A multiplicity of business, economic and political factors made the
year gone by among the most challenging in recent times. The global
economy is seeking to recover from uncertainties centred on the
European Union. Domestically, a deterioration in macroeconomic
indicators and a marked deceleration in the investment momentum
aggravated bearish sentiments in the capital markets. Infrastructure
sectors have been hampered by resource constraints and other issues.
Investment decisions, as a result, have seen prolonged deferment, with
only a few projects being awarded.
It is heartening, however, that the intrinsic strengths and embedded
characteristics of the Indian economy still remain positive. GDP
growth, at 6.5%, though sharply down from the levels that prevailed a
couple of years back, still has the potential to revive.
Against this backdrop, your Company has successfully steered a steady
course and consolidated its position as Indias leading E&C player.
Fresh Order Inflows at Rs 70,574 Cr enabled the year-end unexecuted
Order Book position to increase by 11% to Rs 145,723 Cr, an all-time
high for the Company. The slowdown in orders from the domestic market
was partially compensated by growth in international orders, mainly
from the Middle East region. International orders accounted for 18% of
the full years Order Inflow. L&T ensured on-track execution of
projects that have been committed for delivery. This is reflected in
the robust revenue of Rs 53,171 Cr, an increase of 21 % overFY11. Profit
after tax, excluding exceptional and extraordinary items at Rs 4,413 Cr,
translates to an increase of 20% over the previous year.
At the group level, your Company recorded net revenues of Rs 64,313 Cr,
an increase of 24% over FY11. Consolidated PAT, excluding exceptional
and extraordinary items rose by 10% toRs 4,649 Cr during FY12.
It gives me pleasure to announce that your Company has recommended a
dividend of Rs 16.50 per equity share on a face value of Rs 2 per share
for the year. The corresponding dividend during the previous fiscal
stood at Rs 14.50 per equity share.
Your Company is augmenting its presence in existing international
markets such as Middle East and South East Asia Regions and expanding
its footprints in new geographies like Australia, CIS and select
African countries. New offices have been set up at key locations such
as Perth and Istanbul. A multi-cultural leadership team is being built
through induction of expatriates with local knowledge, customer
intimacy and domain expertise.
Over the last few years, your Company has built manufacturing
capacities in areas of strategic significance and in low cost regions.
Production at the state of the art manufacturing facilities for
supercritical boilers and turbines, which were commissioned over a year
ago, has been streamlined - thus enhancing productivity. This has been
achieved through increased indigenisation of manufacturing processes.
Facilities for manufacture of critical piping and Electrostatic
Precipitators have recently been commissioned. A new switchgear
manufacturing unit has been set up in Vadodara which is expected to
lower cost of production. Greenfield and brownfield expansion of the
manufacturing units for Low and Medium voltage electrical control panel
are nearing completion in Ahmednagar (Maharashtra) and Coimbatore
(Tamil Nadu). A shipyard capable of manufacturing a variety of
specialised defence and commercial vessels is under commissioning.
While some of the investments are capital intensive, the Company sees
long term prospects for sustainable growth in these areas.
People are critical to L&Ts growth and enduring success. Your Company
has institutionalized a 5 Step Leadership Development initiative in
association with a global consultancy firm to ensure a robust
leadership pipeline. An expanded Leadership Development Academy forms a
pivotal resource for this program. To address the needs of capability
building at multiple levels, your Company also runs a world class L&T
Institute of Project Management accredited by PMI of USA, and supports
multiple CSTI (Construction Skill Training Institutes) across the
Sustainability remains high on your Companys agenda going forward. The
Company is working actively on the green front, with considerable
headway in energy conservation, renewable energy usage, water
conservation and waste management. On the social development front, our
thrust areas are mother & child health, education and skill building.
In the last two years, your Companys sustainability reporting secured
various national and international accolades, recognizing its
significant efforts in this area.
To address demands of the changing business environment and future
growth prospects, the Board of your Company decided to further
strengthen the top leadership of the Company by elevating Mr K.
Venkataramanan as CEO and Managing Director with effect from April 1,
2012. This will enable the Executive Chairman to focus on value
creation through portfolio restructuring, institutionalising the
Independent Company structure, mentoring the leadership team to face
global challenges and implementing the strategic plans as laid out in
Lakshya 2016. A younger generation of Directors have been brought on
the Board to ensure long term sustainable leadership.
Despite the challenging macro environment, your Companys range of
offerings straddling multiple areas in the infrastructure and energy
sectors allows sighting of opportunities which could fructify into
project awards. Some segments within these sectors holding out promise
of growth in FY13 are:
a Roads - the program of road building continues and in FY13, NHAI is
likely to bid over 8,000 km of road contracts, some through
construction awards and the majority through BOT concessions.
b Metro and Mono Rail - a number of Tier-1 and Tier-2 cities have
kick-started projects to implement metro and / or mono rail systems,
since this has proven to be one of the best solutions for decongesting
The aggregate of these prospects presents a large and profitable basket
c Railways Business - With the Dedicated Freight Corridor taking shape,
large opportunities are expected to materialise commencing FY13. Indian
Railways is also augmenting and upgrading its network, which gives rise
to business potential in this area.
d Water Projects - Standard water management facilities (bulk
transmission, water treatment, effluent treatment, etc) as well as
advanced water solutions such as Desalination and Reverse Osmosis
plants provide good opportunity for growth. Apart from domestic
markets, your Company expects good prospects in Qatar, Saudi Arabia,
UAE and Oman by offering total water solutions.
e Urban Infrastructure - Strong drivers such as population density,
high nominal GDP growth, high domestic savings and increasing
aspiration levels are driving an urban transformation. This is opening
up opportunities in areas of residential housing, commercial office
space, hotels, hospitals, educational institutions and shopping
complexes in Tier 1, 2 & 3 cities.
f Airports - The Aviation industry seems to be poised for sustained
growth with increasing trends of both passenger and cargo traffic,
annually. Opportunities are opening up with expansion plans of many
non-metro airports in India and internationally in the Middle East,
Asia, Africa and South East Asia.
g International Markets - Your Company is targeting the Middle East and
other Asian markets for infrastructure business in areas such as
Airports, Roads, Bridges, Water Treatment and Power Transmission.
2 Heavy Engineering
Your Company is one of the worlds leading manufacturers of the
technology-intensive custom-built equipment and expects to continue its
growth in process equipment in FY13. Although the unfortunate Fukushima
nuclear incident in Japan has reduced the pace of growth in this
sector, your Company is targeting international prospects such as Spent
Fuel storage equipment and decommissioning of Generation II plants. The
defence sector shows good promise in the medium to long term - both in
land and marine business segments. The Defence Offset Programme and
recent Government initiatives for encouraging private sector for
partnering with Defence Public Sector Undertakings provide a range of
Indias efforts to achieve minimum energy security can only be
successful through investment in development of upstream assets. While
capex spends on downstream facilities creation is likely to remain
modest for some time, investment in deep sea projects and new pipeline
networks are likely generate opportunity. Fertiliser capex is likely to
revive in FY13 and should provide promising business opportunities.
Your Companys thrust on international markets has yielded results,
with several prestigious international project orders during the year.
In addition to GCC markets, your Company is targeting select
opportunities in new geographies like South East Asia, Australia,
Africa & CIS through local country presence, strategic partnerships,
4 Thermal Power
While power is one of the largest bottlenecks to economic growth,
investment decisions to set up fresh capacity for coal and gas fired
power plants remain uncertain due to constraints of coal / gas, land,
water, environment clearance and long term finance. While boiler and
turbine manufacturing capacities are likely to be well utilised for the
current year, improved order inflow is critical for a robust FY14. Your
Company, however, is geared to leverage its capabilities in the power
sector both in India and nearby countries.
5 Power Transmission & Distribution
Your Company has demonstrated an impressive order book growth in FY12
both in domestic and international markets, backed by strong EPC,
fabrication, testing and execution capabilities. The increased
investments in India by government undertakings and strengthening of
transmission grids in GCC countries provide significant business
opportunities for power transmission and distribution business.
6 Metallurgical & Material Handling
The short term outlook in this area remains challenging due to
complexities of present mining policies, delays in land acquisition and
environmental clearances. The demand, however, for metals in the
medium to long term is expected to grow, driven by capex plans by
Integrated Steel Players, increased consumption and investments in
infrastructure. Material handling prospects are also looking up in
areas of power, mining, steel and ports.
7 Electrical & Automation
Although sluggish offtake from industrial sectors led to muted overall
growth in FY12, agriculture and buildings sectors are providing growth
opportunities to this business. Business is focusing on forging ahead
with world class contemporary products, and has filed 162 patent
applications in FY12. The Electrical & Automation business can expect
an upward momentum when the general economy improves.
8 Machinery & Industrial Products
Machinery & Industrial Products business has been affected by general
slowdown, deceleration in industrial activity, and restrictions on
mining. In Industrial Products, valves maintained the positive trend in
FY12, registering a healthy growth in order inflow and sales. Sustained
oil & gas project activities in the Middle East, North Africa and
Australia provide good opportunities. The Construction Machinery
Business successfully sustained the performance of the preceding year
in a market which witnessed intense competition. The Business Unit has
maintained its leadership position in the premium market segment and
strengthened its position with new offerings in Large Size Mining
9 Information Technology & Integrated Engineering Services
L&T Infotech, a wholly owned subsidiary, grew at 30% Y-o-Y on a
consolidated basis with over 90% of its revenues from overseas clients.
Profit after Tax grew by 33% in spite of withdrawal of STPI Tax
benefits in FY12 through tax policy change. L&T Infotech has taken
several initiatives for operational excellence, tapping new markets and
forging strategic alliances to provide solutions in upcoming
Integrated Engineering Services, an SBU within L&T and a provider of
engineering services, is a global operator with 94% of its business
from overseas. It has shown a robust growth of 64% in the revenues
during the current fiscal, despite economic slowdown in USA, Europe,
etc. With growing clientele, the business is poised for encouraging
growth over the next few years.
10 Financial Services
L&T Finance Holdings Ltd. made its debut in Equity Capital Markets in
FY12 through a maiden IPO which received overwhelming response from
investors. The business continued its growth momentum during FY12 with
a 42% growth in its consolidated Total Income and a growth of 16% in
Profits after Tax. The Loans and advances extended by the Financial
Services Companies have grown by 39% and stands at Rs 25,442 Cr at
end-FY12. The Financial Services group is now a broad-based,
diversified Financial Services provider and is benefiting from a solid
11 Developmental Projects
Your company has built a significant portfolio of assets covering
concessions, mainly in roads, ports, power generation and Metro rail.
The majority of projects are in various stages of completion. While
returns on developmental projects are typically back-ended, your
Company would be seeking to unlock value through churning of mature
assets within the portfolio and through equity partnership.
Before ! conclude, I would like to thank all L&T-ites for their
unstinted support and commitment during the challenging yet exciting
period. I would also like to thank my fellow Board members for the
support that they have unconditionally extended. I also extend my
gratitude to our customers, supply chain partners and all other
stakeholders for their continuous support. We remain committed to
stakeholder value creation and will live up to the trust reposed in us.
A. M. Naik
Chairman & Managing Director
Mumbai, May 14, 2012