Dalal Street Investments

Larsen & Toubro – Re-Structuring Review

March 14, 2011

India’s leading company – L&T is in the process of re-organizing the company‚Äôs operations into 9 independent companies. Each company would have an independent board and management team under the L&T legal entity with the intent of making the decision-making process quicker, resulting in faster growth for the conglomerate.

Management continues to reiterate that L&T will meet its guidance on revenue growth (20% y-y). The company is likely to miss its FY11 order-flow guidance of 25% y-y growth. In the power sector, L&T has a solid pipeline of 13 units (including two of its own) from private developers in FY12, implying an opportunity size of about INR250b for equipment

L&T and other infrastructure companies with ethical business practices are expecting resumption of award activity in highways with the change of Minister [KamalNath is shown the door due to the massive kickbacks he demanded from companies – Listen to Radia Gate Scandal Tapes] Current Minister Mr. Joshi is supposed to be a very good worker and his move to award points to companies like L&T on the basis of their track record will now change the rules of the game as any sick and illiterate Politician who occupies PWD Ministry cannot dis-qualify these companies from tenders.

L&T OrderBook – Current value of the order book is 1.1 Trillion or 1.1 Lakh Crore with 46% of orders from government entities, 40% from private entities and 14% L&T group related orders.

Sum of the Parts Valuation of L&T:
L&T Core Rs 1614
L&T Finance – Rs 111
L&T Infotech – Rs 70
L&T IDPL – Rs 105
L&T MHI Power – Rs 46
Others at Book Value Rs 42

The above is based on FY 12 earnings expectations. The company has told our Analysts that various subsidiaries, may be independently listed in future.


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