How Debashis Chatterjee turned the newly merged entity LTIMindtree into an IT powerhouse

The mega merger between the erstwhile IT majors Mindtree and Larsen & Toubro Infotech (LTI) was announced in May 2022; its significance for the diversified multinational conglomerate L&T was visible from the fact that none other than then LTI Chairman A.M. Naik and Vice Chairman S.N. Subrahmanyan announced the merger, addressed the media, and took on the barrage of questions.

The two listed entities started operating as a single merged company—now the fifth-largest IT services firm in the country—from November 14, 2022. However, the seeds of the merger were sown much earlier. They had been working together on several deals even before the merger.

It was the pandemic that pushed the clock back. “If Covid-19 had not happened, then the merger of LTI and Mindtree would have happened earlier. The first criterion was that none of the companies should be leaning on each other,” says CEO & MD Debashis Chatterjee.

During the pandemic, both LTI and Mindtree were affected, with Mindtree experiencing a greater impact due to its reliance on the travel and hospitality sectors, which accounted for 17-18% of its revenue. This was a major factor behind the delay in announcing the merger.

“All credit goes to A.M. Naik and SNS [S.N. Subrahmanyan] for envisioning when the two companies should be brought together. And the vision was that the two companies can come together only when both are performing well in their own ways, rather than trying to time the market,” says Chatterjee, who was the CEO & MD of Mindtree when the merger was announced.

But as mentioned earlier, the two companies were not strangers to each other and had already been working together. “It was very clear that there were quite a few opportunities or deals where you as an individual entity may not get a seat at the table. I have been personally told that ‘you are too small for our size’. And I used to ask, what can I do? Can you bring your sister company also together, create a consortium and bid, they used to say,” says Chatterjee.

During 2019-2020, the two companies formed a consortium and bid, and won quite a few deals; they also put in place a ‘teaming agreement’ for select opportunities. However, the real benefit of the agreement was not securing specific bids but something far more significant. It facilitated the collaboration between the two companies to swiftly implement a merger strategy.

When two entities of a similar size merge, integration can be challenging due to potential cultural or behaviourial issues. “For these two companies, because of some of the arrangements we had, we kind of knew how to work with each other. We knew each other’s strengths and weaknesses,” says Chatterjee, pointing out that Naik and SNS always emphasised the “complementary capabilities” of the two companies in their discussions. This was also the second reason for the merger.

“LTI’s strengths were data, cloud, and enterprise apps. Mindtree’s was experience, data, and the cloud. So, there were a lot of complementary capabilities and synergies. That was the rationale. The benefit of the integration was that you could take those capabilities to the client. We had only 10-12 clients where there was an overlap,” explains Chatterjee.

“We knew that the two companies would come together at the right time. We knew that there were synergies in terms of capabilities. We also saw that there is an opportunity in terms of upselling and cross-selling. These three aspects are very critical to understanding how the whole thing happened,” he adds.

Synergies in terms of capabilities and upselling and cross-selling benefits are all fine, but cultural integration can at times be the most challenging aspect of a merger. Fortunately, the two companies successfully navigated this hurdle with a proper strategy in place. “When we decided to merge, it was decided by SNS that there should be a steering committee, but we should do it in such a way that the two companies do not get distracted in any manner,” says Chatterjee.

The steering committee consisted of a select group of people from both companies, with a few also coming from L&T. It was led by SNS himself and had multiple tracks established to oversee key verticals like human resources, finance, sales, and culture, among others.

“We had decided to do the merger in record time… every track was given six months,” says Chatterjee. “We could not find any example of a merger that was completed in six to seven months. We took it up as a challenge, the reason being that if we could get the merger out of the way, then it would also help in having a unified go-to-market strategy,” he says.

Incidentally, the cultural part was smoothly taken care of since there were a lot of commonalities between the two IT companies. “Almost 80% [of the] pillars were common… purpose, caring, learning, delivering results. We realised that culturally it was not much different, and we did a lot of cultural assimilations and workshops,” says Chatterjee, who was heading the culture track. To be honest, six months was a bit of a stretch, but people really worked hard, he adds.

But the benefits were clearly visible. “Definitely, there is an acknowledgement among clients that LTIMindtree deserves a seat at the table. Our size is such that you cannot ignore us. Secondly, we are now very well positioned to compete with whoever it is, and we are winning too. All the metrics of the combined entity are looking much better,” says Chatterjee.

Complementary verticals and increased firm size would help in grabbing bigger deals… Cross-selling and upselling among clients, increase in geographies would also help the company to diversify its clientele, says a report by investment fund Bodhi Capital.

Currently, the company boasts revenues in excess of $4 billion, serving more than 700 clients in 30 countries, with a team of over 82,000 employees. With the merger in place and the combined entity functioning smoothly, the next goal is to expand the company’s size and reach.

“I want to see LTIMindtree become a $10-billion company. That is the vision that A.M. Naik and SNS have, and I think that is a fair vision. They want the services revenue to become a significant portion of the group’s total revenue because services give a better margin. Do we have a vision to go up to $10 billion? The answer is yes,” says Chatterjee.

 

@ashishrukhaiyar