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Nabha Power, Hyderabad Metro and the land parcels around the latter could be some of Larsen and Toubro's major monetisation targets over the next 12-36 months, according to analysts.

This comes after the engineering and infrastructure conglomerate and Canadian Pension Plan Investment Board (CPP Investments) signed a share purchase agreement to transfer their entire shareholding in L&T Infrastructure Development Projects Ltd. (L&T IDPL), along with their subsidiaries to Epic Concesiones Pvt. Ltd., a special purpose vehicle (SPV) created for this transaction.

The deal was done for an enterprise value of Rs 6,000 crore and an equity consideration of Rs 2,723.4 crore.

The SPV is part of the Infrastructure Yield Plus II, an infrastructure fund managed by Edelweiss Alternative Asset Advisors Ltd.

LTIDPL is a joint venture company between Larsen & Toubro and Canada Pension Plan Investment Board (CPP Investments) wherein the companies hold 51 percent and 49 percent stake respectively.

The sale is expected to be completed subject to satisfaction of customary closing conditions, including applicable regulatory and other approvals.

For financial year 2022, the overall revenue of L&T Infrastructure Development Projects Ltd. and its 13 subsidiaries stood at Rs 1,840 crore. Two of those 13 subsidiaries had zero revenue during the financial year. Together, the formed 1.2 percent of L&T's consolidated revenue of Rs 1.56 lakh crore during the year.

However, L&T does not count revenue from LTIDPL and its subsidiaries as part of its consolidated revenue since it is a joint venture entity. The same is consolidated at a net profit level using appropriate accounting methods.

These entities will no longer be subsidiaries of L&T once the transaction is completed.

Shares of L&T are trading close to their all-time high. Brokerage firm Goldman Sachs maintained its buy rating on L&T with a price target of Rs 2,460. The brokerage wrote that the company is well-positioned to benefit from the government-funded infrastructure projects and that its order inflow from West Asia also remains strong.

It had also mentioned that a potential sale of non-core assets would be a key catalyst for the company going forward.

Jefferies believes that a buoyant equity market is helping L&T with its monetisation drive as the management always looks to sell the asset at a reasonable valuation. It has maintained its buy rating on the stock with a price target of Rs 2,455.

Macquarie also says that the divestment of non-core assets will be key to improve the company's overall returns. It also has an outperform rating on the stock with a price target of Rs 2,240.

Shares of L&T are trading 0.4 percent lower at Rs 2,137.

Also Read: Larsen & Toubro construction unit wins "Mega" order from ArcelorMittal JV

First Published:Dec 17, 2022 10:20 AM IST