Merger with Mindtree to clear the way for LTI to gain market share and new capabilities

After acquiring and merging more than seven companies in various capacities since 2016, Larsen & Toubro Infotech’s potential merger with Mindtree could help it achieve the right scale and positioning to unlock mega deals hitherto awarded to large service companies. India IT.

“In technology, we are generally dealing with labor arbitration business. When they acquire a company, it is to gain strategic clients, gain access to various markets, but above all obtain trained labor. As these IT companies grow, they can access larger deals,” said Sandip Agarwal, ED, IE, Edelweiss Securities. Line of business.

He explained: “Mindtree and LTI already have over $1 billion in revenue, allowing them to participate in nearly 80-90 percent of deals. Once they hit $4-5 billion in revenue, they’ll be able to access the 10 percent big-deal balance. Over the next year, there will be a lot of big deals coming into the market due to the rise of digital transformation, and these companies will need big, strong teams on the back end.”

As of now, the combined revenue of LTI and Mindtree will be around $3.5-4 billion.

Agarwal added that the other key reason for the merger would be talent retention as the industry continues to grapple with labor shortages. Having in-house labor retained would also help the company better manage costs.

combined forces

According to Jyoti Roy, DVP, Equity Strategist, Angel One, the merger was always supposed to happen eventually since the acquisition.

“The acquisition was great for LTI because there wasn’t a lot of overlap in the business. LTI’s majority revenue comes from the BFSI sector, which contributes nearly 45 percent of its revenue, with manufacturing covering about 17 percent, and then power and utilities. But for Mindtree, BFSI is the weakest segment with just 18 percent of revenue, they make money and provide capabilities in the high-tech TMT (Telecommunications, Media and Technology) space. Mindtree is also big in the travel & hospitality and retail & consumer space. Hi-tech TMT accounts for 43 percent of Mindtree’s revenue,” he said. Line of business.

“This is a strategic merger for both Mindtree and LTI and a win-win situation. The biggest benefit of the merger is economies of scale. General administrative expenses cover 4 to 6 percent of revenue. So there is some hope of rationalization in spending,” he added.

mergers and acquisitions game plan

LTI has played well in selecting the right bets which, according to sources, currently brings in nearly half of their total revenue. Some of the major names acquired include Cuelogic, an outsourced IT service provider, which helped LTI gain expertise in digital products and services, fueling its recent growth; Nielsen + Partner, a Swiss Temenos Wealth Suite specialist who helped LTI strengthen its reputation as a major player in the wealth management sector.

LTI also acquired PowerUp Cloud in 2019 through which it set its ambitions on a $1 billion cloud practice.

“LTI is a fast-growing company that has developed an acquisition-driven growth strategy to expand the breadth and depth of its services. In recent years, LTI has completed seven major M&A deals, which have allowed the company to delve into new and exciting areas such as Digital, Data and Cloud,” said a source on condition of anonymity.

“Today, these business segments account for about half of LTI’s total revenue, reflecting the success of the LTI approach. As LTI continues to expand and evolve its offerings, we can expect to see even more exciting developments from this company.”

Published in

May 02, 2022

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