Engineering major Larsen & Toubro (L&T) plans to list its information technology (IT) arm L&T Infotech by December 2015. Chairman AM Naik revealed this in an interview to a television news channel. This indicates the company is moving faster for the listing as the earlier target to list the subsidiary was mid-2016. The executive confirmed L&T has plans to offload 10% stake in the subsidiary through the initial public offering (IPO). Following the executive’s comments, L&T advanced more than 2% and closed the day at INR1769.95.
L&T is currently in the process of a restructuring exercise which also involves selling its non-core businesses, although the infotech unit is far from a divestment candidate. On the contrary, the business is considered an important link in its quest to get global exposure. Currently, L&T Infotech counts Chevron, Freescale, Hitachi and Lafarge among its clients. “It’s an area that we need to mastermind and grow,” the engineering major’s chief financial officer R. Shankar Raman said in an earlier interview.
L&T had plans of acquiring smaller competitors in the IT business before listing L&T Infotech. The plan was to spend close to INR6,500 crore on acquisitions to get better valuations for the technology subsidiary. L&T reportedly plans to raise around INR1,600 crore through the IPO which is likely to value L&T Infotech at nearly INR16,000 crore. The latest statement from Naik means we can expect an update from L&T on the planned acquisitions pretty soon.
L&T Infotech IPO would mark listing of second business of the Mumbai-based engineering major following the listing of L&T Finance Holdings in 2011. The technology business currently employs 20,000. L&T was among the potential suitors in 2009 to acquire Satyam’s stressed and tainted technology business. Satyam Computer Services was eventually acquired by Mahindra group company Tech Mahindra.
After two years of poor performance, India’s primary market is showing signs of recovery. So far this year, market regulator SEBI has green lighted 20 companies to float IPOs, up from just five nods in the first six months of 2014. Seven companies Ortel Communications Ltd, Adlabs Entertainment Ltd, Inox Wind Limited, VRL Logistics Ltd, MEP Infrastructure Developers, UFO Moviez India, and PNC Infratech have raised close to INR3,500 crore while another contender Manpasand Beverages is scheduled to start its INR400 crore IPO on 24 June.