Larsen & Toubro (L&T) Chairman AM Naik said the acquisition of information and technology (IT) services company Mindtree was to enhance the asset-light proportion of L&T's business.
“In keeping with our long-term plan to enhance the asset-light proportion of L&T’s business portfolio, your Company has acquired a controlling stake in Mindtree Limited – a company operating in the IT services space,” said Naik in his speech to shareholders at the company’s 74th annual general meeting (AGM).
“We believe that the acquisition will complement the Company’s existing IT services capabilities, thereby widening our IT and Technology Services
portfolio, and creating value in the years ahead,” Naik added.
L&T, which is India's largest engineering and construction firm, has paid around Rs 10,000 crore to acquire shares held by various shareholders, including a 20 percent stake from VG Siddhartha and Coffee Day Enterprises through block deals for Rs 3,211 crore. VG Siddhartha died of an apparent suicide earlier this week.
L&T now holds around a 60 percent stake in Mindtree, making it the promoter of the Bengaluru-based IT company.
Around 10 percent of L&T's revenues come from IT and its Technology Services division, which will now increase substantially with the acquisition of Mindtree.
Indian economy
Naik expressed concern over the slowdown of India’s Gross Domestic Product (GDP).
“India’s GDP in FY2019 is estimated to have grown by around 7 percent. While this is a laudable achievement in the global context, it falls marginally short of expectations due to an interplay of macro-economic and political factors," Naik said.
“The economy also had to grapple with a funding crunch for NBFCs precipitated by the IL&FS debt default, deceleration in the agriculture and mining sectors and widening of fiscal and current account deficits,” Naik said.
The Indian economy slipped to a five-year low of 5.8 percent in the March quarter.
"I am cautiously optimistic," is what he said when sought his outlook on the economy. He said it will take up to 18 months for the government to accelerate public spending for faster development.
L&T has been able to withstand the pressures by diversifying its revenue base to overseas markets, which contribute 37 percent of its topline now, Naik said.
Expressing satisfaction over the company’s performance, Naik said the company has once again turned in a stellar performance on all key parameters.
“The unexecuted order book as on March 31, 2019 stood at Rs 2.93 trillion, which gives us strong revenue and margin visibility for the next few years,” Naik said.
L&T order inflows came in at Rs 1.8 trillion in FY19, registering a strong growth of percent over FY18.
Revenues registered a year-on-year growth of 18 percent in FY19 to Rs 1.4 trillion. The profit after tax touched an all-time high of Rs 8,905 crore in FY19, representing a substantial growth of 21 percent over FY18.
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