2019 was a tough year but optimistic about future: L&T's Subrahmanyan

He said the stoppage of infrastructure projects in multiple states, macroeconomic concerns, and the coronavirus scare have led to the company losing its growth momentum briefly

Larsen & Toubro (L&T) is one year away from its 'Lakshya 2021' business plan, where it set a Rs 2-trillion revenue target. S N Subrahmanyan, chief executive officer and managing director of the company, told Amritha Pillay and Dev Chatterjee that he was still positive about meeting the target. Referring to the current financial year as one of the toughest, he added that the stoppage of infrastructure projects in multiple states, macroeconomic concerns, and the coronavirus scare have led to the company losing its growth momentum briefly. Edited excerpts:

How has the Mindtree acquisition worked out?

It has come out as well as expected. The previous ownership has moved away. Most of the senior positions have been filled. We have not had any unusual or unreasonable attrition. 

Mindtree has strong leadership, great clients, and good relationship with them. It’s on a good wicket and will do well.

Are you satisfied with the way the strategic five-year plan ‘Lakshya 2021’ has worked out?

It could have been better. This has been one of the toughest years. We have seen some awkward situations, which were not anticipated. One of them was a change in the government in Andhra Pradesh, which resulted in some major works coming to a halt. The new government wanted to review what has been placed by the previous regime. That was a setback because the work that was going very fast got affected. The pace is coming back, but we lost momentum. Second, we had this unusual litigation in Mumbai Coastal Road and the Shivaji statue project. Then we had the green tribunal stopping work in Delhi for environmental reasons, which also affected progress for 45 to 60 days. All this resulted in a slowdown, and once you slow down, it takes some time to remobilise. But we are back on track now.

The three state elections and the global economy blips, including coronavirus, are factors that have affected the industry. There is a slowdown in terms of cash availability and fund allocation. We did not anticipate this, and it could have been better.

How much has the coronavirus outbreak impacted the daily business?

As of now, it has not. There are some delays with respect to sourcing from China, but we have other sources. Travel movements are restricted, and clients are cancelling meetings due to this. 

Will you meet the Rs 2-trillion revenue target for FY21?

We are positive on targets. Our group chairman, A M Naik, has played a big part in not only building L&T to where it is today, but also in grooming and bringing in many of us. The succession planning in L&T has worked very well.

We work through a plan, we have a budget, and we go after it. It is not easy when we have such asks. 

It would be good if the economy also grows faster, and the fiscal situation in India, the Middle-East and Africa improves because that will help us to gather momentum. Therefore, one hopes for those positive signals as one looks ahead. The services business is predominantly in the US and Europe. I hope the current coronavirus situation resolves itself at the earliest and business continues as it is. We are on the job on 'Lakshya 2026'. It's still work in progress. I think by September sometime, we should be ready with it.

What are your plans on capital allocation? Is share buyback on the table?

At the moment, there is no buyback contemplated. We did try it a year back. Due to the consolidation of debt, the regulator took another view, but I think they've clarified it now. If there is a possibility that exists to benefit our shareholders, we will be the first company to think about it.

Are more inorganic growth options being explored?

There are no inorganic plans. We have started a fund called L&T Innovation Fund to invest in slightly mature start-ups in areas similar to our business. We have identified a couple of investments and will take them forward if we find them good. And then there is L&T Nxt, our digital journey within the company, using technologies such as internet of things, robotics, data analytics, machine learning, and artificial intelligence. Now we want to take this experiment which we did within the company to the outside world.

How does India look in terms of opportunities in defence?

Defence is a permanent start-up. We set up a factory for the K9 Vajra Guns order, but we would like to get continuous orders once this order is complete. So this is a bit of what you would call a story, which is positive but does not get going. We can use the facility for some other purpose and that we have already identified. Now that the skill set will get used for something else, in future if we get the order, we will need to rediscover the tempo which can be a bit frustrating.