The Hindu Business Line : L&T bets big on China

The company's `China strategy' encompasses sourcing of raw materials and setting up of a wholly owned subsidiary to manufacture high-end Air Circuit Breakers, apart from other manufacturing facilities.

MR A.M. NAIK (left), CMD, Larsen & Toubro Ltd, and Mr Y.M. Deosthalee, whole-time Director & CFO, at the company's AGM in Mumbai on Friday. — Paul Noronha

Mumbai , Aug. 25

China is now a major focus area for L&T not only to compete in the Chinese market but also to facilitate consolidation of its presence in other overseas market.

Unveiling L&T's China plans, Mr A. M. Naik, the Chairman, told shareholders at the 61st AGM here on Friday that it was actively pursuing the China strategy with a three-fold objective.

Firstly, the company would directly compete in the Chinese market with its products. Secondly, it will pick up some of the low-end products from the Chinese market and package them with its own high-end products to broaden its product offerings in other overseas markets. And, thirdly the company plans to source some raw materials such as forgings and castings to enhance the cost-effectiveness of manufacturing products in India. In other words, the company is working towards multiple engagements with China's burgeoning industry.

"China's strong manufacture base offers the potential for L&T to set up a sourcing office in that country," Mr Naik said.

Having already set up a manufacturing facility for high-end switchgear in Wuxi New District, the company is now actively engaged in setting up new manufacturing facilities in that country for selected machinery and industrial products.

Apart from China, the Middle East also represents another focus area in L&T's overseas business strategy.

The company recommended a dividend of Rs 22 per equity share and announced a bonus issue in the ratio of 1:1.

"To address the needs of a rapidly expanding GCC market, the company is in the process of setting up a modular fabrication facility in Oman and has entered into a JV in Saudi Arabia for manufacture and marketing of switchboards and other related electrical products," Mr Naik said.

The company has a capital expenditure programme of Rs 1,200 crore in the current fiscal for capacity augmentation, expansion of its product base and procurement of equipment and machinery.

Airport projects

On airport project, Mr Naik said the company could have lost investment opportunity, but it will be playing a significant role in the actual construction and upgradation of the Mumbai and Delhi airports. "We are in talks with both the companies that have been awarded the airport projects," he said.

On the company's plans to foray into SEZ projects, he said the awarding of such projects in its present form, including the bidding process, was not proper. "These have become more of property development projects. But we do not rule out our foray into such projects, if things get streamlined in the future, " he pointed out.

In response to a question by a shareholder, he said L&T Infotech would make a debut on the stock exchanges when it developed into a "sizable company." Last fiscal, its revenues touched Rs 800 crore and in the next two years it is projected to reach Rs 1,500 crore. "Until then, we have no plans to get it listed," he said.

More Stories on : Overseas Investments | Diversified | Larsen & Toubro Ltd

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page