L&T Infotech and Mindtree hosted a joint conference call on May 06, 2022. In the conference call, the companies were represented by Mr Debasis Chatterjee-CEO Mindtree,Mr Nachiketh Deshpande-Director L&T Infotech, Mr Anil Rander-CFO L&T Infotech and Mr Vinit Teredesai-CFO Mindtree.

Key takeaways of the call

Board of Directors of both the companies met and have approved the merger of L& T Infotech and Mindtree through amalgamation.

The combined entity will become the 5 th largest IT company above Tech Mahindra.

Two companies together had revenues of US $ 3.5 billion and PAT of combined entity is US $ 530 million in FY2022.

The combined entity will be led by Mr Debasis Chatterjee. MR Sanjay Jalona (MD L& T Infotech)has resigned due to personal reasons.

Shareholders of Mindtree will get 73 shares of L&T Infotech for 100 shares of Mindtree. Larsen and Toubro (Promoter) will own 68.7% stake in the merged entity.

The valuation is arrived based on financial advisors, independent valuation experts, through fairness opinion and legal advisors.

The amalgamated entity will be named as ‘LTIMindtree'.

The transaction completion is subject to shareholders, creditors and regulatory approvals and is expected to be completed in 9-12 months. Till the transaction is complete both the companies will continue to function as independent units as they are.

Merger of both the entities will enhance scale and competitiveness which will bridge gap between large peers and win large deals; Complementary industry capabilities; Diversified and balanced service offerings across geographies which will help bid for large deals and also help in pricing and delivery; and enhanced capabilities and stronger relationships across partner ecosystems. Both the companies have very few overlaps with respect to clients and together will have 750+ customers.

The combined entity will have larger cash pool, consolidation of delivery centers and access to wider and diversified talent pool.

The combined entity will employ more than 80000 employees including 4000 sales and support personnel.

Steering committee: Steering committee will be formed which will be chaired by Chairman and vice chairman of L&T group which will foresee the process of merger and integration of the companies.

Attrition: Given the fact that demand environment is strong both the companies have put in place enough measures to curtail attrition. There is very little overlap in between employees of the companies and everyone will get better opportunities. Even for second level managers playing field will become bigger and better.

Cost optimization: There will be synergies and opportunities to improve operational efficiencies and optimization which will be known over a period of time.

Revenue synergies: With respect to clients both the companies have very minimal overlap which will help in up selling and cross selling. The companies see synergy opportunities in mining the clients and increase the wallet share.

The demand which the company sees is led by digital and entities need end-to end capability at scale. Merger will bring in end to end capabilities at scale which will help up-sell and cross sell.

Large deals: Both the companies are chasing large deals with fair success and the combined entity will look for much bigger deals. The combined entity will innovate and structure deals which are multiyear. Both the companies know how to work together and will continue to work together. The structure and mechanism are in place to bid for US $ 100 million + deals.

HR: Culture of both the companies are aligned to L&T group culture as such culture will not act as a challenge.

Clients Response: Both the companies have carefully drafted the customer communication. Both the companies are clients centric and will continue to be.

The company has not received any client's response till now however, expects that it will be positive.

Most of the clients know that both the companies are part of L&T group.

Operationally both the companies will work independently till the approvals are obtained. However, within the frame work the companies will work together in specific deals. Both the companies will continue to grow at rapid pace and achieve the specific goals till the merger happens. Once the integration is done, the team will decide the focus areas.

Guidance:FY2023 guidance of both the companies is intact and will work to expand the margins as a combined entity down the line through revenue and cost synergies.

Management Commentary:

Speaking about the merger, A. M. Naik, Chairman, LTI, said, “This merger represents our continued commitment to grow the IT services business in line with our strategic vision. The highly complementary businesses of LTI and Mindtree will make this integration a ‘win-win' proposition for our customers, investors, shareholders, and employees.”

Speaking about the merger, S. N. Subrahmanyan, Vice Chairman, LTI, said, “We are confident that the proposed merger will help us build on the combined strengths of both these organizations to unlock synergies through scale, cross-vertical expertise, and talent pool. This will help us emerge as a partner of choice for large-scale tech transformations and create a distinctive employee value proposition.”