L&T aims at doubling revenue and order inflow in five years

“As we look into the future, EPC project business, which is about 70% of the company, may come down to about 65% of the company and the 5% space could get occupied by the IT and technology services business. This means the market cap of L&T, which is now 30% by IT and technology services companies, can become 40 to 45%. So we will be more profitable, average weighted average profitability will go up. We will be more of a technology solutions provider company and that is robust and good from an overall point of view,” Subrahmanyan said. 

In this five-year period, L&T will continue capital expenditure in current businesses– projects, manufacturing and realty, step up investments in new businesses such as digital platforms and data centers and its green energy portfolio. The company will also be open to acquisitions in IT and TS segments to fill gaps in its offerings. 

“In the EPC project business, will continue to grow at 11 to 13 per cent. The last two years were impacted by Covid and looking at them does not give the right picture. If you look at the trend overall, it continues to grow at 11 - 13 per cent,” the CEO said. 

L&T reported its highest ever consolidated order book at Rs 357,595 crore as on March 31, 2022, with international orders having a share of 27 percent.

“The hi-tech manufacturing business will grow at between 12 to 15 per cent. Our shops are full right now. We continue to expect that these sectors will get sufficient orders with the growth of refinery, petrochemical, green business and such,” Subrahmanyan said.  

The company hopes that its services business, excluding L&T Financial, which have been growing over 20- 25 per cent will be boosted by the merger of its arms L&T Infotech Ltd (LTI) and and Mindtree Ltd. “LTI is very strong in ERP (enterprise resource planning), and Mindtree is very strong in the customer experience space. A combination of these provides a fantastic service input to the clients,” he said. 

L&T first launched a five-year strategic plan in FY2000-FY2005, calling it Project Blue Chip. Thereafter it undertook Lakshya 1 (FY2005-FY10), Lakshya 2 (FY2010-FY15), Lakshya 2021 (FY2017-FY2021). Lakshya 2 was extended by a year since the company didn’t achieve some of the targets, and the new plan was also delayed by a year due to Covid-related disruptions. 

New Businesses 

Lakshya’26 would see L&T grow some of its fledgling businesses, which the company is incubating like startups– L&T-SuFin, which is an integrated platform for buying and selling of industrial products and services, and L&T EduTech, which is a digital education platform for industry-led practical and application-oriented engineering curriculum.  

When asked if L&T will drive scale in these startup ventures and then go for an initial public offering for them, like it has done with other subsidiaries from the group, Subrahmanyan said, "Time will tell whether the new initiatives are good startups or where it goes. I hope I can repeat the winning formula.”

The strategic plan will also see L&T transition towards green energy, with focus on green hydrogen and grid based battery storage. 

“At the moment, it’s not viable because the battery costs upwards of $190 per kilowatt hour. It needs to come down drastically for it to be viable as a power source. We are again in touch with some technology players to see how we can jointly do some research and development to bring the battery costs down. And if that happens during the latter part of the planned period, it could see some investments in the battery space, but not right now,” Subrahmanyan said. 

In the green hydrogen space, the company has already tied up with ReNew Power and state-run Indian Oil Corporation. L&T has also signed a pact with Norway-based electrolyzer technology and manufacturer HydrogenPro AS to set up a manufacturing unit in India. 

The company plans to invest around Rs 1,000 crores for a 500 MW electrolyser production capacity. It is in talks with its joint venture partner Mitsubishi Heavy Industries to potentially convert their power turbine generator unit into a manufacturing unit for electrolysers.

The joint venture with Mitsubishi has been hit due to lack of new thermal coal based power projects in India.

Commenting on the JV, Subrahmanyan said, “We are talking to them; they're also worried. They also have coal and gas power factories in other parts of the world. So both of us are in dialogue and if something else comes out of it, we'll do that. Otherwise, we will have to jointly think of how to take it forward, including making electrolysers as such in those factories.”

Subrahmanyan said that talent management across L&T’s businesses will be a priority for the company. 

“To achieve our strategic plan and be a Rs 2.73 lakh crore organisation by 2026, we need a huge amount of talent within the organisation. I spend a lot of time mentoring people, talking to people, even recruiting people. This is probably the single biggest chance and opportunity that I have to develop the right set of leaders from a succession point of view.”