Larsen & Toubro flexes its engineering might

On January 26, 2007, when the sleek, indigenously developed Nag Missile Carrier (NAMICA) rolled down Rajpath in the Republic Day parade, Larsen & Toubro (L&T) executives and workers watched with satisfaction.

The NAMICA, based on a BMP-1 armoured vehicle, had been integrated by India's biggest private sector engineering company, a project that had begun years before defence manufacturing was thrown open to the private sector in 2001.

That opening, boast L&T executives, off the record, was for lesser companies. L&T, they point out, has been manufacturing for India's strategic sector since the late 1960s in nuclear power generation as well as the space programme.

The Mumbai-based engineering giant is one of just nine companies worldwide that is cleared to export nuclear power generation equipment to the US and to Europe.

Those decades of association with the strategic sector are now being leveraged, as L&T jockeys for a share of the Rs 2,00,000 crore of business that India's Ministry of Defence (MoD) is likely to generate over the next five years.

Unlike other private entrants into defence production, say senior L&T executives, its business strategy is not based on project-specific tie-ups of convenience with foreign defence majors.

Instead, L&T sees itself as having covered the learning curve over decades, and now has its own experience and expertise on offer.

MV Kotwal, vice president of L&T's Heavy Engineering Division, gives an example from shipbuilding, when L&T was asked to mount the Dhanush missile (the naval version of the Prithvi) on a warship.

Kotwal explains how the company grappled with, and overcame, a range of problems, "It was engineering in the most difficult circumstances. A ship rolls heavily, so we developed new technologies in stabilised platforms. We gained experience in mechanical, hydraulic, electrical, electronic, pneumatics... all kinds of technologies. We started integrating those into one, so we became a one-stop integrator. That is the key differentiator for us; we always said we must be a total solution provider, not just one part of a system."

For pursuing this strategy of building up L&T as a "systems integrator", or a company that integrates sub-systems and components, often manufactured by other companies, into a complex weapons platform, the company has set up a dedicated manufacturing facility.

Last Sunday, L&T inaugurated its spanking new Assembly, Integration and Testing Facility at Talegaon, 20 kilometres from Pune. The company has invested almost Rs 100 crore into the new facility.

The Talegaon plant will eventually be L&T's manufacturing centre for all land systems. The Pinaka multi-barrel rocket launcher (MBRL) system, radars, missiles, and components for the Brahmos cruise missile will roll out of this facility. L&T hopes that Talegaon will produce Rs 100 crore worth of defence equipment during 2007-08.

This will be the first private sector manufacturing unit set up exclusively for defence. The L&T strategy in setting up dedicated facilities contrasts with the Tata Group's strategy to spread defence manufacture across the existing manufacturing facilities of 11 group companies.

L&T is also taking a different route from the Tata Group by focusing strongly on naval systems.

Besides the Dhanush missile integration and various torpedo systems, L&T is also playing an important role in building India's hush-hush nuclear submarine project, officially dubbed the Advanced Technology Vessel (ATV).

Now, the company is supplementing its largely civilian shipyard at Hazira, with a major new Rs 2,000-crore shipyard on the east coast of India.

Commodore Mukesh Bhargava, Head of Marine Business, L&T, says, "We hope the Indian Navy will be our prime customer. The shipyard will be geared for the modular manufacture of warships and submarines. But maintenance, repair and overhaul (MRO) will be a major revenue stream, including major repairs for bigger ships. The new dockyard will have dry docks for an aircraft carrier sized ship of up to 550 metres long."

L&T was also exploring the purchase of the public sector Hindustan Shipyard Ltd (HSL). Now, however, with the Vishakapatnam-based yard likely to be handed over to the MoD, L&T's Marine Division is likely to be asked to run HSL on a government-owned-company-operated (GOCO) basis.

Sources in the MoD say the ATV project could be moved to HSL, and L&T would continue to work on the hull in partnership with the other organisations that are involved in the nuclear submarine project.