Larsen & Toubro has decided to list its wholly owned subsidiary L & T Information Technology. The listing, on the Nasdaq is planned by January 2001. The subsidiary has been valued at Rs.35 bn.
L&T is an engineering and cement giant with engineering contributing almost 70% to its Rs.74 bn turnover (in FY99) and with cement capacity of 12 m tpa among the largest in the industry. The company’s information technology subsidiary L&T Information Technology is counted among the top 15 software companies in the country with 1,400 people.
The Boston Consulting Group had made the recommendation that L & T’s stake in L&T Information Technology (FY99 turnover: Rs.1.61 bn; net profit: Rs.368 m) be brought down through a public listing preferably on the Nasdaq. The company has now decided to divest 25% of its equity. It hopes to garner around Rs.100 bn through this divestment.
The proceeds from this divestment are expected to be used to retire L & T existing debt of Rs.33.58 bn. From L & T Information Technology’s point of view it could give the company an independent window to provide future finances as well provide the company with a currency for potential acquisitions.
L & T Information Technology is expected to clock a turnover of Rs.2.50 bn and a net profit of Rs. 500 million in the current year i.e. FY2000. The BCG report had earlier projected a turnover of Rs.30 bn and a net profit of Rs.6.50 bn by FY2005.
Analysts view the developments positively and have rated the stock as a ‘Buy’ as the move is likely to lead to higher return on capital and shareholder value for L & T both of which have been concerns in the past.
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.
LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India. Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: email@example.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407