...But L&T bets big on ship-building foray
Larsen and Toubro said it has no intention to abort the strategic plans to build a high-tech ship building facility, from which it expects over a billion dollar in business over a couple of years.business Updated: Dec 24, 2008 20:21 IST
India's largest engineering and construction firm Larsen and Toubro said it has no intention to abort the strategic plans to build a high-tech ship building facility, from which it expects over a billion dollar in business over a couple of years.
The company would go ahead with its investment plans to build the facility in the eastern coast near Chennai and a financial closure in this regard would be finalised shortly.
"In principle, the government has cleared the land and we are going through procedures. Our plan is strategic in nature and we believe it's a long term business," said MV Kotwal, senior executive vice president and board member, L&T. "We are moving ahead in phases and expects revenues over a billion dollars in a couple of years."
L&T intends to invest over Rs 2,000 crore to build a large shipyard at Kattupalli near Chennai.
"We have charted out three strategic plans for the shipping business—commercial shipbuilding, which includes large commercial carriers including very large container carriers, naval ships and submarines and a ship repairing and overhaul facility. We will go ahead with each of them based on order flows," Kotwal said.
The company currently has a facility at Hazira in Gujarat, and has over $365 million orders to build 10 ships for a Dutch
Independent sources said the defence contracts that are currently in the kitty are worth over $4.8 billion, which includes war ships and submarines.
Analysts were positive about the company's product mix and diversification in the short to medium term. "We are positive on management's efforts at improving the company's product mix by increasing the share of high-technology products for process industries, defence, nuclear, and aerospace applications; and of engineering and embedded services. These segments have better growth potential and margins than the projects business, in our view," Citi Group analysts Venkatesh Balasubramaniam, Deepal delivala and Atul Tiwari said in a research note to its clients.