NEW DELHI: Larsen & Toubro Ltd. is considering merging two of its publicly held software subsidiaries as the Indian conglomerate seeks scale to compete with global digital titans, according to media reports. 

As per the reports, the boards of Mindtree Ltd. and Larsen & Toubro Infotech Ltd., two software divisions controlled by the Mumbai-based engineering firm, could explore share swap ratios for the merger as soon as next week, requesting anonymity since the information isn’t public.

Larsen acquired control of Mindtree in 2019. The conglomerate holds about a 61% stake in the company, which has a market value of $8.3 billion and has around 74% of L&T Infotech, which has a market capitalization of $13.6 billion, data compiled by Bloomberg show. 

The two companies have minimal overlap in businesses or clients, and a tie-up would give them better pricing power and lower costs. 

The proposed merger comes as software companies are seeing surging demand from businesses embracing the digitization that accelerated during Covid-19. Large IT outsourcing firms are also expanding into areas such as cybersecurity, automation and machine-learning support, moving beyond lower-margin traditional back-room services.

Larsen & Toubro Ltd, generally known as L&T, is an Indian multinational company, with commercial interests in engineering, building, manufacturing, technology and financial services, based in Mumbai.

The firm is one of the top five construction firms in the globe. It was founded in India by two Danish engineers who had sought refuge there. L&T Group has 118 subsidiaries, 6 associates, 25 joint-venture and 35 joint operations firms as of 2020, active in basic and heavy engineering, construction, real estate, capital goods manufacture, information technology, and financial services.