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Our Bureau

Shortlists AP, TN, Gujarat; location to be finalised by Jan

Mumbai , Nov. 22

Larsen & Toubro Ltd, which recently forayed into the shipbuilding sector, will be setting up a Rs 2,000-crore shipyard in India with the capacity to build high-value ships.

The company is looking for a suitable piece of land, measuring 800 acres to 1,200 acres, to set up the shipyard. The company, which has narrowed down the search to the three States - Tamil Nadu, Andhra Pradesh and Gujarat - expects to finalise the location by end of January 2006.

"There is a huge demand for shipbuilding in India, which has not yet developed the capacity to build big-sized carriers to the desired level. The country needs at least three to four more efficient shipyards," Mr A.M. Naik, L&T's Chairman and Managing Director, told presspersons here on Wednesday. The company is still examining whether to hive off its shipbuilding unit into a subsidiary or a separate company, he added.

Joint Venture

Asked whether L&T was mulling the option of taking over existing shipyards, Mr Naik said the company had proposed a joint venture with the state-owned Hindustan Shipyard Ltd in Visakhapatnam about three years ago. "The proposal has been pending with the Ministry of Shipping since then. We are still open to the proposal, but we do not know when it will take off," he said. He, however, added that a joint venture with Hindustan Shipyard Ltd would not take care of the requirement of its proposed Rs 2,000-crore shipyard, as the Visakhapatnam yard had a land measuring only 170 acres.

Power Sector

L&T is also bullish on its foray into the power sector. It is in the process of sewing up a joint venture with Mitsubishi Heavy Industries of Japan for manufacture of super-critical boilers required by the mega power projects being planned for the country.

The L&T-Mitsubishi joint venture will be setting up a Rs 500-crore boiler plant with an annual capacity of 2,000 MW initially. "We expect to start production from 2009 and we are at present scouting for a suitable location for the plant in three States, he said. He did not disclose the names of the States.

Asked whether the joint venture would be a 50:50 one, he did not give a specific reply, only stating that "it would be close to that." He said L&T's equity exposure to the joint venture would be around Rs 125 crore. Explaining the rationale behind L&T's foray into this sector, he said BHEL was the only major player in this segment in the country, while neighbouring China had "four such companies." India, which was importing some 1,500 MW to 2,000 MW of power equipment from China and Russia, faces a significant demand-supply gap in the boiler and turbine segments.

Human Resource Factor

On the question of employee attrition, Mr Naik said L&T, like other companies in this segment, was facing the problem of attrition in the wake of a boom in infrastructure activities, especially in the Gulf. This has prompted the company to blueprint a special human resource strategy to at least reduce the level of attrition.

"We are facing an attrition rate of 15 per cent in the design & engineering division, 8.9 per cent in the construction segment, about 10 per cent in manufacturing and 14 per cent in our IT/infotech division. As a whole, the company faces an attrition level of about 12.5 per cent. We would have been comfortable with a rate of below 5 per cent, but we have accepted the fact that attrition is here to stay," he said. The company's human resource strategy includes accelerating training, and giving opportunities to its employees to participate in its overseas assignments.

More Stories on : Infrastructure | Diversification | Shipping | Outlook | Larsen & Toubro Ltd

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