Since January 2019, there have been media reports of a possible MindTree takeover by L&T InfoTech. However, according to recent media reports, L&T has been speculated to be the acquirer. We will be surprised if L&T is the entity involved vs L&T InfoTech, as it is not core for L&T operations.

From a consolidated B/S and P&L perspective impact, it is negligible for L&T. It might lead to near-term pressure until core fundamentals become the focus again.

As per Sebi guidelines, a 25% acquisition of a listed company’s’ shares triggers a mandatory open offer for an incremental 26% stake. If L&T, instead of L&T Infotech, buys MindTree we believe it will not be in line with L&T’s core focus of listing non-core businesses and enhancing shareholder value. Jefferies India IT analyst Arya Sen highlights that being a people’s business, integration may not be easy, especially if it is a hostile takeover. The only reason we believe L&T might get involved is to keep the two entities independent for now or reluctance to leverage L&T Infotech’s B/S beyond 1x. We maintain that over the next 6-12 months as core fundamentals deliver, L&T should provide strong potential upside.

Larsen & Toubro is India’s largest engineering and construction company with more than seven decades of history. The company has manufacturing facilities in India, China, Oman and Saudi Arabia. Further the company has presence in technology and financial sectors. Jefferies’ methodology for assigning ratings may include the following: Market capitalisation, maturity, growth/value, volatility and expected total return over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market risk, growth rate, revenue stream, discounted cash flow (DCF), Ebitda, EPS, cash flow (CF), free cash flow (FCF), EV/Ebitda, P/E, PE/growth, P/CF, P/ FCF, premium (discount)/average group EV/Ebitda, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns and return on equity (ROE) over the next 12 months.