L&T looking overseas to beat local slowdown

Larsen and Toubro, India's biggest engineering conglomerate, is targeting overseas revenue growth as part of a strategy to beat a slowdown in Asia's third-largest economy, the firm's chief financial officer said on Monday.

Ships-to-software firm Larsen last month slashed its order growth guidance for the financial year to March, as it warned of project deferrals and sluggish investor appetite in India thanks to high interest rates and a gloomy economic outlook. Larsen plans to increase its revenue share from overseas projects to 15-20% from 10-12% currently, R. Shankar Raman told the Reuters India Investment Summit in Mumbai. "It's essentially an India de-risking strategy," he said. Larsen, with a market capitalization of USD 15 billion, has aggressively targeted overseas projects in recent months, and has announced USD 1.1 billion worth of new foreign contracts, mainly for hydrocarbon firms in the Gulf region, since August. India has pledged to spend USD 1 trillion on upgrading its creaking power plants, railways and ports in the five years to 2017. Private cash has been pencilled in for half of that. But investments have slowed in recent quarters, as stubbornly high inflation, 13 interest rate hikes since early 2010 and rising commodity prices bite. Companies also point fingers at a policy paralysis in New Delhi. "The opportunity spectrum around this time last year was coming around to USD 100 billion," said Shankar Raman. "We find that half of those USD 100 billion has got deferred." Larsen, which gets more than 80% of its revenue from the domestic market, cut its order growth guidance for the current fiscal year by a third to 5% last month, blaming slowing investments and rising competition. "We've not seen any cancellations in our order book. There are deferments. People are sitting and waiting and watching," said Shankar Raman. "Inflation has been sticky so consequently they had to rework their numbers, but they are still working. They have not pulled back," he said, adding that he expected deferred projects to come back on line during the 12 months to March 2013. Shares in the firm have fallen almost 40% this year, double that of the drop in the benchmark index, wiping more than USD 8 billion off the firm's market value. ($1 = 51.7 Indian Rupees)