Schneider, Eaton Corp in race to buy L&T’s Electrical and Electronics business

Engineering giant Larsen & Toubro is looking to sell off its Electrical and Electronics business as part of the ongoing restructuring plans , at least two people familiar with the development said on condition of anonymity. The deal size is likely to be over Rs 10,000 cr.

The board of directors of the company, which met on Wednesday, gave its in-principle approval to hive off the electricals and electronics vertical. L&T is in talks with several multinational corporations for sale of the business. French major Schneider Electric and NYSE listed Eaton Corp are in the race, said one of the sources mentioned above.

The management of L&T declined to comment.

ET NOW was the first channel to report the story of L&T wanting to sell off its Electrical and Electronic business.

Schneider Electric had recently acquired Smartlink's Digilink and has already indicated that it will grow in India by focusing on acquisitions. It has also been reported that Schneider is also looking to buy stake in Luminous.

Eaton Corp is a $17 bn engineering company based out of Cleveland and owns the brand 'Moeller' which builds control circuit devices, circuit breakers, electronic sensors and switchgrears.

The Electrical and Electronics division constitutes around 7% to the total revenues of L&T and makes products like switch gears, air circuit breakers, circuit breakers and switch boards. The division had revenues of Rs 2212 cr for the first 9 months of the year and has an EBITDA margin of around 11%. The division has manufacturing facilities in Powai, Ahmednagar, Mysore, Navi Mumbai, Coimbatore and several locations abroad.

The company expects that this division would generate revenues of Rs 4500 cr in FY12 on the back of improvement in the power, agriculture and infrastructure sectors. Indian markets contribute 70% to this division while the rest comes from overseas.

An analyst who did not want to be identified said "The division would have revenues of around Rs 3000 - 3200 cr for the full year. This division is lagging in business for L&T and the company is now focusing on core businesses. L&T is the leader in switchgears and hence the deal could command a premium"

The stock of L&T was up 3% after the story was broken on ET NOW.

Source: www.economictimes.indiatimes.com

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Gaurav Agarwal
Head Dealer
DENIP Consultants Pvt Ltd