L&T selling off E&A unit to Schneider Electric for Rs14,000 cr
02 May 2018
Heavy engineering and construction giant Larsen & Toubro is selling its electrical and automation (E&A) business to France’s Schneider Electric, a global player, for an all-cash consideration of Rs14,000 crore, about 2.8 times its current revenue of Rs5038 crore.
S N Subrahmanyan, CEO & MD, Larsen & Toubro
The unit offers a wide range of low and medium voltage switchgear, electrical systems, marine switchgear, industrial and building automation solutions, energy management systems and metering solutions, spread across manufacturing facilities in Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysore, and Saudi Arabia, the UAE, Kuwait, Malaysia, Indonesia, and the UK. .
The deal includes all the current business segments of E&A except marine switchgear and the UK unit Servowatch Systems. The E&A business reported operating margins of 15.1 per cent in FY17, up from 12.5 per cent a year ago.
The giant engineering major is divesting from its non-core business as part of a longer-term plan to streamline its operations.
Earlier, Siemens, ABB, Hitachi and Honeywell were also said to have shown interest in the business, Rhe Financial Express reported.
According to the company, L&T's E&A business has built strong research and development capabilities and has a wide network of channel partners across India and international markets.
“L&T’s E&A business has had a strong presence for decades and is well-positioned to continue its growth trajectory with outstanding technologies, brands, people and global presence,” said S N Subrahmanyan, CEO & MD, Larsen & Toubro. “We believe the partnership with Schneider Electric, which has a strong product and geographic presence, would further enhance the business prospects for E&A business & its employees.”
The divestment of E&A business, the biggest for the company, is in line with L&T’s stated intent of unlocking value within the existing business portfolio to streamline and allocate capital and management focus for creating long-term value for its stakeholders, he added.
Earlier in October 2017, L&T sold its stake in its wholly-owned subsidiary, EWAC Alloys, to Swiss company Elektriska Svetsnings-Aktiebolaget's UK-based ESAB Holdings for Rs522 crore. A monthearlier L&T entered into a deal to sell its entire stake in privately-held L&T Cutting Tools to IMC International Metalworking Companies for Rs174 crore.
In 2016, L&T sold its general insurance business to HDFC Ergo for Rs551 crore.
“We believe the partnership with Schneider is win-win for our employees, business partners, and shareholders,” added Subrahmanyan.
The E&A business reported net revenue of Rs5,038 crore during FY2016-17. According to A.M. Naik, group chairman, Larsen & Toubro, the transaction includes all the current business segments of E&A except marine switchgear and Servowatch Systems.
The strategic divestment is in line with L&T’s stated goal of unlocking value for future growth. The Indian multinational is engaged in technology, engineering, construction, manufacturing and financial services and has over $17 billion in revenues. It operates in over 30 countries worldwide.