(Updates with closing share prices in sixth paragraph.)
June 28 (Bloomberg) -- Larsen & Toubro Ltd., India’s biggest engineering company, may seek a partner for its electrical and automation business to expand the company’s product portfolio after spinning off the unit.
“A lot can happen once there is a successful partnership,” K.V. Rangaswami, a director on Larsen’s board, said in an interview on June 24 in Chennai, southern India. “By entering into a joint venture with a foreign company, we enhance our product range.”
Shareholders of the Mumbai-based company approved a plan last month to split off the division making electrical meters, switchgears and industrial automation products into a separate entity that it will control. Larsen is spinning off some businesses as it prepares to capitalize on India’s proposal to spend $1 trillion in the five years to 2017 to improve infrastructure such as airports and highways.
“Demand for electrical equipment in India is very high,” Rupesh Kumar, an analyst at KR Choksey Shares & Securities Pvt. in Mumbai, said by telephone. “So finding a technology partner is very easy.”
Kumar, who has a “buy” rating on the stock, said a foreign partner will be able to tap Larsen’s existing customers. Some companies have made initial contact with Larsen, Rangaswami said, without identifying them.
Larsen gained 0.8 percent to 1,800.90 rupees at the 3:30 p.m. close in Mumbai trading. The stock has declined 9 percent this year, compared with a 9.8 percent drop for India’s benchmark Sensitive Index.
Plan to Split
The company is in talks to sell its electrical and electronics unit for $3 billion, Reuters reported in April, citing two people with knowledge of the matter. Schneider Electric SA and Eaton Corp. were among the possible buyers, according to the report.
Larsen Chairman A.M. Naik denied on May 19 that Larsen plans to sell the electrical business.
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, the company said Jan. 24 This step will help Larsen focus on each business and simplify its structure, KR Choksey’s 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.
The electrical and automation business posted profit before interest and tax of 3.9 billion rupees ($87 million) on revenue of 36.8 billion rupees in the year ended March 31, 2010, according to a company statement dated April 6.
--With assistance from Karthikeyan Sundaram in New Delhi. Editors: Subramaniam Sharma, Lena Lee.
To contact the reporter on this story: Ganesh Nagarajan in New Delhi at email@example.com
To contact the editor responsible for this story: Sam Nagarajan at firstname.lastname@example.org