AM Naik aims international market to sustain Larsen & Toubro growth

MUMBAI: Engineering major Larsen & Toubro aims to lean on the international market for growth as business in India, which delivers 91% of its orders, is constrained by problems such as corruption, Chairman and Managing Director AM Naik was quoted as saying in a Morgan Stanley report.

“I am also putting enormous pressure to increase share of exports in L&T and we want to increase its share by at least 10 percentage points,” Naik was quoted in the report called ‘India Strategy: CEOSpeak’. The company’s spokesman declined to comment on the matter.

The $11.7-billion conglomerate currently derives almost 91% of its .`136,172 crore order book from domestic business. L&T had recently said that order inflow would pick up driven by jobs from the west Asia for hydrocarbon, power transmission and distribution and infrastructure projects.

“The order inflow has been very strong over the past few months. Overseas customers are keen to deal with us because they know they are engaging a clean company. I am creating the superstructure for the firm – networking with various people, countries and pursuing opportunities across the world,” Naik said.

Naik said that India was not delivering up to its full potential and the growth has been marred by too much political fragmentation. “India’s problems are the current electoral design; corruption, even though there is some improvement at the margin, and competence in the politics. We also need more competition in bureaucracy and encourage private sector talent to enter the country’s administrative services,” Naik said.

Earlier this month, the company reiterated its earlier guidance of 25% for revenue growth and 15-20% for order inflow despite challenges arising from volatility in the market, slower decision making process, and hardening of interest rates. It said that margin may be under pressure due to higher input cost, staff cost and competitive pressure. The company has undertaken a comprehensive restructuring exercise to divide its businesses into nine independent companies. Naik listed hiring and retention of employees as the key challenge for the company going ahead.

“To secure the future of L&T, I am trying to identify people who will be able to run critical business units. Once we have that, the next generation of leaders will be in place,” Naik said.

The company which recently concluded the .`1,245-crore initial public offer of subsidiary L&T Finance Holdings, is also looking at more opportunities to unlock value.

“L&T has several hidden rabbits in its structure – areas where we can unlock value and surprise investors,” Naik said in the report. The engineering major aims at becoming a “big player” in defense, nuclear and other high-technology areas, which may be losses making in the short run but are “strong long-term businesses”.