L&T Infotech likely to merge with Mindtree to create $22 billion firm: Report

The planned merger comes at a time when software firms are facing increased demand from enterprises that are adopting digitalization, which has intensified under Covid-19. Large IT outsourcing businesses are also branching out into areas such as cybersecurity, automation, and machine learning assistance, pushing beyond lower-margin conventional back-room services.

Larsen & Toubro (L&T) is considering combining its IT divisions, Mindtree and L&T Infotech, into a $22 billion conglomerate, according to various media reports. The agreement is set to be inked next week. Mindtree was taken over by Larsen in 2019. According to Bloomberg data, the conglomerate owns around 61 per cent of the firm, which has a market valuation of $8.3 billion, and approximately 74 per cent of L&T Infotech, which has a market capitalization of $13.6 billion.

According to sources, the two companies have little overlap in their operations or clientele, and a merger would provide them stronger pricing power and cheaper expenses. If the merger occurs, it will result in cost synergies for both organisations since administrative costs such as HR would be reduced. It remains to be seen whether Mindtree CEO and Managing Director Debashis Chatterjee or L&T Infotech CEO and Managing Director Sanjay Jalona would oversee this amalgamated business.

The planned merger comes at a time when software firms are facing increased demand from enterprises that are adopting digitalization, which has intensified under Covid-19. Large IT outsourcing businesses are also branching out into areas such as cybersecurity, automation, and machine learning assistance, pushing beyond lower-margin conventional back-room services.

Separately, Mindtree and L&T Infotech will have board meetings on April 18 and 19, respectively, to announce profits. In 2019, L&T conducted the first hostile takeover of an Indian software startup, Mindtree. The conglomerate owns around 61 per cent of the firm, which has a market capitalization of $8.3 billion, and approximately 74 per cent of L&T Infotech, which has a market capitalisation of $13.6 billion.

Mindtree's revenue in FY21 was $1.07 billion, whereas L&T Infotech's sales was $1.67 billion. Both firms' dollar revenue has increased by 30.2 percent and 25.3 percent, respectively.