Shares of L&T Technology Services will be in focus on Friday, March 27, as JP Morgan has maintained a "neutral" rating after the company announced divestiture from Smart World Communications (SWC). The brokerage has set a target price of Rs 3,500 on the stock.
JP Morgan, in its recent note, said that L&T Tech's SWC business was sold at a haircut. The unit has been sold to AMI Paradigm Solutions for Rs 4.5 billion on a slump sale, at a 45% haircut, as this business was bought for Rs 8 billion.
SWC's revenues have been flattish. In FY25, the unit's revenue was Rs 10.3 billion, compared to Rs 10.98 billion in FY22, indicating no growth over a three-year period. "We believe that given the lack of synergies between SWC and the core ER&D business, it is the right decision to sell SWC," the note read.
How will the sale help L&T Tech?
JP Morgan believes that this sale will help L&T Tech in three ways.
- The transactions is expected to reduce revenue volatility, as SWC used to have strong fourth quarter but then revenues declined in first quarter, hence making the quarterly revenues more stable.
- SWC's EBITDA margin was at 8-10%, lower than the company average of 16.7%, thereby helping margins improve post the sale.
- SWC had high receivable days of 400, which had led to Days Sales Outstanding jumping from 90 days prior to the acquisition in FY23 to 105 days post acquisition in FY25, hence this sale is expected to bring down DSOs.
On Wednesday, March 25, L&T Tech announced to sell and transfer of the SWC Unit of the company, on a slump sale basis, to AMI Paradigm Solutions Private Limited. The transaction is expected to be completed on or before Sept. 30, 2026.
Highlighting the rationale behind the sale, L&T Tech said that it plans to accelerate focus across manufacturing, industrial, and technology-led Enterprise sectors and pivot on Engineering Intelligence, according to the company's next 5-year roadmap.
In view of the evolving technological trends and accelerated pace of disruptions, L&T Tech informed that it plans to boost focus and investments on six large technology bets.
In terms of financials, the revenue of the SWC for FY 2024-25 was Rs 1,027.95 crore, around 9.63% of L&T Tech's consolidated revenue as on March 31, 2025. The net worth of the unit for FY 2024-25 was Rs 445.89 crore, constituting 7.31% of the tech firm's net worth as on March 31, 2025.
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