Giant now stands on 12 verticals that will have 12 boards filled with young leaders; some units will be spun off through IPOs.
Giant now stands on 12 verticals that will have 12 boards filled with young leaders; some units will be spun off through IPOs
MUMBAI: Larsen & Toubro (L&T) has reached the end of its seven-year business restructuring programme, which was kick-started when A M Naik, chairman and managing director, took reins of the diversified engineering and construction conglomerate.
L&T will now stand on 12 verticals as it readies to capitalise on the opportunities presented by India’s infrastructure build-up, a plan that has been blueprinted by the L&T management and the Boston Consulting Group (BCG).
In an interview with DNA Money, Naik spoke about how the first three years after he took control in 2000 were spent on restructuring and re-organising.
“It was the getting-ready kind of thing. We heavily invested in divisional structures till 2002-03,” Naik said.
BCG is still working with the management, but Naik and his core team have got a fix on how to take the company past a turnover of Rs 50,000 crore in five years.
The company will focus much of its energies in ‘Building India’ infrastructure, even as it prepares a base in the Middle East to get its engineers to face competition from global giants on a foreign turf.
“They will be ready to face foreign rivals closer home when the multinationals troupe in. It is a rare opportunity that comes once in the life time of any company,” Naik said.
L&T will position itself as an Indian engineering company concentrating mainly on Indian projects.
Business historians will say that’s similar to the way chaebols Hyundai and Samsung reached their current size — when South Korea built its infrastructure brick by brick.
The 12 verticals will eventually have 12 boards filled-up basically by young leaders in the company.
L&T has already announced that a few of the standalone entities will be spun off with a few even raising funds through public offerings.
The verticals are in its construction group with two of them — mechanical and electrical — headquartered in Chennai.
Two more under the engineering & construction division, and two in the power and hydrocarbons segment would make it six verticals.
No. 7 is electricals, 8 machineries, 9 industrial products and 10 heavy engineering.
Vertical No. 11 will be ship-building, which is an emerging sector, and No. 12 is the information technology space.
The L&T chairman believes that except for shipbuilding, which is a nascent business, the rest have tailwind and mass to stand on their own.
“We’ll grow these verticals rapidly,” he said.
“If I go beyond 2011-12, then we could end up with 14 or 15 verticals and then we will stop there.”
Naik was referring to defence and nuclear energy and engineering & construction businesses siring at least two verticals, namely, upstream & downstream and power as India’s investment in infrastructure in these spaces grow.
“Nine verticals are mature businesses now. Two are part of the mid-term and long-term strategy.”
The company has also decided to do it alone in shipbuilding without a foreign partner.
“L&T has orders to make 12 ships just with an assurance that we have the land for the shipyard. Tomorrow, when we set it up, I am sure in 3 months we can get orders for 20 more ships,” he said.
While he said he prefers to set up a big shipyard in Tamil Nadu, he indicated he has an offer from Gujarat.
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