To drive growth in its information technology and engineering businesses, Larsen & Toubro (L&T) on Friday announced restructuring of L&T Infotech and L&T Integrated Engineering Services.
This indicates the company has opted to focus on driving organic growth, rather than wait for an inorganic target. Earlier this year, speculations were rife the group might look at acquiring mid-cap IT services firm Hexaware. However, owing to a valuation mismatch, the deal failed to materialise. Earlier, L&T Infotech had evinced interest in acquiring Mahindra Satyam (erstwhile Satyam Computer Services) and Patni Computer Systems.
Now, L&T Infotech has been reorganised into two business clusters---industrial and services. To head these, the company has roped in industry veterans Mukesh Aghi, who headed the India operations of France-based IT services and consulting group Steria Group, and Vivek Chopra, group president of US-based IT services company CSC and head of its India operations.
After Sudeep Banerjee resigned as chief executive in 2011, L&T Infotech had roped in V K Magapu, whole-time director & president (IT, engineering services and corporate initiatives) to steer the company.
Under the restructuring plan, Aghi would head the 'services' cluster, which would include banking, financial services and insurance (BFSI). Verticals recently forayed into-travel & logistics, media & entertainment and healthcare-would fall under this segment, which would include testing, mobility, infrastructure management system, business intelligence and data warehousing.
Chopra would head the 'industrials' cluster, which would leverage the company's strengths and heritage to address manufacturing plants and establishments, including wholesale and retail. This segment would also account for establishments dealing with energy and utilities, SAP, enterprise integration and manufacturing execution systems.
In the earlier structure, manufacturing contributed 30 per cent to the company's revenue, BFSI about 40 per cent, energy and utilities 15 per cent and telecom about 10 per cent.
L&T Integrated Engineering Services (IES) would also be rebranded as L&T Technology Services. Under the new set-up, the telecom vertical would now be part of the IES business. This business would continue to be headed by Keshab Panda. IES revenue for the quarter ended June stood at Rs 295 crore, a rise of 69 per cent on a year-on-year basis. The operating margin of the business was 32.3 per cent.
Panda would also join the L&T Infotech board, along with Aghi and Chopra. L&T believes the restructuring would help the company expand its businesses. L&T Infotech's revenue for FY12 was Rs 3,166 crore, while profit after tax stood at Rs 419 crore.