L&T to buy stake in Ramaiah's oil business

ACTION TIME ON DEAL STREET

50% stake of the group's upstream business had been sold to L&T.

Larsen & Toubro, the country's largest engineering and construction company, has signed an agreement to acquire a 50 per cent stake in the Bangalore-based privately held MS Ramaiah group's upstream oil and gas project related engineering business for an undisclosed sum.

A formal announcement is expected to be made in the next few weeks, after regulatory approvals are obtained.

L&T executives were not available for comments. However, a company source confirmed the development and said: "L&T has entered into an agreement to acquire a 50 per cent stake in the MS Ramaiah group's engineering business related to oil production and exploration. This is a strategic fit for L&T's core line of business."

"A new legal entity, in which L&T and Valdel Corporation (the Ramaiah group's holding company) will be equal partners, is being formed and is likely to be named L&T-Valdel. The necessary approvals from various authorities are in the process of being obtained," the source said.

Valdel Engineers & Constructors, the MS Ramaiah group's engineering, procurement and construction service provider for the hydrocarbon, chemical, petrochemical, power and metallurgical industries, has been split for the deal into two separate companies, one housing its upstream business and the other the downstream operations.

The downstream business will continue to be known as Valdel Engineers & Constructors and will be wholly-owned by the group. Valdel Engineers & Constructors has orders from ONGC and Cairn Energy, among others, to set up major projects.

An MS Ramaiah group source told Business Standard a 50 per cent stake in the hived-off upstream business had been sold to L&T.

L&T had earlier told Business Standard it was in the process of bagging major oil and gas projects in India. So, the acquisition makes sense for the engineering giant.

Not very long ago, the MS Ramaiah group put three of its companies, John Brown Technologies, AmSoft Information Services and Sun Mart, under a single holding company, Valdel Corporation.

Established in 1991 as John Brown Engineering (I) Pvt Ltd, Valdel Engineers & Constructors has grown from providing specialised design and engineering services to the oil and gas industry to becoming a fully diversified engineering company that offers a spectrum of services. The group is also foraying into the retail and BPO industries and has interests in the telecom and financial sectors.

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Going all out

OIL INTERESTS Valdel Engineers & Constructors is the MS Ramaiah group's engineering service provider for the hydrocarbon, chemical, petrochemical, power and metallurgical industries

GROUP DYNAMICS The group has split its upstream and downstream operations into two companies for the deal

SMART MOVE L&T is in the process of bagging major oil and gas projects in India. So, the acquisition of the upstream interests of Valdel makes sense for the engineering giant