Move to quickly set up new offices abroad, start joint ventures, hire talent.
Slowing order inflows might have made many construction companies jittery, but A M Naik and his team at Larsen & Toubro (L&T) are busy brainstorming on ways to bag more orders.
One such executive decision made by the 1938-founded conglomerate is to go for more international orders aggressively, from various geographies. This plan also includes making investments in setting up new offices and hiring people — all this, quickly.
L&T, which was already looking extensively at the Gulf region for more orders, is also setting its sights on various other economies. On the second day of the new year, the company opened an office in Istanbul in Turkey, to look at orders from CIS countries.
“We are gearing up, opening offices, starting joint ventures, hiring the right talent,” said Naik in an exclusive interview with Business Standard. “Even as we speak, we are trying to hire people abroad to head such offices internationally.”
The company is training its sight on probable growth of orders from the hydrocarbon sector, pushing it to open offices in Jeddah in Saudi Arabia besides Perth in Australia, which is especially for the upstream sector -- oil exploration and drilling.
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“We are making lots of investment now, but the question is speed, right people and a country representative,” Naik noted. “If we can do that, after about two to three quarters, we will start seeing signs of improved business in these countries. Now is the time to invest in people and offices.”
The company, which also has an office for up- and mid-stream (pipelines) in London, is also looking at opening an office in Paris. It has also opened in Russia and Milan in Italy. Apart from Brazil, the company is also looking to bag more orders from other South American countries, and is in the process of boosting manpower there.
Gulf of course will remain a huge focus for the company in the near future. “We are trying a lot in the Gulf, We are today doing $1.2 billion (Rs 6,324 crore) there. Next year, we are planning to exceed $2 billion (Rs 10,540 crore), said Naik.
Domestic order placement slowed down since the last one year due to various reasons like high interest rates, lack of financing and slower movement of projects due to drying up of equity markets. This has made the company cut its order book guidance to five per cent last quarter — from 15-20 per cent growth which was given at the start of the financial year.
| NEW SHORES * Eyes sights on Gulf, CIS countries; only recently opened office in Turkish capital * Expecting hydrocarbon sector orders, establishments in Jeddah, Perth * After an office for up- and mid-stream pipelines in London, is also looking at opening an office in Paris. Also opened in Russia and Milan |
* Gulf, where the company is doing ~6,324 crore business, will be key-focus area
* Opening situation rooms, letting section heads innovate on what to do with idling capacities in areas like power
Bagging new orders is very important even for L&T, which is currently sitting on a massive order book of around Rs 1,30,000 crore. This order book is supposed to grow to Rs 1,45,000 crore by the end of the current financial year. Slowdown in orders this year, would mean slower revenues in the next two years.
L&T is also opening up its situation rooms, letting section heads innovate on what to do with idling capacities in certain areas, especially those like power.
“Heavy engineering will have some challenges especially after nuclear orders from Japan did not come as expected,” said Naik. “We are now working on locating the kind of other industries for which we can use this capacity.”