After years of caution, India’s private sector is beginning to spend again. Capital expenditure, once led largely by the government, is now gaining fresh momentum from private companies. L&T Chairman and MD S N Subrahmanyan calls this a turning point for the investment cycle. In a conversation with Moneycontrol’s Bodhisatva Ganguli and Deborshi Chaki, he discusses why private capex is picking up, how L&T is preparing to ride the cycle, and why nurturing leaders from within remains central to the company’s DNA. He also points to growth opportunities in freight corridors, semiconductors, and green energy, while reflecting on succession planning and the global outlook.
Edited excerpts:
Q. I want to start with a big picture question. What is your view on the economy and can you take us through how L&T strategies through the emerging opportunities?
A. I feel extremely positive about the two geographies that we are in. We are predominantly in India and to a large extent in the Middle East. Both geographies are doing extremely well for us and I see them continuing to do well for the next 10 years. India has been doing extremely well. Leave GDP and other macro numbers aside, from our point of view at the micro level — growth of organizations, growth in the public sector, and spending by the government, predominantly central — it has been good for the organization. We have a presence in most of these critical areas. We have orders from these areas, execution has been good, payments have been timely, and we have grown with such orders.
So the way the company is structured is broadly in three sectors. The first is EPC projects, which is the biggest. Within this there are two main sub-sectors: one is the construction part of it, which is what we call ECC construction, and the other is the energy sector. Construction includes buildings, transportation, heavy civil, minerals and metals, water, power transmission, distribution and renewables. The energy sector includes offshore hydrocarbon, onshore hydrocarbon, L&T Energy-CarbonLite, which was our earlier EPC power business, and green energy. So that is one sector but into two because this is predominantly projects.
Then you have the manufacturing sector, which is the heavy engineering business where L&T originally started in Powai. Now it also includes defense, which we are calling precision engineering, because it not only does defense but also many other applications oriented towards space and other advanced uses.
The third sector is services, which is predominantly LTIMindtree and L&T Technology Services. L&T Finance is also playing a reasonable part now, and maybe in the future L&T Realty. This is what the company is about. There are some other businesses as well, some new areas we have started, some areas we are getting out of, and some businesses which we have to see how to move forward. That is work in progress.
Q. And what is your outlook on projects in India right now?
A. Today what is propelling is predominantly central government orders — the huge developments of Central Vista, a lot of hospital developments, both centre and states. The Jal Jeevan Mission has slowed down a little, maybe due to certain government-related matters and excess spend that has taken place. The government is reviewing how to reorganize it and take it forward.
The Atal Mission, which was the rural electrification scheme and the urban electrification scheme, has gone well.
The dedicated freight corridor was very good, but much of what needs to be done has already been completed — both the western corridor and the eastern corridor. Now we must wait for further corridors. The idea was to connect across the country — maybe Mumbai–Chennai, Chennai–Kolkata, something connecting Hyderabad–Vizag, and so on. These are heavy traffic corridors, and we’ll have to see how they are connected.
The high-speed corridor between Ahmedabad and Mumbai is progressing. Much of the civil work is done, but electrical, signaling, and telecommunication packages have just been awarded, so maybe it will take another two and a half to three years. But other corridors are yet to be implemented. One high-speed corridor is fine, but other high-density corridors should also be connected with high speed, which will improve passenger movement, business movement, and so on.
Some states have done extremely well. Maharashtra, for example, with the Atal Setu, the coastal corridor, the metros, and many other packages. But further acceleration has to be done. Andhra is also doing quite well now — the positive atmosphere is back, and you see Amaravati coming back as the capital, with a lot of spending around Amaravati and Vizag.
So I feel fairly positive that some states and the central government continue to push big capital projects, which are real change makers. The rapid rail transit system, the Char Dham railway system connecting important holy cities — these are epoch projects. And when you say project, it also includes locomotives and such, which have gone well. A little more push on this side will keep the economy moving like this from our point of view.
Q. How has the Middle East been, and do you see scope for further geographical expansion?
A. The Middle East has also been good for us. We went there long back, but as a company we didn’t do very well initially. Then we recalibrated ourselves and decided to focus only on certain businesses. Right now we are there only in hydrocarbons, both offshore and onshore. We are there in renewables and in power transmission and distribution. Occasionally we take on an infrastructure project like a metro, maybe a desalination plant where required, but predominantly it is these three areas.
These three have done extremely well for us. We have earned a reputation with big clients like Saudi Aramco, SABIC, Ma’aden, Saudi Electricity Company, and ACWA as a preeminent EPC contractor. We have done massive-scale projects on time and with quality, and today we have a strong reputation there. We are considered one of the best EPC players in that part of the world.
We are now doing two massive platforms in Qatar. One is for NOC, a joint venture between Total of France and Qatar Energy — a huge platform in the Ras Laffan fields. The other is a massive project called Com4, which combines two projects. It involves nearly 130,000 tons of fabrication of processing platforms and living quarters for Qatar Gas. Both have just started, early days, but they seem to be going well. If we do this well, we will establish a great name in Qatar also.
Kuwait is opening up. Oman has been there for us for long, though not in a big way, but still reasonably. This makes us feel good. Our backlog is more than six lakh crore — nearly $80 billion. Very few EPCs have such a backlog. Maybe the Chinese do, but in the free world we may be number one or two with such a backlog. It represents about two and a half years of our sales. That is a comfortable feeling to have.
The company is now organized with individual verticals, each developing its own expertise, talent, HR, resources, and capabilities in design and execution. At the holding company level, people like me oversee it, but the verticals take it forward. That makes it purposeful and strong.
Q. Can you outline the growth drivers for L&T’s manufacturing business, especially the nuclear power business?
A. Leaving projects aside and moving to manufacturing, the shops are full. There has been a change in the shop profile. Earlier, the heavy engineering shop used to do huge thick plates and heavy tunnel equipment for refineries and projects like that. Today there’s a shift towards petrochemicals and biofuels. The kind of orders we get now are smaller in tonnage but of the same complexity, because petrochemicals and biofuels don’t require the same thick plates and heavy vessels.
The complexity remains, dealing with multiple alloys like chromium, molybdenum, vanadium vessels, stainless steel vessels — very high-pressure equipment. The shops are doing fine. We expect growth in nuclear, as you pointed out. The key issue in nuclear today is the CND clause on liability. It needs to be amended so that there is no liability on an operator. Right now there is severe liability for any unforeseen incident. If that clause is amended, private capital will find it easier to enter the sector. If private capital is also allowed into mining, refining, and processing, then the entire chain will become controllable and sustainable from a private investment point of view.
As an organization, we may not get into nuclear power generation per se, that is not our area, but we do have the capability to deliver an entire nuclear power plant. Very few companies in the world can do that, and we are one of them. To make a calandria, to make an end shield, to make a steam generator, we are even looking at steam turbines. We can do the civil works for the entire nuclear power plant. For example, the Tarapur nuclear power plant was done on a total turnkey basis by us, including supplying mechanical equipment. This is a very specialized area. We have the ability and capability.
So if the sector opens up in the manner we believe it could, right now with Nuclear Power Corporation being the only company putting up plants, and with the government allowing NPC and NTPC to jointly build nuclear power plants starting in Rajasthan, if the law is amended and private sector investments are allowed, you could see many more nuclear power plants coming up depending on policy and framework. There has also been thought on Bharat reactors, smaller reactors of 220 megawatt or even smaller. Technology and capability are there with us, but we’ll have to see how it goes, because having multiple small nuclear power plants raises issues of regulation, manpower, and uranium supply chains.
If a proper framework comes, we will see growth here. Nuclear is clean power, efficient power. Investment is high initially, gestation period is longer, but like a hydel power plant, once it’s up, it runs. You keep feeding uranium and the turbine keeps running. There is no pollution and it provides 24x7 base power, unlike solar which is limited to sunlight hours. It is a good way forward.
Q. Do you feel there is a case for the private sector to be allowed into uranium mining?
A. What I am saying is if you allow the private sector across the chain, from mining to power development, then they feel they are in control of the value chain. It’s like a steel plant — you control coal mining, you control iron ore mining, you control the steel plant, and you sell. You feel in control of the entire chain. Similarly, a power plant producer will also want to control the chain because then it makes sense from a cost point of view. We are only into nuclear power plant equipment. Of course, we make mining equipment like big trucks and other products we sell through our construction equipment business. But our high-end value addition is in making calandrias, end shields, generators, tubings — that is where we come in.
Q. There is a lot of talk about private capex not keeping pace with what it should be. Do you think it is changing? Because a lot of people say India is at an inflection point, like China was a decade ago. Do you feel you have a ground-level view on that?
A. It’s not really so. During Covid the government of India really stepped up to assist us, because there were no projects, nobody was investing, everyone had gone into a shell, and balance sheets were not okay. Everybody knows the story, let’s not get into it. Sentiments were down, and therefore government orders really helped many of us stay afloat, including L&T. Full credit to the government of India and to some state governments for that.
As of today, our orders are a mix — government of India orders, public sector orders, multilateral-funded orders through state or central governments, some state government orders, and private orders. During Covid in 2021–22 there were hardly any private orders. But today there are a lot of private orders coming in. We have orders from all the major groups. Some of our recent announcements are all private orders. I’m not an economist to talk about inflection points, or what share of the book private orders should be, but right now we have enough private orders in the book. All the major groups we know of are spending, and we have good relationships and projects with them. Steel capacity is expanding, copper capacity is expanding, alumina and zinc capacities are expanding. Car manufacturing capacity also seems to be expanding. The semiconductor space is expanding. I won’t name clients, but you know who they are. A lot of factories of Rs 500–600 crore value are in the book. These are fast orders — eight months, twelve months, you execute and move on. So we are positive about this. I’m sure this momentum will continue for some time.
Q. One thing people say is that capital is available only to a limited set of people with a strong credit profile. Do you see availability of capital as a concern, especially one notch down from the largest groups?
A. It’s psychology. The bigger you are, the bolder you are, and the more assurance you have to take a step. If you are already doing well, you have the confidence to take bigger risks. The bigger groups now have balance sheet size, leverage, and the mindset to take bold risks because they’ve done it before and succeeded. You spend Rs 1,000 crore and pull it off, then you say let’s do Rs 10,000 crore. Next time it’s Rs 1 lakh crore. It builds over time. For us also, when I joined, a Rs 20 crore project was a big deal. Today $5 billion is manageable. It’s about the mind, the backbone you develop, the abilities you strengthen to take bigger risks. Not every group in the country can be big. Some have reached scale and are willing to take bolder steps. The others have to emulate them and gradually come up. That’s okay, it’s natural. We should not overthink it — this is true across the globe, it’s human psychology.
Q. The EPC sector — except for L&T — has struggled. Others have gone through challenges. Why do you think that has been the situation?
A. I can only talk about L&T, not others. L&T has evolved over time, it wasn’t born yesterday. A person like me, if there is a technical problem at a site and I get involved, I can just pick up the phone, call someone, and it gets fixed. If the same happened in another company, maybe it wouldn’t. That’s because this capability has been built by solid leaders over time. This platform is about building talent, building technical capability, experimenting, making mistakes and learning, building client relationships. It’s laboratories inside, proof of concepts inside, solution rooms inside, design centers inside. Many companies treat their engineering design research centers as overheads. We treat ours as an asset. That’s the difference.
Q. How are things shaping up in L&T Finance ? The book is now more than 90 percent retail. Has it helped ?
A. It’s on track. We have simplified it, made it retail focused. The idea was to derisk it, because it had a lot of wholesale lending earlier. That has been brought down, and retail has been strengthened. The team there is doing a good job. Over time it will unlock value.
Q. Are you looking to unlock value in the realty business ?
A. We are looking at options. Realty is a business where you need huge upfront capital. It’s not like EPC where you get client advances. We are evaluating how best to take it forward, maybe with partners.
Q. How are you thinking about grooming the next leadership?
A. We did not parachute them from outside in the past. We are doing the same now. Several people have been identified, running businesses, sitting on the board, going abroad, meeting clients, taking decisions. Over the next five to seven years, the next leader will emerge from this pool.
Q. So never an outsider CEO?
A. Very unlikely. L&T is not just a company—it is an institution. To succeed here, one must truly understand its DNA and have gone through the grind. Outsiders rarely last; we’ve seen it happen before. The culture is built around grooming leaders from within, and there is ample talent available internally.
One must also remember that succession planning takes into account an age gap between current and next-line leadership, since the present leadership will continue until retirement.
Q. Mr. Naik was very hands-on. Are you the same?
A. No one can be like him. He was unique, built the company, saved it from takeover, created the culture. I am more collaborative, I take views, build consensus. When a decision has to be taken, I take it. My style is different, but the values are the same — protect the company, grow it, keep it independent, serve the nation.
Q. Do you still speak to him regularly?
A. Oh yes, very regularly. He calls me, I call him. We discuss many things. He’s still active, sharp, knows everything that’s happening, gives advice and guidance. He is a mentor and a father figure to me.
Q. You were quoted as asking employees to work on Sundays. Can you take us through the chain of events?
A. There were serious issues on my mind. Five or six clients, including some very high-profile ones, personally spoke to me, called me, sent emails about our progress. I was worried because we were struggling to mobilize staff and labour, and work was not happening the way it should. Despite my involvement, projects were not moving. It was not good to be called out at that level. It doesn’t reflect well on me or the organization.
When one gentleman asked me the question, I spoke casually, but it (recording the conversation) went against the rules as there was a statutory warning of no recording. On hindsight I could have answered differently. Normally I speak in an easy manner, that’s my style. But I acknowledge I could have spoken differently. My wife also felt bad because her name got involved.
It has not been easy. It has preyed on my mind. But what happened, happened. I cannot withdraw it now. If a similar question comes in a similar mood, maybe I’ll answer differently. There was a bad background then — performance was poor. And performance is our oxygen. When it goes wrong, things come out in that manner. Maybe it could have come out differently.
Q. On future listings — L&T Realty, or the green business?
Too early. Realty is possible. Green business, not yet. We’ve done electrolyzers, but that alone is not enough. You list a company for resources. We are a conglomerate, multiple businesses need resources. I must allocate carefully — more to the ones doing well, be careful with the ones not doing so well. Green is just starting. Too early.
Q. How is L&T promoting women leaders across the Group?
A. We don’t promote people because they’re women or men—we promote them because they’re the best for the job. Some of our strongest operators happen to be women, and that’s something we’re proud of. Think of K. Bhavani head of Heavy Civil IC, Seema Ambastha leading our Data Centre business, Kruti Badjatiya as Chief of Staff in the CMD’s office, Neha Kathuria and Chetana Patnaik shaping brand and people at LTIMindtree, Sushma Kaushik running the L&T Innovation Fund, and Kavita Jagtiani at L&T Finance. Through our Saudi JV, NextEra, Dina Aboonoq serves as CEO. M. F. Febin heads L&T EduTech. What matters to us is performance, potential and values. We back high-calibre people early, rotate them through tough roles, and give them the support to succeed. The titles follow the talent, not the other way around.”
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