In a top-level tech consolidation, global tech major Larsen & Toubro (L&T) is looking to merge two of its publicly traded software firms in a bid to scale up operations to compete with global digital giants.
According to top company sources, the boards of Mindtree and Larsen & Toubro Infotech, two software units controlled by the Mumbai-based engineering firm, could consider share swap ratios for the merger as early as next week.
Larsen acquired control of Mindtree in 2019. The conglomerate holds about a 61% stake in the company, which has a market value of $8.3 billion and has around 74% of L&T Infotech, which has a market capitalization of $13.6 billion, a recent data shows.
The two companies have minimal overlap in businesses or clients, and a tie-up is likely to strengthen its clientele base with better pricing power and lower costs.
Meanwhile, a representative for Larsen said the company declined to comment on speculation. Reports about the merger are speculative, Mindtree and L&T Infotech told the stock exchange.
Mindtree on Monday reported a fourth-quarter net income of Rs 473 crore ($62 million), higher than the Rs 441 crore estimate in a Bloomberg survey. L&T Infotech is scheduled to report earnings Tuesday.
The proposed merger comes as software companies are seeing surging demand from businesses embracing the digitization that accelerated during Covid-19. Large IT outsourcing firms are also expanding into areas such as cybersecurity, automation, and machine-learning support, moving beyond lower-margin traditional back-room services.