Domestic engineering company Larsen & Toubro (L&T) will issue an initial public offering (IPO) for its software arm L&T Infotech by December this year.
As part of its plans to monetise non-core businesses, India’s biggest engineering and construction company will sell 10% stake in IT services unit, L&T chairman AM Naik toldCNBC-TV18.
“It looks like we will be coming up in the market in December if not November,” Naik noted.
Reacting to the news, shares of L&T gained over 2% on Tuesday, to trade at ₹1,766.40 at the Bombay Stock Exchange (BSE).
L&T Infotech will be the second unit of the parent company to go public, after L&T Finance Holdings Ltd, the financial services arm, was listed in 2011.
The company is also looking to list its other units including hydrocarbons and transmission and distribution units in the coming years, Naik said.
In May, Bloomberg had reported that L&T was planning to spend up to 1$ billion to acquire IT firms to enable its software arm L&T Infotech to take on rivals and get better valuations for the subsidiary when it goes for IPO in mid-2016.
Falling demand and weak client spending has led Indian IT companies to look for acquisitions to boost revenues. Global spending on IT services is estimated to decline 0.7% this year, led by a drop in spending by US companies, research firm Gartner Inc said in April.
Naik said L&T Infotech has recorded revenue of $810 million in the fiscal year ending March and he expects it increase to $950 million in FY16. He estimates the software division’s profit to go up to ₹900 crore in the current financial year compared to ₹762 last fiscal year.
Replying to a question on whether $3 billion valuation for L&T Infotech seems appropriate, Naik said “I will accept anything which is attractive enough for our shareholders of L&T.”
L&T Infotech currently employs 20,000 employees; it has Chevron Corp., Hitachi Ltd and Lafarge SA as its top clients.
In 2009, the parent company had made an unsuccessful bid to takeover Satyam Computer Services, which was hit by India’s biggest corporate fraud at that time.
[“source – ibtimes.co.in”]