Larsen & Toubro Ltd aims to execute a divestment deal and exit its road projects portfolio in fiscal 2022-23, said Chief Financial Officer R Shankar Raman.
As a part of its asset-light strategy, L&T has identified some non-core operations that it wants to exit. While the company denied media reports that it is in a pact to sell eight roads, and a power transmission project to Edelweiss fund for Rs 7,000 crore, the management said that it is hopeful of closing the deal for the sale of the assets in the current fiscal.
“The approach will be to sell our investment in the platform, which is a work in progress. Investment in infrastructure is a very challenging space and today largely it is the international funds which are interested,” Raman said.
“We are careful that we want to sell it to an agency or investor who will actually take the platform forward…we are making progress with every quarter.”
The company has also identified its thermal power generation unit, the Nabha power plant in Punjab for divestment. Commenting on it, Raman said, “Nabha Power is a work in progress because it is a thermal project, which has limited takers among people who already have the capacity and want to consolidate.” He said that the project’s ability to run at a high plant load factor will lure strategic investors.
With regards to the third divestment target, L&T Metro Rail (Hyderabad), the company said it is working on a de-risking plan before it can divest it. The project, which was built for Rs 18,000 crore, has a concession agreement with the state to operate it for 35 years. The project was marred with delays due to right-of-way issues and issues with approvals, leading to cost overruns. The revenue from the project did not match the initial projection and was further hit by Covid-led disruptions.
Raman said that L&T is working on reducing risk in the Hyderabad metro project by refinancing debt, monetising real estate assets, seeking government grants, getting a co-investor, and increasing ridership.
SN Subrahmanyan, chief executive officer and managing director of L&T had told Moneycontrol in an interview in May that the company aims to close at least two of its major divestment plans to become a zero-debt company, excluding the debt of its non-banking financial arm L&T Finance, by the end of 2022-23.
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