Engineering conglomerate Larsen & Toubro (L&T) on Monday announced completion of the sale of its electrical and automation (E&A) business to Schneider Electric. The deal was first announced in May 2018.
Valued at Rs 14,000 crore, it is one of L&T’s biggest divestment so far in value terms.
“The significant and complex divestment deal, one of its kind in India announced in May 2018 has been completed after receiving the requisite regulatory approvals and fulfilment of necessary conditions,” the company said in its statement. In addition to its complex nature, the deal completion was also impacted due to restrictions on air-travel post March.
Chairman for the group, AM Naik added, “The challenge was to carve out a business of this scale, with minimum disruption to the sprawling customer base and do it all amid the constraints of a pandemic.”
The company, so far has not shared any concrete plan for the cash proceeds. “This all-cash deal will help us create a much stronger balance sheet, thereby creating long-term value opportunities for our stakeholders by focusing on key aspects of business,” said S N Subrahmanyan, chief executive officer and managing director for the company. Post the deal announcement, L&T considered a Rs 9,000 crore share buy-back to unlock value in August 2018, however, the plan hit a regulatory hurdle and was later shelved.
Part of the deal terms, L&T said Schneider Electric will use related brand insignia for a specified period “as the brand is very popular and has a strong brand recall in the switchgear market.” In terms of workforce, 5,000 employees of the E&A business will become part of Schneider Electric. The manufacturing facilities of E&A in Navi Mumbai, Ahmednagar, Vadodara, Coimbatore and Mysuru in India and related subsidiaries in UAE, Kuwait, Malaysia and Indonesia are also being transferred to Schneider Electric.
The company said, in view of the pending local approvals, the subsidiary in Saudi Arabia, L&T Electrical & Automation Saudi Arabia Company Limited (LTEASA), will be transferred to Schneider, once the requisite regulatory approvals are in place.
Announced in 2018, the divestment plan for the E&A business has been under consideration since 2015, according to people in the know. L&T announced sale of this asset to Schneider Electric in 2018 as part of its larger plan to streamline operations and divest non-core assets. The contribution from the E&A division to L&T’s total revenue had declined over the years as the proportion of other segments such as infrastructure and engineering, procurement, and construction grew.
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