L&T shares slip as Rs 6,297 crore realty deal kicks in—What investors should watch

Larsen & Toubro (L&T) shares were trading slightly lower on Tuesday as the company announced a major restructuring move in its real estate operations. The stock was at Rs 3,978.30, down 0.46 per cent, at 10:15 AM. The stock opened at Rs 3,990, touched a high of Rs 3,990, and hit a low of Rs 3,949.10. The company’s market cap stands at Rs 5.47 lakh crore. Its 52-week range is Rs 2,965.30 to Rs 4,140.

L&T transfers realty business to subsidiary

Infrastructure major L&T said it has approved the transfer of its realty business to its wholly-owned arm, L&T Realty Properties Ltd, marking the start of a phased consolidation of all real estate assets under one structure.

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The board cleared the plan through a slump sale via a scheme of arrangement, subject to regulatory approvals. In a regulatory filing, L&T said L&T Realty Properties will issue 393.53 lakh shares with a face value of Rs 10 each at a premium of Rs 6 each to the company. The total value of the deal is Rs 6,297 crore.

“The Board of Directors of L&T has approved the transfer of its Realty Business Undertaking (Realty BU) to L&T Realty Properties Ltd,” the company said in a statement.

Need for a unified real estate structure

Chairman & Managing Director S. N. Subrahmanyan said that L&T Realty must operate independently and expand its project pipeline by strengthening its land bank and pursuing joint development opportunities.

“This requires periodic capital infusion, and therefore, it is essential to bring all our real estate operations under a singular corporate structure and bolster L&T Realty’s position as a unified brand for real estate,” he said.

L&T’s realty operations

L&T created its Realty BU in 2007 to develop residential and commercial projects on its land parcels. In 2011, it set up L&T Realty as a subsidiary to build projects on both L&T-owned land and joint-venture opportunities with partners.

The current consolidation aims to streamline operations, improve capital allocation, and push growth in the company’s real estate vertical.

Brokerage view: Motilal Oswal

In its recent brokerage note, Motilal Oswal maintained a Neutral rating on L&T Technology with a target price of Rs 4,400.