Technology Services, are expected to generate $5.2 billion revenue this year. Naik expects the IT business revenue to cross $6 billion next year.
Debashis Chatterjee, chief executive and managing director of LTIMindtree, expects the merger to provide several synergies for the growth of the business.

“There are natural synergies in terms of capabilities. There are areas where Mindtree is strong and there are areas where LTI is strong. In terms of industries, there is not much overlap. With both companies coming together you will get access to more industries than you have individually. For example, LTI is present in the oil and gas sector, while Mindtree is not. Similarly while Mindtree has a strong presence in sectors such as travel and hospitality, LTI doesn’t," he said.

“Amid the proliferation of new business models and revenue streams in a rapidly converging world, LTIMindtree will help businesses proactively take on and shape the future by harnessing the full power of digital technologies. Armed with top talent, comprehensive offerings, and a cumulative experience of more than five decades, LTIMindtree brings the diversity of scale and capabilities required to help businesses reimagine possibilities," he says.