Larsen & Toubro is focusing on global markets to make up for the huge slowdown in orders in the domestic market. In this interview with Sanjay Jog & Aneesh Phadnis, Chairman A M Naik says no new major projects are coming up and even if Indian companies hurry up with their decisions, projects will come up for execution only in 2013-14. Edited excerpts:
What’s your assessment of the economic environment?
Right now, it isn’t a bright story. But I have hope that we will possibly get over most of the issues within a year and will be back on track. In order to instill confidence, political parties should strive to at least pass the non-controversial Bills in Parliament so that the country can get on with business. The Opposition should support the government in this regard and not oppose for the sake of opposing. In the US, Republicans and Democrats bury their political differences to work in national interest in times of crisis.
But that’s just a hope, isn’t it?
The Indian economy is not very export-dependent, and this gives us a great opportunity to grow on the back of domestic demand if we can get our act together. If we fail to do so, it will be an opportunity wasted, and history will be unforgiving.
How is L&T facing the challenges?
We are doing more internationally to make up for the slowdown in India. An unprecedented push is being given to our international business. We will make up at least $ 2 billion in orders that we will lose or not get the opportunity for in India.
What’s your take on L&T’s domestic business?
There is no pipeline of major new projects in India. What we are executing today are those which entered the pipeline some years ago. Since last year, no new major projects have come. It takes three years for companies to make decisions for tenders to be awarded and project execution to start. 2013-14 is anyway bad because even if companies hurry up with their decisions, these projects will come up for execution only in 2014-15. So we have to work very hard.
Will L&T be able to maintain its 15% order guidance?
We are nearly done for 2012-13. In the first six months, we have had more than 20% growth. We will maintain our guidance.
You seem to have taken charge of L&T's switch gear business almost like its CEO. What steps you are taking to revitalise the business and gain market share?
When we launched the strategic plan two years ago, we had two choices: to retain the switchgear business and revitalise it, or sell it. We were losing market share and profitability. At one time we used to have 42% share in switch gear. Today we are down to 24%. Losing 15 percent market share because of non-competitveness could have impacted profitability in a big way. We chose to revitalise the business. We have undertaken product development, have widened our product basket and done four acquisitions to widen our product range and improve our competitiveness.
What’s the level of investment in switch gear?
We are investing around Rs 500 crore. Our factories in Baroda and Indonesia are ready and facilities in Navi Mumbai, Malaysia and Saudi Arabia will be ready next year. The manufacturing facilities will be ready by 2013 and are as good as the best factories in the world. We are advancing the launch of new products to end-2013. We have also formed strategic alliances with three companies in the electrical products business in which L&T has acquired 26% stake. Our cost next year will come down by 2-2.5 percent because of all these measures. We will become more competitive. Our designs are modern and our product portfolio is expanding. Electrical components segment comprises six percent of L&T's business. We have improved our market share by 1-1.5 percent in six months. We want to increase it to 30% by 2016.