MUMBAI: American private equity firm KKR has emerged as a frontrunner to buy a large stake in Larsen & Toubro’s industrial valves unit, a source familiar with the matter told TOI. The deal, if closed, will be the latest bet by KKR in the country’s manufacturing and industrial sector after its investment in JBF IndustriesBSE -3.32 % last year.
L&T Valves, a more than five decade-old-company, clocked revenues of Rs 1,465 crore and profits of Rs 138 crore in fiscal 2016. The unit manufactures industrial valves for key sectors like oil & gas, power, and chemicals, among others.
Other investors, including London-based private equity fund Actis, have fielded interest in L&T Valves, which has three manufacturing facilities in the country. But KKR is said to be more aggressive. KKR has been working on the deal for the past six months and has had several meetings with the Larsen & Toubro leadership, which is actively working on divesting non-core businesses like valves and hydrocarbons.
The conglomerate’s chairman A M Naik will decide on the eventual investor and the quantum of the stake it would sell in the valves unit, a decision which is expected within a few weeks, sources said. Last year, media reports said Larsen & Toubro was seeking a $700-million valuation for an outright sale of the asset.
The eventual plan of the $16-billion Larsen & Toubro is to exit the industrial valves business completely and the move to sell part of its 100% stake is towards that direction. The diversified enterprise’s stated intention is to get out of small, non-core businesses which have revenues of Rs 1,000-1,500 crore.
L&T Valves accounted for just 1.18% of the construction and engineering company’s net assets and 2.7% of its profits. The conglomerate, over the last few years, has been divesting several non-core units such as petrol pump vending machines and plastic moulding machines businesses to rationalise its wide portfolio.
Naik confirmed that the company is in talks with investors to sell a stake in the valves business but said that no deal has been sealed yet. KKR India head Sanjay Nayar declined to comment on the story. KKR, which set up its India operations nine years ago, has invested more than $2 billion in various companies till date.
L&T Valves started as a joint venture between Larsen & Toubro and UK’s Serck Audco in 1961. Later, following the acquisition of Serck Audco by Flowserve, the latter continued as a partner in the India valves business. However, in 2013, Larsen & Toubro bought out its foreign ally’s stake, thus gaining 100% control of the valves business, which is a leading player in the segment.
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Source: Economic Times
