ITC Could Do Just as Well as L&T With Spin-Offs

With a change of guard, a split could be also on the ta­ble. While some busi­nesses are yet to scale up, a few like pa­per could be a can­di­date

The Economic Times - - Smart -

The pos­si­bil­ity of a split is not ill­founded with L&T set­ting a strong prece­dent. It has listed two of its sub­sidiaries — L&T In­fotech and L&T Fi­nance — and in the process cre­ated ad­di­tional share­holder value of ₹ 30,000 crore. The com­pany has plans to spin off its other non-engi­neer­ing busi­nesses for even­tual list­ing. This will nar­row down the con­glom­er­ate dis­count and cre­ate bet­ter value for ex­ist­ing share­hold­ers.

Be­sides, the ar­gu­ment of ‘too di­verse to han­dle’ may also gain ground, un­der­scor­ing the need for each busi­ness to have a sep­a­rate man­age­ment over­sight. Glob­ally, tobacco ma­jors such as Philip Mor­ris and RJR Nabisco di­vested their foods busi­nesses to ex­clu­sively fo­cus on ex­pand­ing their core ar­eas.

ITC stock hit a new high of ₹ 291.95 on Tues­day. While GST is the trig­ger in the short term, there is no sig­nif­i­cant long-term trig­ger to drive val­u­a­tions to a fresh high. In­vestors wouldn’t be un­re­al­is­tic in ex­pect­ing it to even­tu­ally go ahead with a busi­ness split.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.