L&T sees revival in heavy engineering orders

Larsen & Toubro Ltd’s heavy engineering and machinery business, which has been facing rough weather for the past two years, is witnessing a turnaround aided by business from new markets and from the Indian defence sector that is opening up to private companies.

L&T, the largest private player in the Indian defence business, has bid for the Indian Coast Guard’s four contracts, worth around `4,000 crore, to supply training, support and patrol vessels. The company will also participate in contracts to build two landing platform docks, M V Kotwal, whole-time director and president-heavy engineering, told reporters.

The Coast Guard bids are likely to be decided within six months. The government wants to build four landing platform docks--an amphibious warfare ship--each of which could cost `1,000-2,000 crore. Of these, two will be awarded to public sector yards and the remaining to a joint venture of public and private companies. The company expects the request for proposal for the vessels will also be floated within the next few months.

“It is giving a strong signal to the industry that the government really means what it says when it talks about indigenisation, and if that would happen, in the next two years, we can see a clear swing in defence orders given to indigenous companies,” Kotwal said adding that his company will be participating.

The Indian government has over the last two years awarded some contracts to build fast patrol boats, frigates, submarines and support vessels for the Navy to private companies. The government is keen to increase private participation as it wants to fast track projects that have been languishing for years.

L&T is also keen to work on the project to build six Scorpene submarines for which a joint venture agreement was signed with Mazagon Dock Ltd last year. 

To fast track building of warships and submarines worth over `1 lakh crore that Mazagon dock was entrusted with, the government had allowed it to set up two separate joint ventures with Larsen & Toubro and Pipavav Defence and Offshore Engineering Co.

Though the joint venture agreements were signed, the shipyard is yet to finalise the modalities to transfer some orders to the joint ventures. 

“Currently what we understand is that is on hold,” Kotwal said. “There is an issue of how the work will be divided. It’s going through its paces. We hope it will be decided soon.”

The engineering and capital goods major is also pitching for more orders from restrictive markets such as Russia, where the company recently won its first order. The segment accounts for 8-10% of the company’s total revenues. 

Kotwal said the company expects “much better order flow” for its heavy engineering division and has sufficient capacity to cater to the rising demand. 

He expects order flow from Russia to increase three-four times in the current financial year as there are a lot of old refineries that are likely to go for upgrade soon. It had won only one order, worth `250 crore, in the market last year.

Kotwal said with the company already making inroads in the country more orders will flow soon and it will soon appoint a Russian to push for more orders from the country.

“Russia could be a big market as there are many old refineries that need revamp and modernisation,” Kotwal said.

L&T is also looking to boost its presence in Africa, West Asia and Southeast Asia. Cogencis