By Nuvama Research
L&T Technology Services (LTTS) will acquire the Smart World & Communication (SWC) business of its parent firm, Larsen & Toubro (L&T) for a cash consideration of Rs 800 crore. Smart World & Communication was founded in 2016 to cater to the demands in smart cities, address opportunities and provide smart solutions in the areas of end-to-end communications, city surveillance and intelligent traffic management system for the Government as well as enterprises. It has an employee base of over 700 engineers from diversified technology domains and has crossed an annual revenue of Rs 1,000 crore. The acquisition is expected to be completed on or before 31 March 2023, subject to satisfaction of conditions precedent identified under the business transfer agreement. The proposed acquisition will open new avenues of growth in 5G, digital products & AI, and sustainability.
We remain positive on the LTTS, as we see its strong fundamentals, impressive clientele and capabilities across segments help deliver strong earnings growth over the next three years. In the near-term however, we remain cautious on the entire engineering research and development (ERD) space, given the likely impact of slowdown in US/EU on the discretionary-spend-based ERD business. LTTS was established through a group restructuring exercise by the L&T Group, wherein integrated engineering services of L&T and product engineering services business of L&T Infotech were transferred to LTTS.
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