L&T in talks to sell unit for $3-billion

Larsen & Toubro is in talks with several engineering firms to sell its electrical and electronics unit in a deal that could be worth up to $3 billion, two sources with knowledge of the matter said on Friday. Larsen, India's top engineering and construction firm, is in talks with France's Schneider Electric and US diversified industrial firm Eaton, among others. A deal could be sealed in the next few weeks, they added, declining to be named because the details were not public yet.

A Larsen spokesman declined to comment on the matter. The electrical and electronics division manufactures switchgears, circuit breakers and switchboards and accounts for 7% of Larsen's revenue.

The business is expected to report revenue of R3,500 crore ($786 million) for the fiscal year ended March, but has been facing rising cost and competitive pressures in recent quarters.

Larsen is looking to value the business at three to four times annual revenue, one of the sources said. However, sector analysts put a likely valuation at 2.5 to 3 times revenue .

Earlier this year, Larsen said it would reorganise its operations into nine businesses to simplify its structure and better manage growth. The country plans to spend $1.5 trillion in the 10 years to 2017 to revamp its infrastructure and has also outlined plans to add generation capacity of 100,000 mw from 2012 to 2017, attracting global manufacturers optimistic on growth in Asia's third-largest economy.

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