L&T plans USD1 billion acquisition spree before infotech arm’s IPO


L&T Infotech LogoEngineering major Larsen & Toubro (L&T) is planning to acquire some smaller IT companies ahead of the IPO of L&T Infotech in mid-2016.  The company plans to spend up to USD1 billion to acquire smaller competitors in order to get better valuation for the technology subsidiary.

Although L&T has said it plans to sell of its non-core businesses, it does not plan to sell L&T Infotech. On the contrary, the business is considered an important link in its quest to get global exposure. Currently, the infotech business counts Chevron, Hitachi and Lafarge among its clients. “It’s an area that we need to mastermind and grow,” said R. Shankar Raman, chief financial officer (CFO) of L&T.

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.

Listing Infotech would be also a currency for growth. It seems to be the logical step for the company

– R. Shankar Raman, chief financial officer (CFO), L&T.

L&T Infotech would be 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 19 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.


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