Lanco Group has decided to exit its information technology business, Lanco Global Systems Ltd and focus on its core businesses of infrastructure and power, according to an investment banker close to the development. He did not wish to be identified.
Although Lanco Global Systems has been in existence for eight years, it remains a small company: it ended 2006-07 with Rs78 crore in revenue and Rs8.5 crore in profit. As of 31 December, its paid-up equity was Rs25.4 crore and net worth Rs33 crore.
Lanco is selling the company at an approximate discount of 95% to 3K Technologies Ltd, a company promoted by three Hyderabad-based entrepreneurs K. Tejesh Kumar, K. Venkateswara Rao, and K. Venkata Subba Rao.
On 26 June, Lanco entered into a share sale arrangement with 3K to sell 17 million shares accounting for a little over 67% stake for Rs3.74 crore or Rs2.20 a share (face value: Rs10). Shares of Lanco Global Systems closed at Rs47, up 2.12% on the Bombay Stock Exchange.
The shares have a 52-week high price of Rs61 and a low of Rs20.55. When contacted, Lanco group chairman L. Madhusudhan Rao would only say that the group was exiting the IT business to “focus on its core strength of infrastructure development.” Other group officials refused to comment on the pricing of the deal.
3K proposes to acquire at least a 20% stake in the company from shareholders in keeping with Indian stock market laws at Rs43.80 a share or a total of Rs22.27 crore. As of 31 March, Lanco held an 83.75% stake in its subsidiary.
After the stake sale to 3K, it still holds a 16.72% stake that it can sell during the open offer for a total of Rs18.61 crore.
Nitin A. Khandkar, senior vice-president, research, with the Mumbai-based research firm Keynote Capitals Ltd, said: “Exiting non-core activities such as IT will enable the Lanco group to focus more on its core strength—infrastructure development.”