Larsen & Toubro (L&T) is understood to have deferred its plans to list its business trust on the Singapore Stock Exchange indefinitely due to disagreement on valuation. The company was planning to raise around $700-800 million through this listing.
The company has not filed its prospectus by the June 30 deadline as it was not too keen to list the trust at a discount. Investors’ feedback is believed to be far below the company’s expectations.
The company could have sought extension of the deadline. It, however, did not seek one, indicating that the plan had been shelved for now. It will have to apply afresh, if it wishes to revive the plan later.
The company did not respond to queries on this matter.
“The most important thing is that the company was not happy with the valuation and the feedback it was receiving from investors at road shows. When the listing was planned last year, the Indian economy was in a bad state. But now the situation has dramatically changed. Valuations of infrastructure assets have gone up sharply.
Now the company may look at a newer date,” a merchant banking official said.
In October 2013, the company had announced plans to list its business trust encompassing the projected revenues of six road projects owned by its subsidiary L&T Infrastructure Development Projects Ltd (L&T IDPL) to deleverage the balance sheet.
L&T’s board had cleared this proposal, and the Singapore Stock Exchange granted its approval in April 2014. L&T had also received approval from Monetary Authority of Singapore, their central bank.
L&T IDPL, which is primarily into public-private partnership (PPP) projects, has 22 assets with project costs of $7 billion including toll roads. The business trust would have contained the rights to earn the revenue of six road projects in India. Business Trusts are special purpose vehicles which hold some of the company’s assets that have potential to grow and in which investors put their money.
Such Trusts can be listed separately. A Business Trust is a repository of the projected revenue only and the ownership of the assets continues to be retained by the company, in this case with L&T IDPL.
India does not allow listing of such trusts forcing L&T to opt for Singapore. L&T IDPL has a debt of around Rs.12,000 crore.
The merchant bankers of this proposed listing included Standard Chartered, Nomura, Deutsche Bank, Morgan Stanley and DBS.
Recently, a Canadian Pension Fund announced plans to pick up minority stake in L&T IDPL for Rs.2,000 crore.
In May, L&T IDPL and Tata Steel sold Dhamra Port project for Rs.5,500 crore. As per a new plan, L&T is going for an asset-light model, and will concentrate on its core area of engineering and EPC contracts.