Companies

Larsen & Toubro may delay electrical biz revamp

S. Shanker Mumbai | Updated on March 12, 2018

Mr Sharat C. Bhargava, Senior Vice-President (Electrical and Automation), Larsen & Toubro Ltd.

Larsen.eps

Weighing pros and cons of setting up an independent identity





The process of restructuring L&T's Electrical and Automation (E&A) business appears to have hit the pause button despite a spurt in April.

Mr Sharat C. Bhargava, Senior Vice-president, Electrical and Automation, said though they had registered a company by name ‘L&T Electrical & Automation', as a separate legal entity in April, nothing further had been done. It had no assets or people on its rolls.

Pros and cons

Mr Bhargava said, as of now, there was no development on the restructuring front as the pros and cons of becoming an independent identity away from the L&T fold need to be weighed before taking a call.

He said it was obvious that there were distinct advantages of being part of L&T, especially when it came to size of the balance-sheet while bidding for large projects. Similar was the case when it came to cash flow and funding.

Moreover, internal business accounted for 15 per cent of the E&A revenues, though it was strictly secured through competitively bidding.

Last year, E&A logged revenues of Rs 3,650 crore and is targeting Rs 4,500 this fiscal. For the June quarter, the division clocked Rs 746 crore (Rs 742 crore).

STRATEGIC PLAN

This April, L&T sought shareholders' approval to transfer E&A to a subsidiary/associate company or to any other entity as a going concern. L&T informed its shareholders that the decision was taken considering the challenges posed in operating the business as part of a portfolio of a predominantly project and construction company.

L&T had initiated the process of developing a strategic plan for 2010-15 in September 2009. The process had identified strategies and initiatives for each business unit, besides carrying out a detailed assessment of its portfolio, organisational structure and capital.

The assessment revealed significant opportunities across all business segments and the need to refine the business model to one that will facilitate growth through greater levels of empowerment and delegation, while retaining accountability.

With the company plans focussed on aggressive growth on a large revenue base, the management restructured the company into nine independent companies.

L&T had decided to move away from non-core businesses and focus on prime drivers such as project and construction.

Published on September 13, 2011

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