The article reports that the Larsen & Toubro (L&T) board is set to consider a fundraising plan via a debt issue on March 21. The company is planning to raise funds to deleverage its balance sheet, refinance existing debt, and enhance its financial flexibility.
L&T, one of India’s largest engineering and construction conglomerates, has been under pressure to restructure its debt obligations due to the country’s economic slowdown and a significant decline in infrastructure spending. The company’s debt-to-equity ratio has increased to around 1.1, making it challenging to maintain its growth momentum.
The proposed debt issue is expected to be a combination of domestic and international bonds, with the company dominating the issuance of masala bonds, which are special type of offshore bond sold to Indian companies that are convertible into foreign currency. The exact quantum of the fundraising plan has not been disclosed, but it is expected to be substantial.
The move is seen as a strategic decision to reduce the company’s debt burden and improve its credit profile. The raising of funds will also enable L&T to take advantage of opportunities in the infrastructure sector, which is expected to recover in the medium term.
The company has been expanding its presence in various segments, including infrastructure, real estate, and technology services, to diversify its revenue streams and reduce reliance on any one segment. The planned debt issue is expected to provide the necessary funding to accelerate these growth initiatives and strengthen its market position.
The timing of the debt issue is strategic, with the Indian government’s infrastructure development plans expected to gain momentum in the next few years. The company’s involvement in key projects such as the Delhi-Mumbai Industrial Corridor, the Mumbai-Ahmedabad High-Speed Railways, and the Ganga Jal Project, among others, is likely to provide a significant boost to its topline growth.
Overall, the proposed debt issue is seen as a positive step by L&T to strengthen its financial position and enhance its competitiveness in the Indian and global markets. The move is expected to receive a positive response from investors, given the company’s strong track record and growth prospects.