L&T Technology Services scouts for acquisitions less than $50 million

Mumbai: L&T Technology Services Ltd, a unit of India’s largest engineering and construction company Larsen and Toubro Ltd (L&T), is looking at buying start-ups valued $50 million or less, chief executive officer Keshub Panda said, as the company prepares for an initial share sale.

L&T Technology is also focusing on the Internet of Things (IoT), and cloud and automation technologies, Panda said in an interview.

“We are scouting for small companies or start-ups that have revenues around $20 million and have less financial muscle to grow further. We would not be making acquisitions for more than $50 million. Our team is working on it,” Panda, who is also a member of the board, said last week.

L&T Technology Services, founded in August 2013, is an engineering services provider in areas including industrial products, medical devices, transportation and telecom.

Last year, A.M. Naik, group executive chairman of L&T, decided to take L&T Technology Services public once it crosses $500 million in revenue --a target it has achieved.

In 2009, when Panda joined L&T Technology Services, the firm was a $70 million company with 1,500 employees. It is now a $500 million entity with 10,000-plus employees. The company has three delivery centres in the US through the acquisition of Dell Engineering Services, a unit of Dell Inc.

L&T Technology Services has campuses in Baroda, Bengaluru, Mysore, Mumbai, Chennai and Hyderabad, which have diverse centres of engineering innovation in embedded systems, plant and mechanical engineering addressing automotive, aerospace, telecom, medical and industrial products.

The firm that offers solutions for product design, prototyping and testing and embedded system design, among others, partnered US-based Proximetry, Inc., an IoT device management solutions provider, in January to cater to the market of connected devices that are critical when operating electrical substations and large industrial facilities.

IoT is defined as a network of “things” that include identifiable devices, appliances, equipment and machinery of all forms and sizes with the intelligence to seamlessly connect, communicate and control or manage each other to perform a set of tasks with minimum intervention.

In June, L&T Technology Services acquired a 74% stake in Thales Software India Pvt. Ltd for an undisclosed sum to expand its avionics business.

Last week, L&T Technology and Cisco Systems Inc. jointly launched a global IoT solutions centre in Bengaluru that will demonstrate IoT solutions for various industry verticals.

”We are a strategic partner for Nasscom’s IoT Centre of Excellence, a combined initiative with Department of Electronics & IT and ERNET India,” Panda said, adding that the next phase of growth for the company would come from plant automation using IoT, cloud and analytics.

Effective industrial plant design for manufacturing affordable products and deep knowledge of efficient sourcing channels are helping the company differentiate in the market place, Panda said.

“Innovation is the key differentiator for L&T Technology Services,” Panda said.

India-based engineering research and development (R&D) service providers are building newer capabilities in support engineering functions such as supply chain, regulatory compliances and manufacturing engineering to address a larger engineering opportunity in aerospace and medical devices verticals, according to a 6 October report by Bengaluru-based Zinnov Management Consulting.

The report said IoT was becoming a critical investment area for global R&D spenders and companies are exploring partnerships with R&D service providers for IoT products.

As a result, service providers are investing in building competency in new-age technologies around analytics, usability engineering, communication technologies to partner with R&D spenders in their IoT initiatives, it said.

Overall India-based R&D globalization and R&D services market reached $20 billion in 2015, up 9.9% over 2014—the R&D services market at $7.76 billion and R&D Globalization market (captives) at $12.25 billion.

Indian Engineering R&D service providers, which grew 12.67%, outpaced global engineering service providers’ growth of 8.7%. Automotive, medical devices and software products were the high-growth verticals for India-based engineering R&D service providers, Zinnov said in its report.

“Earlier, a customer used to design with available technology. Now, we are enabling our customers with the best-of-breed technologies to implement their designs that users can afford easily,” Panda said.

Panda added that the company is evaluating the cross-applications of innovations to create a new stream of revenue and innovation using data analytics, sensor technology and machine-to-machine communication capabilities.