Lamp;T to spin off cement, software

MUMBAI, JANUARY 9: Indian engineering and construction conglomerate Larsen amp; Toubro Lamp;T is likely to spin off its cement and sof...

MUMBAI, JANUARY 9: Indian engineering and construction conglomerate Larsen amp; Toubro Lamp;T is likely to spin off its cement and software businesses under a restructuring plan currently under consideration, analysts said on Friday. The US-based Boston Consulting Group has been appointed to conduct a detailed review of Lamp;T8217;s businesses, and Lamp;T is expected to announce its plans soon.

Lamp;T has interests in engineering, construction, electricals, electronics, cement, software and several minor businesses. At the end of the exercise it is likely the original firm will remain only in the businesses of engineering, construction and electricals, as others are spun-off or sold.

Lamp;T8217;s share closed Friday at Rs 544, up 33 per cent from its upturn started on December 20, but off a high of 629.95 struck on January 4. quot;Lamp;T has identified engineering and construction, cement, electricals, construction equipment and information technology as the thrust areas of growth8230;,quot; A M Naik, the company8217;s managing director andchief executive officer said in a report to the company8217;s shareholders.

The underlying theme of the exercise will be to move out of areas which do not fall under the firm8217;s core competencies while focusing resources on their areas of strength, analysts said.

quot;The cement and software units are likely to be spun-off into separate companies while the software unit will get its shares listed,quot; said R Srinivasan, analyst at Motilal Oswal Securities. Aside from focus, the demerger will achieve better valuations for the company as a whole, analysts said.

Lamp;T has an installed capacity to produce over 10 million tonnes of cement and it could enter into alliances to hold its ground as the industry moves through a consolidation phase, analysts said. The company last year acquired 94 per cent of Narmada Cement Company which enhanced the capacity under its control by 1.2 million tonnes.

Analysts said Lamp;T is likely to offer a strategic stake in the demerged cement business to a foreign investor to raise much-neededcash. According to media reports, Holderbank has approached the company with a proposal to pick up 50 per cent stake in the yet to be formed cement company. quot;This will be necessitated to raise funds because the firm has a large debt component,quot; said Rajesh Mazumdar, senior analyst at BNP Prime Peregrine.

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Lamp;T8217;s software business is conducted through its subsidiary Lamp;T Information Technology Ltd Lamp;T Infotech. The subsidiary will be listed at Nasdaq in a year8217;s time, a newspaper report said last week. quot;The software unit8217;s top line is seen around Rs 2.5 billion in the current year, and if we take a price-revenue multiple of seven the unit is worth around Rs 15 billion, quot; said Mazumdar of BNP Prime Peregrine.

Lamp;T Infotech reported profits of Rs 368.57 million in 1998/99 on a total revenue of 1.61 billion.