Engineering and construction giant Larsen and Toubro (L&T) is on track to divest its non-core assets to cut its consolidated debt of around Rs 1,46,000 crore. On Wedneday, L&T said it has agreed to sell its UK-based integrated marine automation solutions provider Servowatch Systems to Rolls-Royce's Power Systems Division for an undisclosed price.
It will be the recent second non-core asset sale after L&T concluded the strategic divestment of its Electrical & Automation business to Schneider Electric for Rs 14,000 crore in August. Besides, the engineering behemoth is in talks with Punjab government to sell its power plant in Rajpura.
L&T made the offer to Punjab government to sell its 1,400-megawatt Nabha Thermal Plant in Rajpura for Rs 9,690 crore. In its proposal, L&T said the offer price included their equity of Rs 2,688 crore and an outstanding debt of Rs 7,002 crore.
L&T is also looking to divest Hyderabad Metro Rail project, which incurs a loss of Rs 300 crore a month to the company. The company has also approached the state government for financial help that was previously promised. But the government has not yet responded to L&T's request.
After the deal with Rolls-Royce, SN Subrahmanyan, CEO & MD, L&T said, "The divestment of Servowatch Systems is as per our stated goal of unlocking value within the existing business portfolio by divesting non-core units."
The company's consolidated net profit fell 44.73 per cent year-on-year (YoY) to Rs 1,410.29 crore for the September quarter. L&T has reduced the consolidated debt by Rs 9,000 crore in Q2 to Rs 1,46,000 crore, thanks to sale of its electrical and automation business to French major Schneider. The debt-equity ratio stands at 1.78 times in September.
Due to the sharp reduction in new orders from the private sector, L&T's order inflow has fallen by 42 per cent in the second quarter. The outstanding order book stood at Rs 2.98 lakh crore in September and 24 per cent of which is from overseas. The management expects to bounce back to normalcy in the second half of this financial year (H2) with order inflow from railways and metro, National Highway Authority of India (NHAI) and power and water sectors.
L&T has recently bagged the 25,000-crore high-speed corridor for Ahmedabad-Mumbai Bullet Train Project. In the last one month, the share price of L&T jumped around 18 per cent.