LTI, Mindtree get NCLT approval for merger; start operating as combined entity

Larsen & Toubro Infotech Ltd (LTI) and Mindtree Ltd, the technology consulting and digital solutions companies under the Larsen & Toubro (L&T) Group, on Monday said that both the Mumbai and Bengaluru benches of National Company Law Tribunal have approved the merger of the two companies and that the two companies have started operating as a combined entity from Monday.

The two companies had announced their intent to merge in May 2022. The NCLT approval clears the way for the merger of the two independently listed companies as LTIMindtree.

As part of the merger, all shareholders of Mindtree will be issued shares of LTI in the ratio of 73 shares of LTI for every 100 shares of Mindtree. The parent company, L&T, will hold 68.73% of the merged entity. The record date to determine the eligible shareholders of Mindtree for issue of equity shares of LTI has been fixed as 24 November.

“The merger positions L&T as 6th largest IT company by revenue and market cap wise we are the fifth largest company,” said A. M. Naik, group chairman of L&T and chairman of LTIMindtree.

“Historical performance and recent industry shift indicate significant advantages to being a larger player in terms of better margin profile, higher participation in large deals, which is very important, greater ability to stitch together 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 will create enormous cross sell and up sell opportunities. It will deliver enhanced value to both new and existing clients through cross pollination,” said Naik.

He added that the merged entity aims to drive double digit growth over the next five years at higher margins.

“We have consistently given 14.5-15% PAT and we think we will not only sustainably continue that but also try to improve on it,” said Naik.

He added that he expects the merger to result in cost savings of at least 1-1.5%.

L&T expects its IT business to contribute around 26% of the group’s total business by 2026, but Naik added that the contribution to market capitalization of the group could be much higher.

The group’s IT business including the merged entity LTI Mindtree and L&T Technology Services are expected to generate a revenue of $5.2 billion this year. Naik expects the IT business revenue to cross $6 billion next year.

Debashis Chatterjee, chief executive officer 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 between the two companies. With both the companies coming together you will get access to more industries than you have individually. For example LTI is present in 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.

LTI shares closed trading at Rs5,161.20 on the BSE, up 2.05%, while the shares of Mindtree closed trading at Rs3,766.34, up 2.81%.