Whispers that L&T will list its oil and gas arm

Vol 21, PW 9 (08 Feb 18) People & Policy

If you're wondering why Larsen & Toubro Hydrocarbon Engineering (LTHE) is bidding so aggressively in EPC tenders in India and overseas, here's your answer.

This report learns L&T wants to showcase a full order book for its oil and gas subsidiary ahead of an imminent stock market launch. Well-placed sources tell us the planned listing is the idea of SN Subrahmanyan who took charge on July 1, 2017 as managing director and CEO of parent company L&T.

Subrahmanyan's logic is simple: if LTHE is listed it can borrow independently from banks freeing up parent L&T to focus on other areas. Key LTHE staff have been told the stock market listing process will begin in the next few months, provided there's a large order book.

"This IPO will be oversubscribed because LTHE is a subsidiary of L&T," says an industry source. "If it (LTHE) has a large order book management can demand a good premium to the share price." When contacted an L&T spokesman neither confirmed nor denied the plans but said in an email: "LTHE has a well-established process for bid preparation and estimation and adopts a disciplined approach towards bidding.

Customer satisfaction and sustainable growth for the business are primary drivers." Some say the planned listing reflects L&T's ambition to expand in the oil and gas sector. Until now LTHE has been supported by parent L&T with working capital and project finance.