Larsen May Seek Partner for Electrical Business to Add Products

By Ganesh Nagarajan - Jun 27, 2011

Larsen & Toubro Ltd. (LT), India’s biggest engineering company, may seek a partner for its electrical and automation business to expand its portfolio of switchgears, energy meters and control systems.

“By entering into a joint venture with a foreign company, we enhance our product range,” K.V. Rangaswami, a director on Larsen’s board, said in a June 24 interview in the southern Indian city of Chennai. “A lot can happen once there is a successful partnership.” Some companies have made initial contact, he said without naming them.

Shareholders of the Mumbai-based company last month approved a plan to spin off the division making electrical meters, switchgears and industrial automation products into a separate entity. A foreign partner will be able to tap Larsen’s existing customers, said Rupesh Kumar, an analyst at KR Choksey Shares & Securities Pvt. in Mumbai.

“Demand for electrical equipment in India is very high,” said Kumar, who has a “buy” rating on the stock. “So finding a technology partner is very easy. They can get anybody.”

Chairman A.M. Naik on April 19 denied Larsen had plans to sell its electrical business. The company is in talks to sell its electrical and electronics unit for $3 billion, Reuters reported, citing two people with knowledge of the matter, in April.

Schneider Electric SA and Eaton Corp. were among the possible buyers, Reuters reported.
Plan to Decentralize

Larsen, which has 64 businesses including finance and computer software, plans to split itself into nine units and five subsidiaries to speed decisions and boost growth. This step will help the company focus on each business and simplify its structure, Kumar said.

Negotiations with possible partners may take time, said Rangaswami, who also is president of Larsen’s construction business and is due to retire this month.

Larsen gained 2.7 percent to 1,786.5 rupees at the 3:30 p.m. close in Mumbai yesterday. The stock has declined 9.7 percent this year, compared with a 10.2 percent fall in the benchmark Sensitive Index of the Bombay Stock Exchange.

The electrical and automation business posted a profit before interest and tax of 3.9 billion rupees ($86 million) on revenue of 36.8 billion rupees in the year ended March 31, 2010, according to a company statement on April 6.

To contact the reporter on this story: Ganesh Nagarajan in Chennai at gnagarajan1@bloomberg.net

To contact the editor responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net
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