New Delhi: Engineering giant Larsen & Toubro is considering a merger between its two software firms, Bloomberg reported, citing sources familiar with the matter.
According to a news agency report, the Indian conglomerate is looking to scale up its two publicly traded IT services companies, Mindtree Ltd and Larsen & Toubro Infotech Ltd, to compete with global giants.
Mumbai-headquartered L&T acquired control of Mindtree in 2019. The group owns about 61 percent stake in the company, which has a market value of $8.3 billion, and about 74 percent of L&T Infotech, which has a market capitalization of $13.6. Billions according to Bloomberg figures
Following the proposed merger between the two firms, the combined entity would form a company with a market capitalization of $22 billion.
Early next week, the boards of Mindtree and Larsen & Toubro Infotech may consider the share swap ratio for the merger, one of the sources said.
A source said the two companies have minimal overlap in businesses or customers, and an alliance would give them better pricing power and lower costs.
People said the merger deal was under discussion and the plan could be delayed or scrapped.
Mindtree and L&T Infotech are due to report earnings on Monday and Tuesday, respectively.
The proposed merger comes at a time when software companies are seeing increasing demand from businesses adopting digitization that accelerated during COVID-19. Large IT outsourcing firms are also expanding into areas such as cyber security, automation and machine-learning support, moving beyond low-margin traditional back-room services.
Shares of Mindtree and L&T Infotech fell after the Bloomberg News report.
Mindtree was down 4.1 per cent, having fallen as much as 6.5 per cent earlier in the day, while L&T Infotech was down 3.2 per cent after sinking 3.9 per cent.