Larsen & Toubro Infotech and Mindtree Merger Effective from 14Nov2022 - vrk100 - 14Nov2022

Larsen & Toubro Infotech and Mindtree Merger Effective from 14Nov2022

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(Updates 11Dec2022, 25Nov2022, 23Nov2022 and 22Nov2022 are available at the end of the article) 

(This is for information purposes only. This should not be construed as a recommendation or investment advice. Please consult your financial adviser before taking any plunge. Safe to assume the author has a vested interest in stocks / investments discussed if any.) 

 

 

After market hours today, Larsen & Toubro Infotech Limited (LTI) and Mindtree Limited (Mindtree) announced that they received approval of regulatory authorities and the merger is effective today, that is, 14th of November, 2022.

And the two companies have submitted a 'Scheme of Arrangement' to stock exchanges today. 

 

The merged / amalgamated entity will be called LTIMindtree Limited and it will become India's fifth largest Information Technology (IT) services company. The merged entity will start operating as one entity from today, that is, 14Nov2022.

The record date for the merger is 24Nov2022 (ex-date 23Nov2022) for the purpose of determining the shareholders of Mindtree who will be allotted shares, as per the share exchange ratio, in LTI. The share exchange ratio is given below.

Annexure-A of the above scheme of arrangement gives details of tax implications for shareholders of amalgamating company (Mindtree).

 

As per NSE Limited, the stock of LTI closed at Rs 5,161/- on 14Nov2022 (market cap Rs 90,512.76 crore) and Mindtree's share price closed at Rs 3,760/- on 14Nov2022 (market cap Rs 62,023.32 crore)

Valuation ratios of the two companies as at the end of market hours on 14Nov2022 are provided (as per Screener) here (prices in the images are as per BSE Ltd) > three images >

 

Brief Background

 

Timeline 06May2022 >

It may be recalled that these two companies, on 06May2022, announced their intention for merger / amalgamation. There were rumours in the media of LTI - Mindtree merger two weeks prior to this formal merger announcement on 06May2022. Some key highlights of the merger > press release and investor presentation

1) Mindtree Ltd (amalgamating company) will be merged with L&T Infotech Ltd (amalgamated company)

2) 73 fully paid-up equity shares of Re 1 each of LTI will be issued and allotted for every 100 fully paid-up equity shares of Rs 10 each held in Mindtree (share exchange ratio or swap ratio)

3) closing price of LTI on 06May2022: Rs 4,593.10; market cap Rs 80,518 crore (as per bseindia.com)

4) closing price of Mindtree on 06May2022: Rs 3,374.65; market cap Rs 55,627 crore (as per bseindia.com)

5) after the amalgmation, Mindtree will stand dissolved without being 

6) post-merger, the common promoter (of both LTI and Mindtree) Larsen & Toubro Ltd will hold 68.73 per cent stake in the combined entity, called LTIMindtree Limited

 7) record date (ex-date) for merger is yet to be announced

8) valuation ratios of two firms as at the end of 06May2022 >

Timeline 23Jul2022 > 

And on 23Jul2022, Mindtree Limited announced share exchange ratio for the merger / amalgamation of Mindtree into Larsen & Toubro Infotech - the brief details as per pages 66 to 74 are > the share exchange ratio was arrived at as the average of three valuation methods, namely, DCF, market price method and comparable multiples methods >

DCF - market multiples - NAV - valuation based on IVS 104 - Tweet dated 23Jul2022 - see two images > 

- - -

 

(The following updates are added after the article was published on 14Nov2022)

P.S. dated 11Dec2022: The merged entity (resulting company) LTIMindtree Ltd on 05Dec2022 commenced the trading on BSE and NSE under its new name by ringing the opening bell at BSE. (this ringing of the opening bell is just a formality)

It may be recalled LTIMindtree Ltd was  formed on 14Nov2022, through the merger of erstwhile Larsen and Toubro Infotech (LTI) and Mindtree, under the Larsen & Toubro (L&T) Group.  

 

The stock code of LTIMindtree is 540005, the same as for the erstwhile Larsen & Toubro Infotech previously. The abbreviated form of LTIMindtree, on both BSE & NSE, will be LTIM (earlier LTI).

 

The ISIN of LTIMindtree is INE214T01019, the same as before for the erstwhile Larsen & Toubro Infotech.

 

The following are two screenshots of LTIMindtree from BSE and Screener.in, with valuation details, as at close of 09Dec2022. The market cap of the combined entity LTIMindtree, as on 09Dec2022, is Rs 130,246 crore with a price of Rs 4,403.25.  

 

Between 14Nov2022 (effective date of merger as approved officially by Registrar of Companies) and now, that is, 09Dec2022, the share price of LTIMindtree fell from Rs 5,161.20 to Rs 4,403.25, suffering a fall of 14.69 per cent.  

 

The valuation ratios (namely, P/E ratio, P/B ratio and P/S ratio) as given in the Screener.in screenshot below, are irrelevant because the balance sheet and profit & loss account of the combined entity will be officially known only when the LTIMindtree's annual results of  FY 2022-23 are declared in April 2023. 

 

As such, investors meanwhile should not go by the valuation ratios given by data firms, like, Screener.in and others. If they want to know the ratios, they may combine the proforma statements available as at the end of 30Sep2022 and independently calculate the valuation ratios.

 

 

P.S. dated 25Nov2022: LTIMindtree on 25Nov2022 allotted 12,04,17,607 equity shares to equity shareholders of erstwhile Mindtree, as per the share exchange ratio -- consequently, the total paid-up equity shares of the company are 29,57,95,949 of Re 1 each

 

P.S. dated 23Nov2022: The last day of trading for Mindtree shares was yesterday, that is, 22Nov2022. The share of Mindtree ended at Rs 3,433.35 (market cap Rs 56,635 crore) and the share of of Larsen & Toubro Infotech ended at Rs 4,755.10 (market cap Rs 83,394 crore) -- both on 22Nov2022. Let us see the total market cap of LTIMindtree Ltd (resulting company) will be once new shares for erstwhile Mindtree shareholders are allotted and listed in the next 15 to 20 days. Images as at the close of 22Nov2022 >

P.S. dated 22Nov2022: The last day of trading for Mindtree shares will be today, that is, 22Nov2022. Mindtree shareholders as on record date (24Nov2022) will be allotted shares of Larsen & Toubro Infotech (now LTIMindtree) as per share exchange ratio. The new shares of LTIMindtree (allotted to erstwhile Mindtree shareholders) will be credited to demat accounts within 15 / 20 days from record date and those shares will start trading on the stock exchanges within 15 / 20 days from record date. see the attached four images > 

P.S. dated 15Nov2022: On 15Nov2022, LTIMindtree informed the exchanges that it received fresh certificate of incorporation from Registrar of Companies changing its name from Larsen & Toubro Infotech Ltd to LTI Mindtree Ltd effective 15Nov2022. The merged entity now has a new website (LTIMindtree.com) also. 

P.S. Archives of Mindtree Ltd - Internet Archive - archived web pages

Mindtree annual report FY 2021-22 

Mindtree annual report FY 2020-21

Mindtree annual report FY 2019-20

Mindtree annual report FY 2018-19

Mindtree annual report FY 2017-18

Screener 

Ticker by Finology 

Trendlyne

BSE India

NSE India

Value Research

Morningstar India

Morningstar.com

Moneycontrol 

 

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Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets. 

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