LTI, Mindtree get approval for merger
NEW DELHI: The Mumbai and Bengaluru benches of the National Company Law Tribunal have approved the merger of Larsen & Toubro Infotech Ltd (LTI) with technology consulting and digital solutions firm Mindtree Ltd, and Ltimindtree has started operating as a single unit, the companies said in a joint statement on Monday. The companies announced the intent to merge in May. As a part of the merger agreement, all Mindtree shareholders will be issued LTI shares in a ratio of 73 shares of LTI for every 100 shares of Mindtree. The parent, L&T, will hold 68.73% in the merged entity. The record date to determine the eligible shareholders of Mindtree for issue of equity shares of LTI has been fixed on 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,” said A. M. Naik, group chairman of L&T, and chairman, Ltimindtree. “Historical performance and recent industry shift 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,” Naik added. Ltimindtree aims to drive double digit growth within five years at higher margins, he said.
“We have consistently given 14.5-15% PAT (profit after tax) and we think we will not only sustainably continue that but also try to improve on it.”
Naik expects the merger to result in cost savings of at least 1-1.5%. L&T also expects its IT business to contribute around 26% to the group’s total business by 2026, but the contribution to market capitalization of the group could be far higher, he said.
The group’s IT business, including 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.