L&T Infotech and Mindtree may merge to become a $22-billion company.

Larsen & Toubro (L&T) is planning to integrate its IT services business divisions, L&T Infotech (LTI) and Mindtree, as the Indian information technology (IT) services industry experiences significant development momentum as a result of digital transformation.

According to a Bloomberg story, the merger might be disclosed as soon as next week, along with specifics on share-swap rates. However, on its earnings call, Mindtree, a mid-cap IT services provider, stated that the rumor is "pure hearsay" and that it would not comment to speculation.

"We do not comment on speculative news," according to an email sent to L&T. LTI did not respond to an email addressed to them.

A merger was always a possibility. It's the appropriate time. "Both firms have done quite well, and the group wants to unleash this potential by merging them into a larger organization," a source close to the situation stated.

"This combination also aligns with the company's goal of becoming a services-focused conglomerate." "More crucially, there are no overlaps in the amalgamated entity," claimed another insider.

The combined company will have a market capitalization of about $22.05 billion (Rs 1.68 trillion) and $3.5 billion in sales. As a result, it will be India's sixth-largest provider of IT services.

This combination is in line with L&T's strategy of becoming more service-oriented. Because both firms' portfolios are complementary, the merger provides business synergies. For example, Mindtree's main concentration areas include communications media and technology, retail, consumer packaged products, and manufacturing.

Banking and financial services, as well as insurance, are LTI's two major verticals, accounting for approximately 32% and 13% of revenue in the third quarter of 2021-22, respectively.

The merger, according to analysts, is coming at an inopportune moment. "It's a foregone conclusion that these two companies will join. Given the current growth momentum of these companies, a merger may not be prudent at this time, as it would divert management's attention away from capturing growth and toward managing merger complexities," said Pareekh Jain, founder, and CEO of Pareekh Consulting, an engineering consulting services firm.