If things go to plan, Larsen & Toubro Ltd and Schneider Electric SE may soon announce one of India's biggest M&A deals in the year so far. Citing sources in the know, a Bloomberg report said that India's largest engineering and construction company has agreed to sell its electrical unit to a consortium led by Schneider Electric SE for a whopping $2.1 billion (around Rs 14,000 crore), including debt.
In fact, the deal could be announced as early as this week. The year so far has reportedly registered four deals in the billion-dollar category. As per the deal being hashed out, Schneider will own a 74 per cent stake in L&T's electrical unit while Temasek Holdings Pte will own the balance.
The report added that the division's net revenue for the nine months ended December 31 was up 12 per cent to Rs 3,590 crore. Two weeks ago, after BSE questioned L&T about this rumoured deal, the latter had replied that "as part of its long-term strategy plan Lakshya 2021" the group was constantly scanning its portfolio and would "carry out restructuring from time to time".
The Indian multinational agreed that its 'electrical and automation business' was also being considered for "appropriate restructuring" but informed the bourses that "In compliance of Regulation 30 of the SEBI (LODR) Regulations, 2015, we shall make necessary disclosures at appropriate time".
The deal has actually been a long time in the making. Last November, L&T's Chief Financial Officer R. Shankar Raman had told the media company that the company expected to sell its electrical unit by March 2018 and that due diligence was underway.
He had significantly added that the company was looking to push into the information technology space, be it analytics, mobility, cloud or artificial intelligence, through acquisitions. Selling off its non-core and sub-scale businesses was reportedly part of the grand plan.
For instance, last October, L&T sold its entire stake in its subsidiary EWAC Alloys to ESAB Holdings for Rs 522 crore. Before that, in August, it divested its entire stake in L&T Cutting Tools Ltd to IMC International Metalworking Companies BV for Rs 174 crore. "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," Raman had explained at the time.