The Hindu : Business : L&T striving to become an `Indian MNC'

Online edition of India's National Newspaper
Friday, Aug 26, 2005

Business

Business

L&T striving to become an `Indian MNC'

Ramnath Subbu

Expects a quarter of its revenues from overseas operations

A. M. Naik

MUMBAI: Larsen & Toubro (L&T) has set itself aggressive overseas plans and over the next five years, the company sees a quarter of its revenues coming from overseas operations. A. M. Naik, Chairman and Managing Director, is clear about making the company `an Indian multinational company (MNC)' and its international thrust is part of project `Lakshya,' the five-year growth plan that it has outlined in consultation with the Boston Consulting Group (BCG).

The largest business for L&T is the engineering and construction (E&C) division, which comprises construction, E&C projects and heavy engineering and contributes well over 80 per cent. The other divisions are electrical and electronics, infotech and others.

Speaking to The Hindu, Mr. Naik said by 2010, the company saw revenues (including India) totalling around $6 billion with around $1 billion from hydrocarbons, $2 billion from infrastructure (including water), around $500 million each from power and metallurgical and from IT services. Capital goods and engineering equipment (heavy engineering, valves, construction machinery and industrial products) will contribute another $2 billion. "By 2010, we have targeted 25 per cent of business from overseas and thereafter at no point of time will it go above 35 per cent as our primary job is to build a strong India and make L&T a multinational company,'' emphasised Mr. Naik.

Thrust on West Asia

Total overseas revenues will increase from the current $500 million (Rs. 2,200 crore) to $1.5 billion (Rs. 6,500 crore) by 2010 of which $1 billion will be from West Asia alone. The region now contributes $340 million (Rs. 1,500 crore) and hydrocarbons is the main focus area.

For a start, L&T will set up a company each in Qatar, Kuwait and the UAE in the next six months. It is also setting up an engineering unit in Abu Dhabi. "We will be governed by local laws — joint ventures where we have a majority or take management control and share ownership,'' said Mr. Naik.

L&T is also looking at a few countries in Africa for construction and turnkey projects. Mr. Naik ruled out looking at Far East Asia for construction because of the Chinese and Malaysian dominance. "They have ambitions to enter India so I do not want to get into a price war situation.''

That has not deterred L&T from setting up offices in Shanghai and Beijing. It has begun outsourcing components and raw materials besides setting up a small switchgear-manufacturing unit. "We want to make circuit breakers and do sourcing till March 2006 and then we will see what the experience has been. We will look to source low-end valves from China.''

Structurally, L&T has been steadily exiting `non-core' areas having exited packaging, dairy equipment, cement and tractors and it is in the process of exiting the glass business. "Any business unit which is not growing over the next 3-4 years and is sub-optimal will be reviewed annually and what does not make sense we will discontinue with,'' said Mr. Naik.

L&T Infotech grew 50 per cent last year and Mr. Naik is confident of a similar growth in the current year and a likely initial public offering (IPO) by March 2008.

It looks at water as a thrust area and executes projects worth around Rs. 800 crore. Plans are afoot to start an engineering knowledge centre in water and participate in further water privatisation.

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