L&T may scout for partner for electrical business

Written by Bloomberg | New Delhi | Updated: Jun 29 2011, 07:14am hrs
Larsen & Toubro (L&T), Indias biggest engineering company, may seek a partner for its electrical and automation business to expand the companys product portfolio after spinning off the unit.

A lot can happen once there is a successful partnership, KV Rangaswami, a director on Larsens board, said in an interview in Chennai. By entering into a joint venture with a foreign company, we enhance our product range, he said.

Shareholders of the Mumbai-based company approved a plan last month to split the division making electrical meters, switchgears and industrial automation products into a separate entity that it will control.

Larsen is spinning off some businesses as it prepares to capitalise on Indias proposal to spend $1 trillion in the five years up to 2017 to improve infrastructure such as airports and highways.

Demand for electrical equipment in India is very high, Rupesh Kumar, an analyst at KR Choksey Shares & Securities said by telephone. So finding a technology partner is very easy.

Kumar, who has buy rating on the stock, said a foreign partner will be able to tap Larsens existing customers. Some companies have made initial contact with Larsen, Rangaswami said, without identifying them.

Larsen fell 9.8% this year, compared with a 10% decline for Indias benchmark Sensitive Index.

The company is in talks to sell its electrical and electronics unit for $3 billion, Reuters reported in April, citing two people with knowledge of the matter.

Schneider Electric and Eaton Corp were among the possible buyers, according to the report.

Larsen & Toubro chairman AM Naik denied on May 19 that the company plans to sell the electrical business.

L&T, which has 64 businesses including finance and computer software, plans to split into nine units and five subsidiaries to speed decisions and boost growth, the company said earlier. This step will help Larsen focus on each business and simplify its structure, KR Chokseys Kumar said.

Negotiations with possible partners may take time, said Rangaswami, who also is president of Larsens construction business. The electrical and automation business posted profit before interest and tax of Rs 390 crore on revenue of Rs 3680 crore in the year ended March 31, 2010.