L&T in talks to sell electrical unit for up to $3 bn: sources

L&T in talks to sell electrical unit for up to $3 bn: sources

Mumbai: Larsen & Toubro (L&T) is in talks with several engineering firms to sell its electrical and electronics unit in a deal that could be worth up to $3 billion, two sources with knowledge of the matter said on Friday.

L&T, India’s top engineering and construction firm, is in talks with France’s Schneider Electric and U.S. diversified industrial firm Eaton Corp, among others, the sources said. A deal could be sealed in the next few weeks, they added, declining to be named because the details were not public yet.

A L&T spokesman declined to comment on the matter.

The electrical and electronics division manufactures switchgears, circuit breakers and switchboards and accounts for 7% to L&T’s revenue.

The business is expected to report revenue of Rs3500 crore ($786 million) for the fiscal year ended March, but has been facing rising cost and competitive pressures in recent quarters.

L&T is looking to value the business at three to four times annual revenue, one of the sources told Reuters. However, sector analysts put a likely valuation at 2.5 to 3 times revenue.

Earlier this year, L&T said it would reorganize its operations into nine business es to simplify its structure and better manage growth.

India plans to spend $1.5 trillion in the 10 years to 2017 to revamp its infrastructure, and has also outlined plans to add generation capacity of 100,000 megawatts from 2012 to 20 17, attracting global manufacturers optimistic on growth in Asia’s third-largest economy.

The country aims to halve its nearly 14% peak-hour power deficit by the end of 2012.

Shares in the conglomerate, valued at $23.5 billion by the market, closed down 0.6% in a weak Mumbai stock market. The stock has declined 12.7% so far this year, compared to a 5.5% fall in the BSE benchmark.