1. L&T to sell electrical unit, spin off road assest to fund IT buying

L&T to sell electrical unit, spin off road assest to fund IT buying

The airports-to-submarines maker has been pruning non-strategic and sub-scale businesses under a plan to spur growth through acquisitions in information technology, where margins are higher.

By: | New Delhi | Published: November 27, 2017 5:33 PM
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Larsen & Toubro Ltd., India’s largest engineering and construction group, said it expects to sell its electrical unit and spin out its road assets trust by March 2018, a sign funding for plans to acquire more companies in information technology will soon be in place. Schneider Electric SE is in exclusive talks to buy the electrical unit, valuing it at around $2 billion, people familiar with the matter said last week. Due diligence is underway, as are talks with investors on an initial public offering for some road assets, Larsen Chief Financial Officer R. Shankar Raman said in a Nov. 20 interview. The airports-to-submarines maker has been pruning non-strategic and sub-scale businesses under a plan to spur growth through acquisitions in information technology, where margins are higher. The push into IT is urgent, said Raman, as Larsen must contend with bigger, more entrenched rivals including Tata Consultancy Services Ltd. and Infosys Ltd. “We don’t have time on our side and we need to jump start for bridging the gap,” Raman said. “Acquisitions would be one of the ways to do that.” He declined to identify any deal targets, though he said the company is looking to buy businesses that can’t scale up on their own.

Silicon Valley
The firm is looking in Silicon Valley and India for deals valued at between $20 million and $100 million, Raman said. “Whether it is analytics, mobility, cloud or artificial intelligence, they are all opportunities for us to draw closer to larger peers,” he said. The L&T Technology unit acquired U.S.-based Esencia Technologies Inc. in June for $27 million, it said in a filing. Earlier this month, the L&T Infotech unit said it plans to acquire Luxembourg-headquartered Syncordis S.A. for 15 million euros ($18 million).
In October, the company sold its unlisted arm EWAC Alloys to U.K.-based ESAB Holdings Ltd. for $80 million and in August it sold a cutting tool unit to IMC International Metalworking Companies BV, an arm of Berkshire Hathway, for $27 million. There are also some machinery manufacturing businesses that could be considered for divestment, Raman said. “The reason we are stepping out of these profitable but sub-scale businesses is that we don’t see them becoming a billion-dollar-plus revenue generating businesses,” said Raman. “We just want to conserve the time and management attention that goes into such businesses.”
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