It has been a challenging year for Indian industry. The economy,
impacted by decelerating GDP growth, mounting fiscal deficit and high
Current Account Deficit, has seen lacklustre investment momentum in
infrastructure, energy and industrial capital expenditure.
The few positives to emerge from this scenario were the clutch of
fiscal reforms introduced in the latter half of the year with a view to
revving up the economy. These measures range from phased deregulation
of diesel prices, formation of a Cabinet Committee on Investments,
direct transfer of subsidies to beneficiaries and efforts to reduce the
losses of state-owned power distribution companies. These measures will
need to be sustained and supplemented by a slew of others to
effectively recharge the economy and restore its growth trajectory.
Against the backdrop of this challenging environment, your Company has
turned in a commendable performance on all key performance parameters.
Order Inflows which are the mainstay of any company engaged
predominantly in Engineering & Construction business, clocked in at Rs.
88,035 Cr representing an impressive 25% growth over the previous year.
The unexecuted Order Book at the year-end stands at Rs. 153,604 Cr.
This provides a healthy revenue and margin visibility over the next few
years. Project execution was largely on track - borne out in the 14%
growth in Gross Revenues which came in at Rs. 61,471 Cr. Profit after
Tax registered Rs. 4,911 Cr which translates to a growth of 10% over
the previous year.
At the Group level, Gross Revenues displayed a growth of 16% and stood
at Rs. 75,195 Cr for the year under review. PAT, at Rs. 5,206 Cr
represents a growth of 11% over the previous year.
It gives me pleasure to announce that your Company has recommended
dividend of Rs. 18.50 per equity share on a face value of Rs. 2 per
share for the year. The corresponding. dividend during the previous
fiscal was at Rs. 16.50 per equity share.
In addition, I am glad to share that, in the 5th anniversary year, your
Company has also recommended bonus shares in the ratio of 1:2 (i.e.,
one bonus equity share of Rs. 21- each for every two equity shares
of Rs.2/- each held).
In times of challenge, a mix of long range strategy and agile tactical
responses are critical to success. Your Company has countered the
slowdown in the domestic market by expanding its footprint and
intensifying operations in geographies with promising business
lalityl/This outreach is predominantly in the Gulf countries, South
East Asia Regions and now working to extend to Australia, a few CIS
countries and select African nations. Quite a few senior business
development executives of different nationalities and having rich
domain experience with customer insight have been inducted at the local
level in these countries.
The thrust on penetration into international markets is yielding
results. International Order Inflows represent 17% of the total inflows
during the year under review.
In the last two decades, we have seen the young generation being
attracted to new economy sectors, resulting in lack of top talent
coming into the core sector, particularly in Project and Construction
industry. This has become a global phenomenon and is not restricted to
India. Hence development of human resources, along with talent
acquisition continues to receive focussed attention in your Company.
People remain the cornerstone of the organisation. We ensure that
employees gain ample opportunities for personal and professional
growth. Our Leadership Development Academy in Lonavala - Maharashtra,
Project Management Institutes at Vadodara - Gujarat and at Chennai -
Tamil Nadu, and systematic career progression of staff are a few of the
multiple initiatives that will facilitate succession planning.
We recognize that the process of internationalization involves adopting
and embracing a multi-cultural work ethos - while retaining our core
national identity. We have intensified recruitment of lateral hires at
the management level, particularly in the Gulf countries and for new
Your Company has aligned itself with the Millennium Development Goals
formulated by the United Nations, and Isas progressed well on the
Social, Environmental and Economic agenda pursued over the last few
years. Considerable headway has been made in the areas of energy
conservation, health care environment protection and social uplift of
the deprived sections of society. The Company harnesses untapped energy
of Indias youth through broad-based skill development centres and
promotes social development through on-going mother & child healthcare
programmes. Your Company has been recognised in various national and
international forums for its sustainability efforts.
Even as the macro environment remains challenging, your Company is
effectively targeting specific opportunities within India and
internationally.; Segments that hold promise in FY14 include -
1) Infrastructure -
a) Roads - This segment witnessed severe contraction in ordering by
NHAI in FY13 but is expected to pick up in FY14 through ordering of
more than 3,500 km of new projects on Engineering,
Procurement & Construction (EPC) mode. We being the distinct leader in
the segment, will selectively participate in these EPC bids where the
prospects meet our internal viability benchmarks. Some upcoming road
projects in the Gulf countries are also being targeted irv FY14.
b) Metro and Mono Rails - The Company has been involved in the
execution of metro rail projects in cities across the country and
Indias first monorail in Mumbai (trial runs conducted in FY13). This
enables the Company to exploit opportunities to secure contracts in
India, where multiple cities are initiating metro rail projects. We are
also participating in mass rapid transport prospects in the Gulf
c) Railways Business - The thrust on strengthening the rail network
across the country holds good prospects for our railways business. We
have already secured an initial order in consortium with a Japanese
company for a major section of the Dedicated Freight Corridor. We are
also exploring international markets, especially the Gulf countries
where several projects are coming up.
d) Water Renewable energy - Backed by strong project execution
capabilities and operational excellence, the Company has achieved good
growth in Water and Renewable Energy sector in FY13. With current Order
Backlog and good order prospects, the business from these sectors is
expected to see an upswing in FY14.
e) Urban Infrastructure - Opportunities in residential buildings,
office space, hospitals, hotels, educational institutions, shopping
complexes and factories continue to provide a large canvass of business
potential. Your Company has become the EPC contractor of choice for
major developers and this is driving profitable growth.
f) Airports - Increasing passenger and cargo traffic has sustained
growth in aviation industry. On the back of excellent track record in
this sector, we are well-positioned for airport projects within and
2) Heavy Engineering & Shipbuilding -
We have the capability to meet the requirements for high technology
critical equipment and systems. In the process plant equipment segment,
the international market looks promising in the medium term. The
domestic nuclear segment is expected to see ordering activity in FY14.
The defence sector has been adversely impacted by the slow pace of
decision making as well as deferral of contract awards. However, recent
initiatives to involve private sector in defence equipment
manufacturing augurs well for your Company.
The shipyard at Kattupalli has been completed and is capable of
building warships, submarines and specialized commercial vessels. It is
equipped with a state-of-the- art shiplift that enables it to undertake
simultaneous new build, repair & refits. While the global commercial
shipbuilding trend remains subdued, we envisage that the Indian defence
sector is likely to open up and provide opportunities for building
3) Hydrocarbon -
On the domestic front, Exploration & Production (E&P) spends in
upstream hydrocarbon segment is expected to sustain during FY14. The
announcement of the recent policy to treat fertiliser production on
priority basis will result in setting up new fertilizer plants. This
will provide increased opportunities. Onshore gas processing segment is
also expected to witness implementation of redevelopment projects.
Large investments are also expected in cross-country pipeline projects.
In the upstream sector, the Company is equipped to repair, rebuild and
construct new Jack-ups, drilling rigs and FPSO topsides. The business
is well placed to leverage its multi-locational Modular Fabrication
Facilities to respond to global trends towards modularization of
onshore Gas Processing plants.
We have improved our international presence through several prestigious
orders. We are increasingly pursuing opportunities overseas through
alliances with the leading global EPC companies. This has necessitated
putting in place a multi-national organization, with a cross-cultural
team possessing local knowledge and domain expertise. The Company
proposes to form a subsidiary for its Hydrocarbon Business. This will
enable greater autonomy and formulation of HR policies in line with
industry practices so as to attract the best talent.
4) Thermal Power -
Policy paralysis, negative market sentiments and procedural bottlenecks
have adversely affected the domestic Power sector in the last couple of
years. Pressing concerns with respect to land, fuel, financing and
statutory approvals have dried up the order pipeline, putting pressure
on the Companys capacity utilization.
This is further aggravatedby large scale imports since the countrys
policies do not provide a level playing field, particularly against
imports from managed economies.
Under the circumstances, we are doing our best to be competitive
through cost reduction, design optimisation and smart sourcing.
Emphasis will also be on expanding our spectrum of services to select
Gulf countries and the Southeast Asia for Gas based power plants.
5) Power Transmission & Distribution
Government policies lay stress on investments in strengthening the
power grid and the power distribution system through central and
multilateral funding agencies. We have demonstrated a steady growth in
order book position in domestic and international markets.
The emphasis on strengthening of transmission grids in Gulf countries
will continue to provide significant business opportunities for power
transmission and distribution business in the coming years.
6) Metallurgical and Material Handling -
The short-term outlook in this area continues to be challenging, due to
prevailing complexities of policies governing mining, land acquisition
and absence of new power projects. These are sought to be resolved
through various government proposals, legislations and policies. As the
economy grows, demand for metals particularly steel, aluminium and
copper will necessitate expansion of capacity. We are well positioned
to benefit from the confidence we enjoy because of our track record and
timely completion of projects.
Material Handling prospects in areas of power, mining, ports and long
distance conveyors for bulk ores are likely to grow in line with
7) Electrical & Automation -
The Electrical & Automation business continues to maintain its
leadership position in LV Switchgear. It has also made a mark in the MV
segment through an acquisition of an international company a few years
ago. Product development in both LV and MV Switchgear continues to
forge ahead. The project business has enhanced its focus on
international markets. The coming year should see an upward momentum.
The Company haralsoacquired two small companies which will bridge
technology gaps in one case and enhance product rangejn another.
8) Machinery & Industrial Products -
The Construction Machinery business maintained its leadership position
in premium excavators segment despite shrinkage in construction
equipment market and entry of new competitors. In Industrial Products,
the valves business maintained the positivetreadin FY13, registering a
growth in sales of 9% over the previous year. Major investments in the
oil & gas segment planned in the USA, Middle East and other countries
provide good opportunities for international operations.
9) Information Technology & Integrated Engineering Services Business;
L&T Infotech, a wholly owned subsidiary, grew at 22% Y-o-Y on a
consolidated basis. Profit after Tax grew by 49%.
L&T Infotech has embarked on building a strong sales and marketing team
globally with emphasis on the Americas, Europe, Gulf countries and the
Far East. The Company has also undertaken some major initiatives
intended to make the L&T Infotech name more visible and distinctive
because of differentiated solutions it offers in multiple domains.
Technology Services, a Strategic Business Unit of L&T, is being formed
into a subsidiary, which will result into consolidation of all
engineering services business of L&T and L&T Infotech. This subsidiary
will provide autonomous functioning in line with industry practices.
10) Financial Services -
This business, which was listed in 2011, continues to grow profitably
with a loan book in excess of Rs. 33,000 Cr at the end of FY13. Net
Interest Margins at 5.5% reflect the healthy interest spreads that the
business earns. The business has successfully concluded acquisitions
in mutual funds business and housing finance. The insurance business is
also joining hands with the Future Group and the Generali Group to
leverage the complementary strengths of both players and to enable
achievement of scale and early profitability.
11) Developmental Projects -
Development projects undertaken by the Company in roads, ports, metro
rail and power continue to progress satisfactorily, with some of these
projects currently operational. The Company plans to open up alternate
funding lines to enable commissioning of the upcoming projects and
reduce dependencies on your Companys balance sheet.
Before I conclude, I would like to extend my thanks to Team L&T,
customers, vendors and other stakeholders, without whom our continued
growth momentum would not have been possible. I would also like to
thank my fellow Board Members for their unstinted support and
A. M. Naik
Group Executive Chairman
Mumbai, May 22, 2013