The focus is on L&T’s agreement to sell its Nabha Power subsidiary to Torrent Power. CLSA expects the transaction to unlock around ₹26 per share in value and sees the potential for a special dividend.
The brokerage said L&T’s decision to exit Nabha Power, a relatively low return-on-equity concession, reinforces its stated objective of achieving an 18% ROE by FY26, a target first outlined in FY21 when ROE stood at 9.8%.For FY25, ROE has already improved to 16%, indicating progress on that roadmap.
According to CLSA, the Nabha Power divestment should further enhance ROE, particularly if surplus cash is returned to shareholders.The equity value of the deal is ₹3,660 crore, compared with a sum-of-the-parts valuation of ₹3,800 crore.
The brokerage said that some profit booking could reflect in the profit and loss account, as L&T had earlier marked down this investment.
With the exit from Nabha Power, L&T is expected to return surplus capital to shareholders through a special dividend as it works towards meeting its 18% ROE goal in FY26.
Of the 34 analysts covering L&T, 28 have a ‘Buy’ rating, four recommend ‘Hold’, and two have a ‘Sell’.
Shares of Larsen & Toubro ended 0.63% higher at ₹4,200 on Monday and have gained over 30% in the past 12 months.
