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Larsen & Toubro has sought shareholders approval to transfer its electrical and automation business, which is largely a product business, to a subsidiary or associate company or to any other entity as a going concern.
L&T said in its communication to shareholders on Tuesday that the decision was taken considering the challenges posed in operating the business as part of a portfolio of a predominantly project and construction company.
Last Wednesday, the company Board accorded its approval for the transfer of the business as part of the ongoing organisational restructuring programme.
L&T said it had initiated the process of developing a strategic plan for 2010-2015 in September 2009. The process had identified strategies and initiatives for each business unit, besides carrying out a detailed assessment of is portfolio, organisational structure and capital.
The assessment revealed significant opportunities across all business segments and the need to refine the business model to one that will facilitate growth through greater levels of empowerment and delegation, while retaining accountability. With the company plans focussed on aggressive growth on a large revenue base, the management decided to restructure the company into various independent companies.
50-YEAR LEGACY
L&T said electrical and automation division needs to be restructured to realise its full potential and participate in the growth of the industry. The division has a legacy of over 50 years and was a leader in low-voltage switchgear in India. Over the years it has become an integrated solution provider.
Comprising four strategic business units, the unit employs 5,328 people. The electrical standard products unit is the largest manufacturer of low-voltage products and has 600 stockists and over 100 service centres.
The metering and protection systems unit makes and markets electronic energy meters and relays. The electrical systems and equipment unit manufactures switchboards and intelligent protection, control and communication systems for power distribution and motor control. Besides catering to the requirements of the domestic market and naval ships, it also serves international markets.
The division's control and automation unit is the single largest system integrator in the country offering automation systems to oil and gas, water, power, cement, metal and infrastructure companies.
L&T is said to be in talks with Schneider Electric and Eaton Corporation and expectations on valuations are said to in the range of Rs 12,000 to Rs 14,000 crore. The division accounts for little less than 7 per cent of L&T's revenues with manufacturing facilities in Mumbai, Ahmednagar and several overseas locations. For FY10, revenues were Rs 3,675 crore.
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