Mumbai: Late Monday, electrical equipment manufacturer Crompton Greaves Ltd told the Bombay Stock Exchange that the company “is not contemplating divestment of its project business” after a day of speculation that India’s largest engineering and construction firm by market value, Larsen and Toubro Ltd (L&T), is looking to acquire the division.
During the day, Crompton shares rose nearly 6% to close at Rs264.35. L&T shares closed about 1% up at Rs2,737.10 on the Bombay Stock Exchange.
L&T has six operating divisions — engineering and construction projects; heavy engineering, engineering construction and contracts; electrical and electronics; machinery and industrial products; information technology; and engineering services.
Crompton is organized into three business groups — power systems, industrial systems and consumer products.
Prior to Crompton’s annouoncement, analysts said its power systems and industrial systems make a lot of sense for L&T, but consumer products is something that the company will not be interested in.
L&T denied it was doing any due diligence of the Crompton business and added it doesn’t comment on market speculation.
Crompton’s power systems business had a profit of Rs257.69 crore on Rs1,963.30 crore revenue for the year ended March, while the industrials systems business had a profit of Rs194.60 crore on revenues of Rs1,057.97 crore for the same period.
“Selling the project side of the business to L&T makes a lot of sense, as the projects business is not core to Crompton but is core to L&T,” says an analyst with a Mumbai-based brokerage, who could not be named due to company policy.
An acquisition of the electricals business of Crompton would have helped L&T scale its electircal business, which has been a laggard as far as the company’s growth targets are concerened, analysts note.
Crompton has recently acquired French power transformers repairing leader Societe Nouvelle de Maintenance Transformateurs (Sonomatra) for EUR1.3 million to enhance its capabilities in the services segment of its transmission and distribution business.