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The L&T Technology Services IPO opened this week. In an exclusive interview with BTVi, AM Naik, Group Chairman of L&T, says the new company aims to double its turnover in the next five years to $1 billion. Excerpts:
While the company is called L&T Technology Services, you have stressed that this is not a ‘technology’ company. Could you tell us what exactly this company is into?
This is a pure play engineering company that does third party outsourcing for clients. Talking about plant engineering, we don’t do that in this company for power plants, or for that matter hydro carbons. Those kinds of engineering are done with their respective businesses within L&T Group.
Here we do plant engineering that we don’t do in the L&T main group, and that is FMCG,for companies like Uniliver, Proctor & Gamble, etc. It has become 18 per cent of the company. Auto and aero is roughly 25 per cent. Industrial product is again around 27 to 28 per cent, and so on.
In the last three years we have grown by 16 per cent in dollar terms and 23 per cent in rupee terms. During this time, if you see, the oil prices have crashed. Had it not happened, we would have been perhaps instead grown by 16 per cent to 19-20 per cent.
Speaking about revenues, you said how you will cross $500 million. Going forward, what is the kind of target that you have set in terms of growth, revenues and also in terms of margins for the next 4-5 years?
The industry is about $1 trillion, out of which about $365 billion is what is addressable. Getting distance working for engineering is not more than $67 billion. Outsourcing to third party – which is being done in India – as well as captive is roughly $20 billion.Within that third party like us may be $5-6 billion.
The balance is captive because most of the companies think that this is their proprietary knowledge and they don’t want that kind of transfer. So building faith is extraordinarily important considering that sometime an untold or unimaginable thing does happen in sectors like oil and gas. I think we will be able to double the turnover in the next five years. Our target is to touch $1 billion standalone in the engineering company. To meet that target we may have to acquire some niche technology companies.
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