India L&T Infotech and Mindtree merge to create $18 billion tech company

BENGALURU, May 6 (Reuters) – Indian conglomerate Larsen & Toubro will merge its software units Mindtree Ltd (MINT.NS) and L&T Infotech (LRTI.NS) to create a $17.69 billion company, which will expand to compete for larger contracts in a booming environment. IT services market since the pandemic.

Mindtree shareholders will receive 73 LTI shares for every 100 Mindtree shares, LTI said in a statement Friday, and the combined entity will be called “LTIMindtree.”

Shares of LTI closed Friday’s session with a valuation of $10.47 billion, while Mindtree closed at $7.24 billion.

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“The end of the year, with the size we will have, will qualify us to really be considered for transactions over $100 million,” LTI Chairman AM Naik said at a press conference. .

L&T’s push for scale in the high-growth software industry comes on the heels of a pandemic-driven surge in digitalization demand, as global enterprises invest billions of dollars in cloud computing, payments infrastructure digital and cybersecurity.

Industry giants such as Tata Consultancy Services (TCS.NS), Infosys (INFY.NS) and Wipro (WIPR.NS) have won bigger contracts and improved their services at a time when the Indian technology industry has exceeded the $220 billion in revenue.

Even as demand for software services soars, the new company will face challenges including high employee attrition and pressure on margins from wage hikes and other expenses.

The merged entity will need about 20% to 30% more employees above the combined workforce of about 80,000, LTI’s Naik said.

LTI also said Sanjay Jalona has resigned as chief executive and managing director.

Larsen & Toubro acquired Mindtree in 2019, following a rare hostile bid for a majority stake, the first of its kind in India’s software services industry. (https://reut.rs/36ob6ep)

Prior to the merger, L&T owned just over 60% of Mindtree and a 74% stake in L&T Infotech.

($1 = 76.8563 Indian rupees)

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Reporting by Nallur Sethuraman in Bangalore; Editing by Devika Syamnath and Rashmi Aich

Our standards: The Thomson Reuters Trust Principles.

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