L&T withdraws plans for listing L&T Infotech

Says withdrawing due to change in offer structure and other considerations

Larsen & Toubro says it is not proceeding with the earlier plan for a Rs 2,000-crore Initial Public Offering (IPO) of shares in its L&T Infotech. The draft prospectus was withdrawn with effect from Monday.

When asked, Deepak Morada, vice-president of corporate brand management and communication, told this newspaper: “We have withdrawn the IPO because of market conditions. And, we want to relook at our pricing. The IT sector undergoes changes on a quarterly basis and it is only fair to investors, in any issue, that they take a call on the financial performance of the most recent quarter.”

The draft prospectus gave details about the company's financial performance till end-September 2015. Asked by when a new draft would be filed, Morada said: “At this point, I cannot comment. There is a possibility of approaching the markets again.”

On the offer structure and the possibility of it changing, he said: “L&T's stake in the company will come down. How much is yet to be decided. It’s more about price discovery.”

Some sources said in the past quarter, the IT services segment had been looking well and this could have led the promoters to review the pricing. “I think it’s more about price discovery,” said a banking source.

The firm was planning to sell 17.5 million shares (10.8 per cent) in L&T Infotech through the IPO. According to reports, L&T was eyeing a valuation between Rs 16,000 crore and Rs 18,000 crore. Kotak Investment Banking, Barclays, Citi and ICICI Securities were handling the IPO.

Other than market conditions, a look at some deals the sector has seen hints at an improving market and demand among investors. Recently, private equity company Blackstone acquired IT services firm Mphasis for $1.1 billion, one of the largest such investments in the sector. HCL Technologies acquired mid-cap engineering services firm Geometric in a share swap deal for a little over $200 million.

Also, recent comments from Tata Consultancy Services and Infosys hint at a better FY17. According to a recent Gartner report, spending in the IT services market is expected to be $929 bn in 2016, up 2.1 per cent from 2015.

A stronger outlook for Japan and India is nearly balanced by a weaker outlook in Brazil, China and South Korea.

L&T Infotech derives about 65 per cent of revenues from the US, another 20 per cent from Europe and the balance from elsewhere. It has presence in all major segments and has around 200 clients.