The board of Larsen and Toubro (L&T) is to take up a comprehensive restructuring plan at a meeting today. Boston Consulting Group (BCG) has drawn up the restructuring plan.
L & T is the largest engineering, procurement and construction (EPC) company (58% of total revenues) in India. The company also has major business interests in cement (24% of total revenues, capacity 12 mtpa), and software.
Under the plan, BCG has suggested that the company exit nine of its existing businesses while retaining six core operating areas – heavy engineering and construction, cement, electricals/electronics, finance and information technology. The core businesses are to be retained either within the company or as joint ventures. The businesses to be exited are packaging and consumerables, medical equipment and closed shoes. The company has also been advised to exit four joint ventures - Tractor Engineers, L&T- Komatsu, EWAC Alloys and Audco India. The sell off of the businesses is expected to raise Rs 30 bn.
The restructuring move is a step in the right direction, as it will bring a semblance of focus into the company. Moreover, the fresh funds raised would help the company in reducing its debt burden and also stepping up investment in its core areas of business. BCG's suggestion to retain the high growth areas of infotech and finance will ensure that L&T has a presence in these areas.
Larsen & Toubro (L&T) has announced third quarter results of financial year 2016-2017 (3QFY17). The company has reported 1.7% YoY growth in sales while profits have grown 38.9% YoY. Here is our analysis of the results.
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