The biggest news of the year for Indian IT was the merger of Mindtree and L&T Infotech (LTI), to form the fifth largest IT services company in India. The proposed merger will be called LTIMindtree, with more than 80,000 employees and combined revenue of USD 3.5 billion.
The joint entity is in the process of establishing an integration committee, and the merger will close in about a year. Close industry observers say the move is highly anticipated. Notably, parent company Larsen and Toubro Group (L&T) undertook a hostile acquisition of Mindtree in 2019, a first for India’s IT industry.
LTI and Mindtree both play in the Analytics service businesses, as do most other large IT/ITes service providers. But, what will the business of integrated entity analytics services look like?
Analytics offers of companies
LTI
In late 2021, the company announced the launch of Phosphorus, an analytics-based data-to-decision platform. Five of its main offerings are – DataOps product called Spectra, autonomous data fabric product Optic, MLOps platform Refract, code -free platform Aspect, and autonomous analytics product Lumin. The Phosphor unit is headed by Satyakam Mohanty.
Notably, Mohanty’s deep tech startup Lymbyc was acquired by LTI in 2019 for an undisclosed amount. The company’s flagship proprietary product, Leni, is a virtual analyst that allows users to communicate to access insights; it has been a great addition to LTI’s offerings.
Over the past few years, LTI has added many features and acquired many analytics -focused companies to complement its bouquet of analytics offerings. This is in line with the growth strategy led by Sanjay Jalona (who took over as CEO and MD of LTI in 2015). Under Jalona’s leadership, the company acquired companies such as big data and analytics firm AugmentIQ Data Sciences and AI-data analytics firm Lymbyc. These acquisitions helped the company make a successful entry into analytics, digital, and cloud – accounting for 53 percent of LTI’s business in 2022 in just six years.
53%is huge, as few traditional IT players in India can claim digital revenues in excess of half of their business.
LTI recently secured USD 40 million for an analytics-based project and partnered with the Indian government for an analytics-led transformation deal. For the latter, LTI is involved in modifying, collecting and disseminating data as information, case management and fraud management using artificial intelligence.
Mindtree
Mindtree services are complementary to the LTI service. The former offers data analytics solutions, cloud infrastructure management, application development and maintenance. The company has also made several strategic acquisitions recently. For example, in May this year, Mindtree acquired NxT Digital Business from L&T for Rs 198 crore. Mindtree uses NxT Digital Business to be a go-to platform for digital transformation partners for its clients.
Two years ago, Mindtree partnered with Databricks to help customers implement cloud-based data platforms for advanced analytics. Also, Mindtree has also signed deals with companies such as Microsoft, Google, ServiceNow, and AWS. Recently, the company launched Microsoft’s go-to-market business unit for cloud business and acquired Azure Advanced Specialization in Analytics, AI and ML.
What comes out of this fusion
L&T, which itself thwarted hostile takeover attempts not once but three times, was successful in acquiring Mindtree in a similar way in 2019 by taking control of 60 percent of the company. L&T completed the purchase of a 31 per cent stake as large investors rushed to sell their holdings after the late coffee baron VG Siddhartha sold his 20.4 per cent stake in Mindtree.
* Using data from the Mint and Bloomberg
Although experts then predicted that LTI and Mindtree would merge after two financial years, they also thought that a three-way merger of LTI, L&T Technology Services, and Mindtree would help compete with the big names. such as Wipro and TCS.
However, the official statement from the representatives of the companies explicitly denied any such kind happening. L&T’s SN Subrahmanyan told the media that Mindtree will operate as a separate entity distinct from LTI and L&T Technology Services. “Entities will run with one arm, and it is not appropriate to think about the future structure now. Continuity will be the main theme in the management transition. No position is intended to be disturbed at Mindtree, and no changes have been made. think about it now, “he said then.
In fiscal year 2022, Mindtree added USD 334 million, up 31 percent over the previous fiscal year.
For LTI, under Jalona’s leadership, the company doubled its revenue to USD 2.1 billion. In FY22 alone, LTI added USD 432 million to revenue, showing a growth of 26 per cent over the previous financial year.
In the merger, the two companies expect significant benefits, which will result in a stronger portfolio of offers across the verticals. “Enhanced customer engagement and delivery models through delivery industrialization and streamlined value enabling processes are expected to result in improvements in big deal capabilities. These opportunities will create a more unique proposition of employee value and stronger partnerships with ecosystem players, ”the official statement said.
That said, both companies are facing major setbacks with the removal of their top leadership. The latest was the resignation of LTI CEO and MD Jalona, often considered the main architect of its growth over the past few years, on the heels of the merger announcement. Without disclosing many details, Jalona said he was stopping for ‘personal reasons’. So far, Debashis Chatterjee, who joined Mindtree as CEO and MD in August 2019, has been named to lead the joint entity.
The merger is seen as an opportunity to consolidate position (for providing competition to giants like TCS and Wipro), particularly with BFSI, boost high-growth such as retail, and expand the travel horizon, transportation, and hospitality domains.
The businesses of the two companies are complementary while there are few overlapping clients. LTI’s strengths are in ERP and analytics, while Mindtree has a stronghold on digital capabilities and customer experience. The joint venture will help LTIMindtree in participating in large innovation deals.
For market analytics, in particular, things seem understandable for the newborn integrated entity. According to an earlier market report, the data analytics market is expected to grow by USD 196.47 billion between 2021 and 2026. However, the main point of concern at present is the possibility of high attrition rates, especially at a lower level, in light of a major change in leadership.
Analytics India Magazine contacted representatives of both companies, seeking their comments on the fate of the joint entity’s analytics offering-both declined to respond.