Why LTIMindtree Share Price is Falling

LTIMindtree is currently trading just 2% away from its 52-week low.

However, it is not the only IT stock trading low. Most Indian IT stocks are ending 2022 in their worst phase since the 2008 global financial crisis, snapping a five-year winning streak.

Amid concerns around margins and growth outlook in a weakening global macro backdrop, the year 2022 has been a never-ending winter for tech stocks.

Just as a receding tide pulls all boats down, most stocks in the IT sector are ending with a sharp declines in their value. LTIMindtree is one of them.

So far, in 2022, LTIMindtree share price has eroded over 41% of its market value.

The stock is again under pressure, continuing its downward momentum, falling another 2% today.

Let's take a look at what has caused a further decline in the stock.

LTI-Mindtree Merger

Larsen & Toubro Infotech (LTI) and Mindtree officially merged to establish LTIMindtree on 14 November 2022. This merged entity relisted on Indian exchanges and commenced trading on 5 December 2022.

Post-merger, the company has become the fifth largest IT services company in India in terms of market capitalisation.

The transaction involved the issuance of LTI shares to MTCL shareholders in the ratio of 73:100.

LTI promoters now hold a 43.9% stake in the merged entity while Mindtree promoters hold a 24.8% stake, bringing the promoter shareholding to 68.7%.

While this merger has created numerous opportunities such as economies of scale and a diversified portfolio, it has also introduced the company to significant risks.

One of the biggest risks of the merger could be a sharp rise in the attrition of both companies, as the industry is grappling with all-time-high attrition levels.

Although the attrition rates at both companies are comparable, the uncertainty that surrounds a significant merger may make it worse for at least the upcoming quarters.

And for this reason, the market seems to think that the merger would harm the firm.

Since LTI and Mindtree have considerable revenue and strong capabilities in application services, the combined entity could have a significant ADM (Application Data Management) concentration.

Although it makes LTIMindtree stronger in the space, the relatively lower focus on IT infrastructure and business process services can limit its chances to compete for large-sized deals that include multiple services.

This has further added to the negative sentiment in the market.

How LTIMindtree Shares have performed recently

LTIMindtree shares have declined by more than 15% in the last month. Over the year, the stock is down more than 30% due to pressure on tech stocks.

The company touched its 52-week high of Rs 7,588.8 on 4 January 2022 and its 52-week low of Rs 3,733 on 26 May 2022.

At the current price, the stock is trading at a PE multiple of 54.6 and a price-to-book value multiple of 15.1.

FIIs have steadily decreased their exposure to the stock since June 2021. FII stake stood at 8.4% in June 2022 quarter. It now stands at 8.1%.

About LTIMindtree

LTIMindtree is a global technology consulting and digital solutions company.

It's in the business of analysing, designing, converting and coding IT-enabled services. Its services include cloud and infrastructure training, cyber security, consulting, and many more.

It enables enterprises across industries to reimagine business models, accelerate innovation, and maximise growth by harnessing digital technologies.

For more details about the company, you can have a look at these articles:

LTIMindtree vs Tech Mahindra

LTIMindtree vs Infosys

LTIMindtree vs Wipro

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