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Larsen and Toubro (L&T), India’s biggest engineering, construction and manufacturing company, is looking to become a ‘zero debt’ company with the sale of its stakes in non-core assets and loss-making projects.
Talking to BusinessLine, SN Subrahmanyan, MD & CEO, L&T, said the company is in talks with investors for the stake sale and would make due announcements soon.
Paring stake
L&T has identified three entities for paring its stake — Hyderabad Metro, Nabha Power and L&T Infrastructure Development — with an aim to bring down its ₹40,000-crore debt (excluding that of L&T Financial Services). “L&T’s gross debt is ₹1,24,000 crore, but it includes ₹84,000 crore from L&T Finance. So, we have a debt of ₹40,000 crore, which includes ₹13,000 crore of Hyderabad Metro and ₹6,000 crore of Nabha Power. The real debt is only ₹20,000 crore and that too, is for working capital purposes,” he said.
“The Government of Telangana recently gave an order to give a soft loan of ₹3,000 crore (to L&T Metro Rail Hyderabad). We are working on an agreement to tie it up. Once that is done, the debt of the project will come down to ₹10,000 crore,” Subrahmanyan added.
Due to the pandemic, the Hyderabad Metro saw a below expected ridership, resulting in a loss-making operation. With more than 3,00,000 people using the metro, ridership has improved lately following resumption of offices and schools. L&T has zeroed in on an investor to raise capital.
In talks with investor
“We are actively talking to an investor. We have a term sheet but I cannot announce it right now because there are a few conditions to be sorted out. So, if that ₹4,000 crore money comes in, the debt in the project will come down to ₹6,000 crore. We will also monetise some of the land. When traffic picks up, it will be a viable project. We will also do an Invit and then exit,” said Subrahmanyan.
The company also has a term sheet with a prominent investor for selling its stake in Infrastructure Development Projects (IDPL), one of India’s largest road builders. Post its execution, L&T would have completely exited the concession business.
“We have (stake) come down to 51 per cent now and Canadian Pension has 49 per cent. We are in active talks with a very prominent investor to sell our stake in IDPL. It will happen shortly and we will come out of the concession business totally,” Subrahmanyan added.
The third divestment would be in Nabha Power. The company has been talking about getting an investor on board since last year but is now hoping to seal the deal in this financial year itself. “We are talking to an investor to move the project away from our balance sheet, that could happen during the latter part of the year. With this, L&T would become a zero-debt company,” he said.
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