According to sources familiar with the subject, Larsen & Toubro Ltd. is considering merging two of its publicly held software subsidiaries as the Indian conglomerate seeks scale to compete with global digital titans.
One of the people said the boards of Mindtree Ltd. and Larsen & Toubro Infotech Ltd., two software divisions controlled by the Mumbai-based engineering firm, could explore share swap ratios for the merger as soon as next week, requesting anonymity since the information isn’t public.
In 2019, Larsen took control of Mindtree. According to Bloomberg data, the conglomerate owns a 61 percent investment in the company, which has a market capitalization of $8.3 billion, and a 74 percent stake in L&T Infotech, which has a market capitalization of $13.6 billion.
According to one of the persons, the two companies have little overlap in terms of industries or clients, and a merger would give them better pricing power and cheaper costs.
The merger is still being discussed, and the deal might be delayed or break apart, according to the sources. Larsen, Mindtree, and L&T Infotech representatives did not respond to requests for comment from Bloomberg News. On Monday and Tuesday, Mindtree and L&T Infotech are expected to report earnings.
The planned merger comes at a time when software companies are facing increased demand from enterprises adopting digitization, which has accelerated since Covid-19. Moving beyond lower-margin traditional back-room services, large IT outsourcing firms are growing into areas such as cybersecurity, automation, and machine-learning support.
Larsen & Toubro Ltd, generally known as L&T, is an Indian multinational company, with commercial interests in engineering, building, manufacturing, technology and financial services, based in Mumbai.
The firm is one of the top five construction firms in the globe. It was founded in India by two Danish engineers who had sought refuge there. L&T Group has 118 subsidiaries, 6 associates, 25 joint-venture and 35 joint operations firms as of 2020, active in basic and heavy engineering, construction, real estate, capital goods manufacture, information technology, and financial services.
L&T formed a relationship with the Defence Research and Development Organisation in 1985. (DRDO). Although L&T was not permitted to manufacture defense equipment by the government, it was permitted to participate in DRDO’s design and development programs.
The firm had to pass over all the blueprints to the DRDO after the design and development was completed. The government would then delegate the manufacturing to a public sector defense unit or ordnance factory. DRDO now produces a variety of weapon and missile systems, command and control systems, engineering systems, and submarines after a string of achievements and favorable policy efforts.
