The Hindu Business Line : L&T plans more tie-ups in West Asia

THE ECC (Engineering, Construction and Contracts) division of Larsen & Toubro Ltd will shortly finalise tie-ups with local partners in West Asia to tap the booming construction sector in the region. It will also make a serious effort to tap industrial projects in Africa.

The company has a tie-up with a local partner in Oman. L&T hopes to replicate this in its business strategy for West Asia, where a large number of projects are reserved for companies of "local status."

L&T will shortly finalise its tie up with local partners in Kuwait, Abu Dhabi, Dubai and Doha, according to Mr K.V. Rangaswami, member of the board and Senior Vice-President, L&T, who also heads the ECC division.

In each of these joint ventures, the local partner will have a 51 per cent stake, for the company to get a "local status," and L&T the balance. The company will be open to increasing its stake in the joint ventures once the law permits such a move.

L&T increased its stake in the joint venture in Oman to 66 per cent from 49 per cent earlier, after the local regulations were relaxed. Last year, the Oman joint venture company booked orders for Rs 500 crore and reported sales of Rs 300 crore.

Once the alliances in West Asia are in place, L&T expects sales from the joint venture companies to double to Rs 500 crore this year. Besides the joint ventures, L&T will participate directly in projects that are open to international construction companies.

Mr Rangaswami said that last year L&T acquired a company in Oman and renamed it L&T Electromechanical Company. This company had secured a Rs 170-crore electromechanical contract.

He was confident that the company's West Asian operations were poised for a big jump, considering the boom in the construction sector in the region. Apart from buildings and transmission line projects, L&T anticipated good business from the industrial projects and utilities sector, which included the oil and gas sector.

L&T's industrial projects and utilities sector was doing a Rs 250-crore project in Kenya for a soda ash plant. It had executed a mega gas pipeline project in Dar-e-Salaam. Both these projects were successful, Mr Rangaswami said, and added that encouraged by this, L&T hoped to pursue more projects in Africa.

It had short-listed Kenya, Tanzania, Uganda, Sudan and Botswana to seriously explore and probably have a more permanent set up to tap business opportunities, he said.

The ECC division had also got a letter of intent for project management to improve the cricket stadium in Barbados, in the Caribbean, in time for the World Cup cricket tournament in 2007. L&T would also be the general contractor for the project, whose value was estimated at Rs 200 crore. While L&T might execute some part of the project by itself, it would also engage local contractors.

Mr Rangaswami said the ECC division hoped to book orders between Rs 10,000 crore and Rs 11,000 crore this year, while sales were expected to grow by 25-30 per cent in 2005-06. Last year, it booked orders for Rs 9,000 crore and achieved sales of Rs 6,900 crore.

In 2004-05, its international order booking was Rs 450 crore and this year it expected the figure to account for 15 per cent of the total. While the company expected international sales to be maintained at between 10 per cent and 12 per cent of the total sales, the contribution from joint ventures would go up substantially.

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