L&T scripting 5-year strategy plan

Expansion plans for Hazira outlined; Rs 600 crore to be spent on capital

Engineering giant Larsen & Toubro (L&T) today said it has started working on a strategic plan for 2005-2010, with its current five-year business plan nearing its end in March 2005.

"This exercise aims at reviewing the business portfolio, identifying gaps if any in terms of products and capability profile and overall, repositioning L&T as a more focused and vibrant organisation," A M Naik, chairman and managing director, L&T, said at the company's annual general meeting here today.

The strategic plan also envisages assessing risk profile of individual businesses as well as the organisation as a whole, he added.

"Our intent is to have a well-balanced portfolio, with about 60 per cent of the revenues from construction and projects business and the rest from the manufacturing and technology services," Naik said.

Besides this, L&T is in the process of setting up a corporate centre which will support its initiatives to grow inorganically in core areas. "This exercise is being undertaken with the help of an international strategy consulting firm "" Boston Consulting Group "" with the objective to re-position L&T for the future," Naik said.

L&T also announced a capital expenditure of Rs 600 crore for the current financial year. The company also outlined plans to expand facilities at its Hazira plant.

Naik said, "We are looking at a capex of around Rs 500-Rs 600 crore for this year for organic growth." The company will use internal accruals to finance the capital expenditure, senior company officials said.

As regards L&T's first quarter performance, Naik said the sluggishness in revenues was due to changed political scenario.

L&T announced a dividend of Rs 16 per share for the year ended March 31, 2004, at the AGM.

The expansion at Hazira is targeted at becoming a major player in the country's defence sector. "Nuclear power and aerospace are the other areas with significant potential, where the company would like to have a leadership," Naik said. The company has its heavy engineering and engineering & construction divisions at the Hazira unit.

He said L&T continues to enter into strategic pre-bid tie-ups with global players possessing the best mix of technology and competitiveness. "Consortium approach is helping the company to develop new capabilities in areas such as deep sea exploration, airports, ports and power plants," Naik said.

The company has identified that two of its businesses - e-engineering services and embedded systems - have reached a size and potential that can now support accelerated expansion, he added.

L&T is looking at entering into strategic pre bid tie-ups with global players to foray into new sectors like deep-sea exploration, airports, ports and power plants.

The company is in the process of preparing its strategic plan for the period 2005 - 2010. "Our intent is to have about sixty per cent of the revenues from the construction and projects business and the rest from manufacturing and technology services.

Meanwhile, Naik said L&T will soon exit the glass container business. The board had approved the sale of its glass container business at its December 30 meeting.

The company expects to fetch nearly Rs 100 crore from the sale, for which it has received three bids.

The sale is part of L&T's strategy to exit non-core areas.

The company only recently exited the cement business, which was acquired by Grasim Industries.

"We will now concentrate on our core businesses of construction, turnkey project execution, heavy engineering, industry machinery, electrical & electronics and information technology," Naik said.