The merger of LTI and Mindtree will create a $3.5 billion company. The combined entity will have a 69% presence in the US, 17% in Europe and 14% in RoW. As per the merger, Mindtree shareholders will receive 73 shares of LTI for 100 shares of Mindtree.
“The merger has a significant revenue and cost synergy. We have assumed 1% revenue and cost synergy in the near term (ie FY24). In addition, the entity will be able to bid, cross sell and have end-to-end capability for larger deals,” brokerage IDBI Capital said in a note.
However, given the macro-economic challenges and leadership and client-related consolidation, the brokerage has prompted the brokerage to maintain hold rating on L&T Infotech (LTI) shares. Mindtree Share with a revised target price of 4,984 more 3,638 respectively.
“The new combined entity will have the scale that will help it win higher market share, win bigger deals than the big players and cross sell Fortune 500 customers. In addition, the company will have large BFSI verticals, CMT and Retail which will help in targeting 1000 customers,” said IDBI Capital.
The company will also have a higher cash supplementary workspace, wider access to the talent pool and better ground presence. Hence, according to the brokerage, the merger is good in the long run.
Post lti-mindtree After the merger, the promoters will hold 68.73 per cent stake in the company. Mindtree will be merged with LTI after getting all approvals and after 9-12 months. The name of the entity will be LTIMindtree Limited and the merged entity will be headed by Debashish Chatterjee.
“The merger will allow the company to bid for large global deals. This is a complementary merger as LTI is focused on BFSI and Mindtree on the communications vertical. The merger is expected to help bring down the high attrition rates. Overall, this could lead to shareholder value creation, said Abhay Agarwal, founder and fund manager, Piper Serica, especially since both companies have seen a sharp correction in their share prices recently.
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