Larsen & Turbo Ltd is mulling a purchase of a 14 per cent stake in L&T Infrastructure Development Projects. The stake will be acquired from IDFC Private Equity and JPMorgan Chase for an estimated Rs 740 crore. That would subsequently transform L&T Infrastructure Development Projects into a wholly owned subsidiary of Larsen & Turbo Ltd. The investment values L&T IDPL at about Rs 5,300 crore.
Back in April, IDFC Private Equity and JPMorgan Chase bought a 21.6 per cent shareholding in L&T Infrastructure for an estimated Rs 550 crore. Back then, the deal had pegged the value of L&T IDPL at about Rs 2,448 crore. In the 2006 stake acquisition, JPMorgan Chase undertook the investment via its subsidiary, Silver Pak Investments, based in Mauritius; while IDFC Private Equity purchased its stake via its infrastructure fund India Development Fund.
However, the two firms paired down their combined stake to 14 per cent this year. However for analysts, the stake buyback is reflective of a commitment by Larsen towards offering investors an exit or it expects big value in the business in the coming few years. L&T IDPL is expected to commence its preliminary share in the coming few years, and equity dilution in the two firms has consistently been higher.
The firms both raise most of their funding via initial public offering, to finance their build-to-transfer (BOT) projects. Should the private equity investors stay in the firm, Larsen’s stake in L&T IDPL will fall below 51 per cent. Currently, L&T Infrastructure Development Projects runs the entire firm’s road & bridge, port and real estate.
L&T Infrastructure Development Projects has a sum asset valuation pegged at Rs 33,500 crore, minus the Seawoods project in Navi Mumbai that is yet to get necessary approvals. Mid this year, L&T Infrastructure Development Projects received Rs 15,000 crore Hyderabad metro projects. The firm is currently redoing its infrastructure development unit to split it into three verticals namely infrastructure, power development and realty. However, the restructuring is yet to be commenced as it is.
In addition to being an engineering, procurement & construction (EPC) player in the power segment, L&T recently got into power generation. L&T IDPL owns 75% stake in L&T Urban Infrastructure (L&T UIL), which is developing over 30 million sq ft of commercial and residential space. The remaining stake is held by HDFC.
Source: Invest in India