Larsen & Toubro (L&T), the engineering and construction major, is all set to take its engineering services business unit, L&T Technology Services public. The Group will be filing the draft red herring prospectus (DRHP) in the next three to five weeks.
The technology services business is looking at a valuation of $1-1.5 billion, said two sources in the know.
“The promoters are planning to par 10% of their stake in the company and is eyeing a valuation of around $1-1.5 billion,” said a source in the know.
When asked AM Naik, chairman L&T, about the company’s IPO plans, he did not decline but said it may not happen so soon.
“L&T Technology Services’ listing will happen in some time, not in 3-4 weeks. Together both the technology subsidiaries have revenue of $1.5 billion. We have not made up our mind on the time line of L&T Technology Services IPO. We want to digest one IPO at a time. It took five-and-a-half years post listing of L&T Finance and now when we are listing the Infotech business. All I can say is that it won’t take another five and a half years,” said Naik.
L&T Infotech, the IT services arm, IPO will open from July 11 and the price band has been fixed at Rs 705-710.
According to sources, L&T Technology Services has revenue of around $470 million for FY16 and is targeting revenue of $525 million by end of fiscal 2017. The bankers working on the IPO include Kotak Mahindra, Bank of America and Merrill Lynch and JM Finance.
“The promoters want to first list the IT services business and then will look at this company,” said another source.
Earlier this year, the company strengthened its management team by making Keshab Panda as CEO and managing director and inducted Kumar Prabhas, chief operating officer, to the board as an executive director. Panda, who joined L&T in 2009 from Tech Mahindra (formerly Mahindra Satyam), as head of Americas, was until recently heading L&T Technology as chief executive.
Apart from this, the company has also expanded its board of directors by inducting former L&T Infotech CEO Sudip Banerjee as independent director.
L&T Technology Services owes its origin to parent L&T, which in 2010 transferred its integrated engineering services business to the former. This was followed by the transfer of the telecom and high-tech product engineering services business from L&T Infotech to L&T Technology Services in January 2014.
“L&T Technology Services was always a part of L&T. Out of $500 million, $85 million revenues was sitting in L&T Infotech which was bought over by L&T Technology Services at fair value in 2014,” added Naik.
In the recent past the engineering services space in India has seen consolidation. Recently HCL Technologies acquired Mumbai-based Geometric, earlier this year QuEST Global Services saw Bain Capital, GIC and Advent International investing $350 million in the company, valuing the company at $1 billion.