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Larsen and Toubro Ltd (L&T) has a services business that will double to Rs 73,980 crore in revenue by the end of the Financial year 2026, and the part of a high-margin business to jump from a fifth of total revenue now to 27 per cent.
L&T shares have a set goal of five year plan, but this is the first time it has disclosed the revenue of individual business segments. The listed IT firms named Larsen and Toubro Infotech (LTI), Mindtree Ltd and L&T Technology Services Ltd together had Rs 32,256 crore ($4.4 billion). The target f the company is technology services, with compound annual growth of 23.06 per cent
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Many analysts consider this target ambitious in the wake of challenges. Earlier this month, L&T decided to merge LTI, which ended with $2.1 billion in revenue last year, and Mindtree Ltd, which ended with $1.41 billion in revenue. L&T, which will own 68.73 per cent of the merged entity, expects the merger to be completed by early May next year. The group’s third listed IT business, L&T Technology Services Ltd, which ended last year with $880 million in revenue, will continue to run independently.
“Our analysis indicates scale is becoming less relevant as a revenue growth driver in the Indian IT services given shifts in clients’ IT spend patterns,” Pankaj Kapoor, an analyst at CLSA, the brokerage, wrote in a note dated 6 May. “While large mergers do have cost synergies, the actual gains tend to be relatively lower and come with a lag. We believe today’s (6 May) announcement of a proposed merger between LTI and Mindree may have a limited medium-term impact on their combined performance. While potential conflicts in integrating senior leadership appear to have been addressed, integration of middle management could still be a challenge.”
