L&T Info builds $150m warchest for acquisitions

L&T Infotech, the information technology solutions arm of the $2 billion Larsen and Toubro conglomerate, has put together a warchest of Rs 450-675 crore ($100-150 million) for acquisitions.

The company is hoping to bring two or three $40-$45 million companies into its fold over three years.

L&T group is also planning a foray into business process outsourcing (BPO), which may involve hiving off L&T Infotech's engineering process outsourcing business into a separate company along with strategic acquisitions.

Acquisitions will include Indian as well as US-based companies operating in enterprise resource planning and banking software solutions.

"We are looking at buying a majority share (51 per cent or more of its equity holding) in these target companies. Our idea is not to take over a company and rip it apart completely, we want the company's management to continue running the company post-acquisition too," said V K Magapu, chief executive officer (CEO) of L&T Infotech.

The company, a 100 per cent subsidiary of the L&T, is also the conglomerate's maiden IT venture but the company has bigger plans to cash in on the outsourcing rush the country is experiencing at present, revealed Magapu.

"We are looking at high-end BPO work including value-added engineering. If our engineering process outsourcing business grows to fairly sizable dimensions then we can hive it off to form a separate BPO company under the L&T banner. We are also scouting around for acquisitions in the same area," confirmed Magapu.

The company expects the proposed acquisitions along with organic growth will propel its turnover from the current Rs 369 crore (2002-03) to Rs 2,700 crore ($600 million) by 2007.

The company, which grew by 40 per cent last fiscal, is hoping to notch up a 75 per cent growth in the current fiscal.

L&T Infotech's initial public offer (IPO) is expected in 2005 when it hopes to scale a turnover of Rs 900 crore ($200 million). L&T is looking at divesting around 20-25 per cent of its stake through the IPO.