By Sethuraman N R
BENGALURU (Reuters) -Indian conglomerate Larsen & Toubro will merge its Mindtree Ltd and L&T Infotech software units to create a $17.69 billion company, building scale to compete for larger deals in a booming market for IT services since the pandemic.
Mindtree shareholders will get 73 shares of LTI for every 100 shares of Mindtree, LTI said in a statement on Friday, and the combined entity will be called "LTIMindtree".
Shares of LTI ended Friday's session with a valuation of $10.47 billion, while Mindtree closed at $7.24 billion.
"End of the year, with the size we will be, will qualify us to really be considered for over $100 million deals," LTI Chairman A. M. Naik said in a press conference.
L&T's push for scale in the high-growth software industry follows a pandemic-led surge in demand for digitalisation, as global businesses invest billions of dollars in cloud-computing, digital payment infrastructure and cyber security.
Sector giants including Tata Consultancy Services, Infosys and Wipro have been securing larger contracts and upgrading their services at a time when India's tech industry has surpassed $220 billion in revenue.
Even as demand soars for software services, the newly minted company will have to face challenges including severe employee attrition and margin pressure from wage hikes and other expenses.
The merged entity will need about 20% to 30% more employees above the combined strength of about 80,000, LTI's Naik said.
LTI also said Sanjay Jalona resigned as chief executive officer and managing director.
Larsen & Toubro acquired Mindtree in 2019, following a rare hostile bid for a controlling stake, the first such pursuit in India's software services industry. (https://reut.rs/36ob6ep)
Before the merger, L&T owned a little over 60% in Mindtree and a 74% stake in L&T Infotech.
($1 = 76.8563 Indian rupees)
(Reporting by Nallur Sethuraman in Bengaluru; Editing by Devika Syamnath and Rashmi Aich)