Larsen & Toubro (L&T) Infotech IPO has inched closer to reality with the filing of draft red herring prospectus (DRHP) with market regulator Securities and Exchange Board of India (SEBI). In a statement on Bombay Stock Exchange (BSE), engineering major Larsen & Toubro disclosed that its subsidiary has sought regulatory clearances for the IPO.
“The issue comprises of an offer for sale of up to 1.75 crore equity shares of the face value INR1 each by Larsen & Toubro,” L&T said in the stock exchange filing. According to earlier reports, L&T was looking to divest 10% stake in the IT subsidiary.
L&T is working on an acquisition strategy to buy some smaller IT companies ahead of the IPO of L&T Infotech. The IPO of the infotech subsidiary was earlier planned for mid-2016 but is now likely to hit the markets by December 2015. “It (infotech) is an area that we need to mastermind and grow,” the engineering major’s chief financial officer R. Shankar Raman said in an earlier interview. Currently, L&T Infotech counts Chevron, Freescale, Hitachi and Lafarge among its clients.
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Meanwhile, L&T is also restructuring its portfolio and selling its non-core businesses. To be sure, L&T plans to use its war chest of INR11,200 crore cash to boost the industry standing of its infotech business and is not looking to use IPO proceeds for this purpose. L&T Infotech registers about USD1 billion in topline every year and remains the third largest contributor to the parent’s consolidated revenues.
L&T Infotech IPO would be second public offer of the Mumbai-based engineering group 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.
