Moneycontrol Pro Panorama | Can LTIMindtree clear the Street test?

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The Panorama newsletter is sent to Moneycontrol Pro subscribers on market days. It offers easy access to stories published on Moneycontrol Pro and gives a little extra by setting out a context or an event or trend that investors should keep track of.

Mergers are always difficult acts to pull off and then convincing investors of their merits when the deal is announced is not easy either. Whether the merger was actually a success or not is also something that plays out in the very long term. The easiest metric that shows up is the mathematical addition of sales and earnings, but whether the much-talked about synergy benefits took place can sometimes remain a mystery. If a company says the synergies did yield expected savings, but these were reinvested into growth initiatives, then investors may feel disappointed that it did not flow into higher earnings growth and therefore, valuations.

Today’s trading shows the initial reaction of investors of L&T Infotech and Mindtree to the merger announcement. At today's close, Mindtree’s shares were down 5.3 percent while those of L&T Infotech were down by 3.4 percent. The deal will see Mindtree’s shareholders get 73 shares of L&T Infotech in return for every 100 shares they hold. As first reactions go, they don’t seem too thrilled with the swap ratio, but this could change.