L&T Infotech may list in 2008: Deosthalee

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Y M Deosthalee, CFO of L&T, said the Larsen Infotech IPO is likely to come in 2008, though there are no definite time plans for listing of L&T IDPL and the finance arm. Most projects under IDPL will be commissioned by 2009 and L&T IDPL may list in 2009, he said. The asset base of L&T Financial will be raised to Rs 7,000-8,000 crore in two-to-three years, he added.

Priyanko Panja, analyst, Edelweiss Capital, said the subsidiaries would contribute 20% of the total valuation of L&T. He is looking at three IPOs from the L&T subsidiaries in two years. The base value of each IPO is likely to be around USD 1 billion each, he added.

Excerpts from CNBC-TV18�s exclusive interview with Priyanko Panja and Y M Deosthalee:

Q: Have you done any analysis of how much value is captured in the subsidiaries and by when they can start getting unlocked?

Panja: In terms of Larsen�s subsidiaries, joint ventures and associates, it�s a very complex web. We expect somewhere around three IPOs, in terms of IDPL, its finance subsidiaries put together, and Larsen Infotech, over the next two-three years. They are likely to be at a base value of a billion dollars each and in a slightly phased manner, given that the first one of the block could be Larsen Infotech.

Q: Do you have a roadmap, which you can share with us, of the kind of value unlocking plan you may have as a management whether through IPOs or any other route?

Deosthalee: As far as L&T Infotech is concerned, we are looking at 2008 as the probable year for listing and we are still working on that time plane. The company has done exceptionally well last year, and we now need to ensure that there is sustainable growth and continuous improvement in terms of profitability, so that when we go to the market, we have a good story to talk about. At present, we are sticking to our plan of late 2008.

As far as other companies are concerned, there is no definite time plan. L&T IDPL has more then 30 odd companies and SPVs under its fold. What�s important is that many of these SPVs are generating cash, which is accruing to L&T IDPL. Apart from that, we have some more projects. It becomes a continuous cycle and there is a visibility in cash flow. By 2009, we expect most of these projects to be commissioned; especially the five large road projects which we are currently implementing, the airport project, which is under implementation, and a couple of hydel projects. They are likely to be completed by 2009.

In 2007, we expect some more projects to come our way, as there is some bidding, which is going to take place in the next few months. If that happens, we will have a portfolio churning cycle and a visibility in terms of cash flow. That�s why we are saying that may be three years down the line we will look at listing these entities. However, if some positive developments take place in between, we may accelerate the pace as well but as of now it�s going to be around 2009.

As far as financial services� subsidiaries are concerned, there are two of them and it�s very important that we have robust business model over there. The asset base of these companies has to grow significantly.

For instance,L&T Finance has an asset base of Rs 3,000 crore at present. We are planning to take it to about Rs 7-8,000 crore in the next two years. Once that happens, we will have reasonable large market share and then we will look at listing. I do not think that it is going to take place before 2009.

Q: For IDPL, what sort of land bank does it have or rather what sort of land bank do the subsidiaries, which is the urban infrastructure development part of the company, hold at this point?

Deosthalee:IDPL does not have a land bank. It has a subsidiary called L&T Urban Infrastructure, which is a joint venture betweenL&T IDPL and HDFC, and that is promoting projects in the real estate sector. We have not been acquiring land over the last few years, as that�s not the business model which we work with. We have partnerships with people who have a land bank or have land and we jointly develop these projects. That�s the way we go about it.

As present, we have about 30 million sq ft of property under development and they are in various cities, so we are not aggressively acquiring land. In the last one-year, we have taken some steps in terms of acquiring land parcels in some parts of the country but they are not very large. We typically do joint developments with some other promoters or entrepreneurs.

Q: For these three businesses - Infotech, Finance, and IDPL - what sort of per share value have you ascribed?

Panja: It would contribute somewhere around 20%, based on our current calculations of the stock valuation. As we approach ramp ups on project portfolios, the additional asset bases, that some of these subsidiaries gather, would potentially be somewhere around 30% of the stock valuation over a period of time.

Q: What could be the current value because investors would try to value these independent businesses - L&T Infotech and IDPL? What kind of a ballpark valuation could one ascribe to these subsidiaries?

Deosthalee: I can�t talk on valuations; it�s for analysts to really look at valuations. I can only provide information to them. I think it�s for the market and analysts to really value these entities. We don�t make any guess work on valuations.