Shares of L&T Technology Services (LTTS) fell more than six per cent in Friday’s trade after the company announced its decision to acquire the Smart World & Communication (SWC) business of parent Larsen & Toubro (L&T). L&T Tech, in an exchange filing, said it has agreed to acquire the Smart World & Communication (SWC) Business of L&T, enabling LTTS to combine synergies and take offerings in Next-Gen Communications, Sustainable Spaces and Cybersecurity to the global market.
The stock cracked 6.22 per cent to hit a day low of Rs 3,414 over its previous close of Rs 3,640.50. A total of 15,000 shares changed hands today on BSE, which was higher than L&T Tech’s two-week average volume of 8,582. Turnover on the counter stood at Rs 5.19 crore, commanding a market capitalisation (m-cap) of Rs 36,274.69 crore.
The scrip was last seen trading lower than 5-day, 20-, 50-, 100- and 200-day moving averages. L&T Tech has an average target price of Rs 3,759.67, Trendlyne data showed. The stock has a one-year beta of 1.36 per cent, suggesting high volatility.
The counter’s 14-day relative strength index (RSI) came at 29.30. A level below 30 is defined as oversold while a value above 70 is considered overbought. The company’s stock has a price-to-equity (P/E) ratio of 37.85.
L&T Tech said, SWC 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 and has crossed an annual revenue of Rs 1,000 crore.
SN Subrahmanyan, Chief Executive Officer & Managing Director of L&T, said, “By combining with a global engineering services player like LTTS, its offerings across next-gen networks, smart spaces, and cybersecurity will help unlock new synergies across the technology spectrum. LTTS is well-positioned to take these capabilities to the global market, cementing its robust leadership in the engineering and technology domain.”
The acquisition is subject to customary closing and approvals, L&T Tech said, adding that closing is expected to be achieved within 3 months.
Kotak Institutional Equities has assigned a ‘sell’ rating on the counter due to “expensive valuations”.
“LTTS announced the acquisition of SWC business of its parent, L&T Group, on a slump-sale basis for a consideration of Rs 800 crore. Per LTTS, this acquisition augments its capabilities in its big bets of 5G, sustainability and digital products,” the brokerage stated in its report.
Kotak said it retained “a ‘sell’ call on expensive valuations, which do not adequately bake in risks from a potential pull-back in discretionary tech spends.”
“We do not expect material revenue synergies post-acquisition,” it added.
Meanwhile, Indian equity benchmarks fell in today’s deals, dragged by technology and consumer stocks.
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