Highlights of Underweight Rating:
- L&T Technology Services’ shares experienced a significant decline of 5% on January 13, and have seen a 38% decrease in the past year.
- The company announced plans to acquire its parent company’s Smart World & Communication (SWC) business for 800 crore Rupees.
- The acquisition is expected to be completed within three months, pending fulfillment of conditions outlined in the agreement.
- SWC provides intelligence solutions for communications, safety and smart solutions, and cybersecurity.
- The acquisition will enable L&T Technology Services to offer next-generation communications, sustainable spaces, and cybersecurity services to the global market.
- Global research firm Morgan Stanley has a negative outlook on the stock with a target price of 3300 Rupee per share and believes the transition of SWC’s domestic business to a global clientele will negatively impact sentiment.
Details of Underweight Rating:
The shares of L&T Technology Services decreased by more than 5% during the morning of January 13th and were the biggest losers among mid-cap stocks with a decline of 38% in the past year.
On January 12th, the pure-play engineering services firm, a publicly-listed subsidiary of Larsen & Toubro Limited (L&T), announced an agreement to acquire the Smart World & Communication (SWC) business of the parent company. SWC was established in 2016 to meet the demands of smart cities, smart utilities, and digital infrastructure. The acquisition of the SWC business is valued at Rs 800 crore, according to the company’s statement.
The acquisition process is expected to be completed in a period of three months, provided that all conditions outlined in the agreement are met. LTTS reported that the SWC business generated an annual revenue of Rs 1,098 crore for the financial year 2021-2022.
SWC is a provider of intelligent solutions that operates in three areas: communications, safety and smart solutions, and cybersecurity. Through this acquisition, LTTS stated that it will be able to merge the strengths of the two companies and offer advanced communications, environmentally friendly spaces, and cybersecurity products to the global market.
Morgan Stanley, a global research firm, has kept its negative outlook on the stock with a target price of Rs 3,300 per share. The acquisition of the Smart World & Communication (SWC) business by the parent company is one of the biggest merger and acquisition deals for the company. The brokerage firm stated that the shift of SWC’s domestic business to a global client base will negatively impact investor sentiment.
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