Mumbai: Engineering and construction major Larsen & Toubro (L&T) on Tuesday said it had signed definitive agreements with Schneider Electric (Schneider) for a strategic divestment of its electrical and automation (E&A) business for an all-cash consideration of Rs 14,000 crore.
L&T's electrical and automation business 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.
Its manufacturing facilities are located at Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysore. It also has a presence in countries such as Saudi Arabia, UAE (Jebel Ali, Dubai), Kuwait, Malaysia, Indonesia, and the UK.
Schneider, present in over 100 countries, makes power management and automation systems.
L&T said the divestment was in line with its stated goal of unlocking value for future growth. It added that the transaction covered all segments of the electric & automation business except marine switchgear and servowatch systems.
The E&A business, which posted net revenues of Rs 5,038 crore in 2016-17, has over the years built strong research and development capabilities and has a wide network of channel partners across India and international markets. It constituted around 4.5 per cent of L&T's consolidated revenue in 2016-17.
In a regulatory filing to the bourses, L&T said the deal was likely to be completed within 18 months. The transaction includes the E&A business and its seven subsidiary firms overseas.
"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. We believe the partnership with Schneider Electric, which has a strong product and geographical presence, would further enhance the business prospects for E&A business & its employees," A.M. Naik, group chairman, Larsen & Toubro, said while commenting on the transaction.
While the deal is subject to regulatory approvals, S.N. Subrahmanyan, CEO & MD of Larsen & Toubro, said it was part of the conglomerate's plan to unlock value within the existing business portfolio to streamline and allocate capital and management focus for creating long-term value for its stakeholders.
"We believe the partnership with Schneider is a win-win for our employees, business partners, and shareholders," he said.
While there were reports that Schneider may team up with Temasek to acquire the E&A business, L&T had recently said this business was also being considered for restructuring.
The L&T scrip had ended with gains of 1.73 per cent, or Rs 23.80, on Monday. During the third quarter ended December 31, 2017, L&T recorded consolidated gross revenue of Rs 28,747 crore, which marked a growth of 9.4 per cent over the same period last year.
International revenues during the period at Rs 10,110 crore constituted 35 per cent of the total revenues. The period saw it winning fresh orders worth Rs 48,130 crore, thus registering a growth of 38 per cent.
International orders at Rs 8,835 crore constituted 18 per cent of the total order inflow. The major orders were secured by infrastructure and hydrocarbon segments.
During the period, the E&A segment customer revenues at Rs 1,231 crore declined 4 per cent over the previous year. Here, international revenues constituted 28 per cent of the total customer revenue. The order book of the segment, too, showed a decline of 13 per cent and stood at Rs 2,879 crore.
