L&T's Crown Jewels ; Larsen & Toubro has Spawned Dozens of Subsidiaries That Have Grown in Value and Have Scaleable Business Models Across a Wide Spectrum of Associated Industries. And the Parent Plans to List 10 of Them in the Years Ahead.

Business Today › June 04, 2007

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Summary

Did you know that Larsen & Toubro (L&T), South and South East Asia's largest engineering and construction company, is also one of India's most successful corporate incubators? There's more: over the next eight years, it plans to list at least 10 subsidiaries to unlock value and create shareholder wealth. "We will list subsidiaries only after they achieve scaleable size," says A.M. Naik, Chairman and Managing Director, L&T. Adds Y.M. Deosthalee, CFO, L&T: "Our portfolio (of subsidiaries and associate or S&A companies) spans three broad verticals--manufacturing, services and projects."

These subsidiaries and associates--18 Indian subsidiaries, six foreign ones and 26 associate companies--are sitting on massive untapped value. Together, they account for 18 per cent of the group's total income of Rs 14,121 crore (for the 9-month period ended December 31, 2006) and 36 per cent of L&T's profits of Rs 1,099 crore during this period. And just the three fastest growing subsidiaries--L&T Infotech, L&T Infrastructure Development Projects (L&T IDPL) and L&T Finance--could have a combined value of more than Rs 8,000 crore. Says Satyam Agarwal, Senior Analyst, Motilal Oswal Securities, a Mumbai-based equity brokerage and research firm: "These three already account for about 18 per cent of L&T's total valuation of Rs 47,100 crore (as on March 2007)." He values L&T Infotech at Rs 4,677.5 crore, L&T IDPL at Rs 2,397.2 crore and L&T Finance at Rs 1,210.4 crore.

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L&T's Crown Jewels ; Larsen & Toubro has Spawned Dozens of Subsidiaries That Have Grown in Value and Have Scaleable Business Models Across a Wide Spectrum of Associated Industries. And the Parent Plans to List 10 of Them in the Years Ahead.

L&T Infotech, which is growing at 55-60 per cent per annum, is likely to be the first to tap the market. Says Deosthalee: "By 2008, when we plan to list L&T Infotech, it will hopefully account for about 8 per cent of the group's turnover compared to 4-5 per cent now." And a large part of L&T's overall growth will come from its subsidiaries and associate companies. "Over the next four years, these jewels will ac...

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