L&T—On to A New Plane of Achievements

L&T—On to A New Plane of Achievements
"The Larsen & Toubro is known for engineering and innovations. Together these qualities carry L&T through exciting opportunities and into a promising future. Undertaking challenging projects in India and abroad are a matter of routine for the company whether it is engineering, innovation or infrastructure development... The E&C has always been the core business of company. The L&T has set an ambitious target of 20-25% growth in our construction business's Order Inflow for 2009-10," says Mr K. V. Rangaswami, President, Construction and Member Board–L&T in an interview with S.A.Faridi.

The company's E&C businesshas driven its performance. How much the big-ticket construction related projects and reduction in commodity prices leading to increase margins have contributed to this turn around. What has been the growth in order inflow in construction business during 2008-09, including the share of international orders? How much growth intake the company expects during 2009–10?
The E&C business has always been the core of L&T. Close to 85% of our revenue comes from E&C business. Consciously we have moved towards execution of large cap construction projects over the last few years. Keeping the management focus on fewer projects helps in timely delivery, better quality and enhanced customer satisfaction apart from improved utilization of resources. We had an impressive 44% growth in the Order Inflow of our construction business for the year 2008–09. The latter half of last financial year witnessed squeeze in private Capex and projects were hard to come by. The current year is expected to be more challenging and projects will start to roll out once the credit situation eases and the newly formed Government kick starts investments in a big way. Despite this macro environment, we have kept an ambitious target of 20-25% growth in our construction business’s Order Inflow for 2009-10.

Over the period L&T has built finest highways, expressways, bridges, longest flyovers, highest viaducts, water supply systems, massive concrete structures and miles of macadam, and energy projects across the country. Is it possible to quantify highways and expressways projects in road lengths? At present in how many BoT projects the company is engaged in different parts of the country?
The total length of road completed is 1806 Kms which includes 71 km of expressway, 83 km of 6-lane highway, 800 km of 4-lane highway, 752 km of state highway, overseas –100 km (Sudan).

Our exclusive list of major and standalone projects in the category of elevated structures (Bridges, Elevated corridors, flyovers and viaducts) crosses 20 projects, and apart from number of major / minor bridges as part of our road projects.

At present we have four BoT projects for a total length of 500 Kms in hand and 3 Bridge projects under BoT are under execution.

The L&T is emerging as one of the strong players in development and construction of Metro rail systems, airports expansion and modernizationand ports up-gradation through JV route. Please name the companies with which L&T has forged joint ventures for these projects? What are the works already executed and the current status of the on ongoing projects?
Forging alliance with leading International players helps us get access to latest technologies, enhance our project management capabilities and exposure to contracts management know-how for large cap projects. We had both business JVs and technological partners. Some of them are: Hochtief GmBH for Ports, Dywidag, Strabag, Samsung, Shimizu and SUCG for Metros, Scomi for Monorail, Siemens, Woodhead, MeinHardt, HoK for Airports.

Our completed projects include Seabird (Naval base at Karwar), Breakwater and pump house for Shell LNG Storage terminal at Hazira, Delhi Metro–Phase I, Bangalore, and Hyderabad International airports.

Some of our on going projects are: Port facilities at Dhamra, Delhi Metro–Phase II, International airports at Delhi and Mumbai, Monorail.

The L&T has a strong presence in the GCC market. What are the important projects in hands at presentand company’s future plans to consolidate its position in the Gulf, Oman and other countries to garner more international revenues?
The company presence in Gulf is in 3 business sectors including Hydrocarbon, Power Transmission & Distribution, Buildings and Urban Infrastructure.

We execute residential towers and villas for leading developers like Nakheel, Maximus group of companies, Dubai sports city etc. Multiple substations and transmission line projects in and around Abu Dhabi / Al-Ain in UAE and across multiple locations in Oman.

The Company continues to focus on Gulf by forging alliances for enhancing capabilities and to increase scale of operations. The business prospects for the Infrastructure, Power Transmission and distribution businesses are promising. We have initiated various actions to consolidate our position in UAE and Oman to strengthen our presence. We are on the way to revitalize our JV Companies in Qatar and Saudi by forging new alliances with reputed companies.

Tell us something about your HRD initiatives, like establishing training facilitiesacross the country to impart construction skills and also induct best engineering talent at the entry levelto ward off manpower crunch?
Our HRD initiatives revolve around leadership development for middle /senior management levels, functional and soft skills training for engineers/managers and vocational training for skilled workmen.

We have training institutes at Chennai, Mumbai, Kolkata, Bangalore, Delhi, and Ahmedabad to train people on various construction skills. This initiative significantly support us in meeting our growing skilled workmen needs.

We follow a rigorous selection process to select right candidates for entry level i.e. Trainees (Graduates/Post Graduates/ Diplomas). We give them on-the-job comprehensive training for 15 to 24 months and make them thorough in systems, procedures and functional aspects.Our leadership development programmes focus on development of leadership qualities, succession planning and career planning.

What is the thought behind L&T's new tag line "It's all about Imagineering." How does holistically it reflect the diversified image and status as a global player in infrastructure space?
It's all about Imagineering' is new tagline coined for L&T. Imagineering is engineering coupled with imagination. This is something new, different, dynamic and daring and it leverages L&T's intrinsic character to launch itself onto a new plane of achievements consistently. L&T is known for engineering and innovations. Together these qualities carry L&T through exciting opportunities and into a promising future. This radically different tagline has in fact taken the company’s aspirations into the international market with global benchmarks.

While L&T makes the use of this tagline, the Construction Division of L&T in tune with the nature of business, its involvement also makes use of another tagline "We Build the Projects that Build the Nation" to establish its strongholds in Infrastructure and Nation building activities. Both taglines reiterate that the challenging projects in India and abroad are a matter of routine for L&T whether it is engineering, innovation or infrastructure development.

L&T appears to be quite optimistic about future push in infrastructure and is aiming at achieving 20-25% growth in top line in the next 2-3 years. What enabling business milieu the company looks to the new Government in terms of reforms in infrastructure sector, financial sector including rationalization in tax regime, compatible with new emerging national and global business environment?
The clear mandate in favour of UPA is welcomed by all industries. It has infused fresh hope into the industries at a time when global economic scenario is not so conducive. The UPA Government has taken various initiatives post global slowdown to increase credit flow into the market. Though the outcome was not as effective, we could see improvement in confidence level of the industry.

Infrastructure, particularly construction sector grew at over 13-14% CAGR during the last 4 to 5 years. At the present economic juncture, Infrastructure is seen as the major hope to boost the confidence level as well as economic growth. We believe that the Government will continue its thrust on Infrastructure.

The major improvements that we foresee are: increased availability of affordable credit for projects through PPP route, faster fructification of Government projects, active support from Government on project approvals/ clearances (MoEF etc.) and ROW issues.
NBMCW July 2009
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