The L&T Infotech and Mindtree combination has been approved, making it India's fifth-largest IT company by market cap

The merger of L&T Infotech and Mindtree has been approved, and as of November 14 the combined company will be the fifth-largest IT provider in the nation by market value and the sixth-largest by sales. One of the biggest mergers in the Indian IT industry is this one.

Because of its size, the combined company, now known as LTIMindtree, will be able to pursue larger outsourcing contracts as clients seek to consolidate vendors in a macro environment that is getting more difficult.

The merger has been authorised by the National Company Law Tribunal's Mumbai and Bengaluru benches in two separate orders, according to L&T Group Chairman AM Naik.

According to Naik, the combined company and L&T Technology Services (LTTS) are together generating $5.6 billion in revenue. According to him, LTIMindtree alone will earn more than $5 billion the following year.

According to Naik, the combination will assist L&T reach its objective of increasing IT-enabled services to 25% of the group's overall revenue by 2026. When it comes to market cap, "it might even be higher," he said.

With a stronger ability to stick together for end-to-end offerings and a deeper involvement in hyperscalers to produce considerable value, the organisation is ideally positioned to merge and scale by competing for larger projects, according to Naik.

According to Naik, LTIMindtree wants to improve from good to outstanding and experience double-digit growth over the following five years.

Despite being a part of the L&T Group, LTI-Mindtree and LTTS will continue to run independently, he added.

L&T previously stated that it anticipates that over the following two to three years, IT services will account for at least 40% of its market capitalization.

On May 6, it was reported that the two L&T software divisions will merge, and the process was anticipated to be finished by the end of the year. LTI is now owned 68.73 percent by L&T Limited. At a ratio of 73 LTI shares for every 100 Mindtree shares, LTI shares will be distributed to Mindtree shareholders.

At September 30, 2022, the companies employed 89,271 people in total.

To oversee the merger process, a steering committee was established, with management representatives from both companies establishing the plans and organisational framework for the combined company.

The combined company will be led by Mindtree CEO Debashis Chatterjee, replacing departing L&T Infotech CEO Sanjay Jalona. Based on his prior experience at Cognizant, where he was in charge of providing technology services across all industry segments, Chatterjee was chosen to lead the combined company. When Jalona was executive vice president and global head of Infosys' high-tech, manufacturing, and engineering services business before joining LTI, his portfolio was smaller.

Nachiket Deshpande, the chief operating officer of LTI, also reported to Chatterjee at Cognizant.

According to Chatterjee, "LTIMindtree will gain from revenue synergies on upselling, cross-selling, and stitching services together." He also noted that the combined company will have access to many industries and verticals that they individually couldn't.

After L&T successfully completed its hostile takeover of Mindtree in 2019, rumours of a merger between the two businesses began to circulate. Despite the convoluted nature of the takeover, Naik insisted it wasn't hostile. He had mentioned the late promoter of Cafe Coffee Day and Mindtree investor VG Siddhartha as one of the stockholders who had approached them.

Following Mindtree's Q2 results in October, Debashis Chatterjee stated that a separate team was working on the overall integration plan, structure, and other aspects, and that it was ready to launch. Management of both organisations stated at the time that they were expecting written legal permissions and that they were anticipated shortly.

Beginning in the third quarter, the combined results of the two companies are anticipated to be released.

He had stated that the lack of overlap was the most appealing aspect of the deal. For instance, LTI and Mindtree are quite strong in terms of supply chain transformation and customer experience transformation, respectively. He told earlier, "If you look at the strengths, they can truly be complementary to each other and will only be good."

According to him, there won't be much overlap amongst the roughly 700 clients the business will have access to. Only a small number of clients share commonality, he had claimed, and even for them, the two businesses specialise in different markets.

Deshpande, the COO of LTI, had previously told Moneycontrol that the two businesses "complement each other on sectors, geographies, and service lines." As a result, the combined portfolio is more resilient than it would be on its own, and if any sectors experience headwinds, the other sectors can make up for it.

Deshpande had stated that they do not anticipate any disruptions or distractions as a result of the merger.