L&T says “Yes” to cement division demerger - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

L&T says “Yes” to cement division demerger

Jul 4, 2000

The management of one of India's largest conglomerates, Larsen & Toubro (L&T) has finally decided to demerge its cement business. The much-delayed decision is a vindication of the stand that a demerger would happen but at a suitable time. There are several benefits that would result from the demerger. First, L&T will rid itself of a cyclical business, which had in recent years exerted tremendous pressure on its bottomline. The pressure was in terms of losses due to intense competition in the market place. Further the large borrowings taken by the company to fund the capacity expansion took their toll in the form of higher interest burden. Indeed, the company’s performance in FY00 suffered due to a sharp rise in interest expenditure.

A key fall out of the decision to demerge would be the unlocking of the value of its highly profitable engineering and construction businesses. This division has continued to generate profits all through the economic downturn (although towards the end topline growth declined significantly). However, due to the shadow cast by L&T’s cement operations, the EPC division’s financial performance was all but over looked. Now, with the demerger, the EPC division would once again be valued on its own.

Meanwhile, the cement division would benefit from the likely induction of a strategic partner. This would help the new entity in meeting its capital expenditure plans to boost capacities and adopt the best business practices to enhance productivity.

However, several issues as yet remain to be tackled. First is the modus operandi of the demerger. The kind of valuation would be given to the cement business. Then, the question whether, and if yes, when, does the company plan to invite a strategic partner. Finally issues relating to independent listing of the new entity will need to be answered.

Equitymaster requests your view! Post a comment on "L&T says “Yes” to cement division demerger". Click here!


More Views on News

L&T Announces Quarterly Results (1QFY22); Net Profit Up 143.9% (Quarterly Result Update)

Jul 31, 2021 | Updated on Jul 31, 2021

For the quarter ended June 2021, L&T has posted a net profit of Rs 16 bn (up 143.9% YoY). Sales on the other hand came in at Rs 293 bn (up 38.0% YoY). Read on for a complete analysis of L&T's quarterly results.

L&T 2020-21 Annual Report Analysis (Annual Result Update)

Jul 26, 2021 | Updated on Jul 26, 2021

Here's an analysis of the annual report of L&T for 2020-21. It includes a full income statement, balance sheet and cash flow analysis of L&T. Also includes updates on the valuation of L&T.

Why L&T Shares Fell 3% Despite Strong Operating Performance (Views On News)

May 17, 2021

Covid second wave is expected to temporarily slow down L&T's growth momentum, especially during the first quarter of FY22.

Nuvoco Vistas Makes a Lackluster Debut. Stock Lists at 17% Discount (Views On News)

Aug 23, 2021

Nuvoco Vistas witnessed a tepid listing on the bourses despite strong outlook for the cement sector.

Shree Cement Shares Tanks on Poor Operating Performance in the June Quarter (Views On News)

Aug 10, 2021

Shree Cement lags peers in volume growth.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

Don't Sell these Stocks if the Market Falls (Profit Hunter)

Nov 17, 2021

These are the 3 types of stocks that you should not sell in a market crash.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.


Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Nov 30, 2021 (Close)