L&T eyes 30% revenue from overseas operations

Engineering and construction company Larsen & Toubro has set up three manufacturing units in China and is nearly replicating its India structure in West Asia as it looks to earn up to 30 per cent of its revenues from overseas in about three years.

The Mumbai-based company, which garnered gross consolidated sales of Rs 16,665 crore in 2006, now gets about 18 per cent of its revenues from operations in other countries. It operates in sectors in which nearly all the prominent multinational companies have set up shop in India.

"The operating environment in India is the same as the global environment. In fact, most MNCs price their products in India lower than anywhere else... We must take advantage of the low-cost manufacturing environment in China and bring some of the learning back to India," the company's president (operations) J P Nayak told Business Standard in an interview in Mumbai on Friday.

In its three fledgling units in China, L&T has already invested $10 million each and plans to scale up sharply, though Nayak did not give a figure.

"We are a cautious organisation. It will be an evolution, not a revolution. However, it may look like a revolution if you look at what happens over five years," he said.

One of the units, for manufacturing electrical distribution gear, is fully owned by L&T. The second is a joint venture with a local company to make electrical valves. The third, a rubber processing machinery unit, has been acquired. It is now 95 per cent owned by L&T but will soon become a fully-owned unit.

"The objective is to scale up and to improve our cost competitiveness as well as participate in the Chinese market," said Nayak. In West Asia, the company has bagged sizeable construction contracts and plans to have all its frontline operations there "� such as equipment manufacturing and engineering "� except information technology.

"We will replicate our India structure in West Asia," said Nayak. However, L&T Infotech will not be a part of it because of a dearth of engineers in the Gulf countries.

The company has a modular fabrication facility in Oman and a joint venture in Saudi Arabia for manufacturing and marketing of switchboards and related electrical products.