LARSEN AND TOUBRO LIMITED
ANNUAL REPORT 2009-2010
DIRECTOR'S REPORT
The Directors have pleasure in presenting their Annual Report and Accounts
for the year ended March 31, 2010.
FINANCIAL RESULTS 2009-2010 2008-2009
Rs. crore Rs. crore
Profit before depreciation and tax 6,295.27 4,246.40
Less: Depreciation and amortization 415.90 307.30
5,879.37 3,939.10
Add: Transfer from Revaluation Reserve 1.30 1.31
Profit before Tax and extraordinary items 5,880.67 3,940.41
Less: Provision for Tax 1,640.87 1,231.21
Profit after Tax 4,238.80 2,709.20
(before extraordinary items)
Gain on extraordinary items (net of tax) 135.72 772.46
Profit after Tax and extraordinary items 4,375.52 3,481.66
Add: Balance brought forward from 100.50 104.31
previous year
Less: Dividend paid for the previous year 2.39 0.33
(including dividend distribution tax)
Balance available for disposal 4,473.63 3,585.64
which the Directors appropriate
as follows:
Debenture Redemption Reserve 43.34 43.34
Proposed Dividend 752.75 614.97
Dividend Tax 110.25 101.83
General Reserve 3,460.00 2,725.00
4,366.34 3,485.14
Balance to be carried forward 107.29 100.50
Dividend
The Directors recommend payment of dividend of 752.75 614.97
Rs.12.50 per equity share of Rs.2/-each on
60,21,95,408 shares
YEAR IN RETROSPECT:
The gross sales and other income for the financial year under review were
Rs. 39,381 crore as against Rs. 35,077 crore for the previous financial
year registering an increase of 12%. The Profit before tax and
extraordinary items (after interest and depreciation charges) of Rs. 5,881
crore and the Profit after tax (before extraordinary items) of Rs. 4,240
crore for the financial year under review as against Rs. 3,940 crore and
Rs. 2,709 crore respectively for the previous financial year, improved by
49% and 57% respectively.
DIVIDEND:
The Directors recommend payment of dividend of Rs. 12.50 per equity share
of Rs. 2/- each.
Equity Shares that may be allotted on exercise of Options granted under the
Employee Stock Option Schemes as also on conversion of outstanding Foreign
Currency Convertible Bonds (FCCBs) before the Book Closure for payment of
dividend will rank pari passu with the existing shares and be entitled to
receive the dividend.
DEPOSITORY SYSTEM:
As the members are aware, the Company's shares are compulsorily tradable in
electronic form. As on March 31, 2010, 96.58% of the Company's total paid-
up Capital representing 58,16,17,239 shares are in dematerialized form. In
view of the numerous advantages offered by the Depository system, members
holding shares in physical mode are advised to avail of the facility of
dematerialization on either of the Depositories.
CAPITAL & FINANCE:
During the year under review, the Company allotted 52,20,861 equity shares
upon exercise of stock options by the eligible employees under the Employee
Stock Option Schemes.
During the year under review, the Company raised Rs. 1,873 crore in India
through the Qualified Institutions Placement route for general corporate
purposes. The Company also issued unsecured Foreign Currency Convertible
Bonds (FCCBs) of USD 200 million to international investors. The FCCBs are
convertible into equity shares of the Company, and if not converted, are
repayable at the end of 5 years. The FCCBs were issued to finance capital
expenditure, investment in overseas subsidiaries and overseas acquisitions.
For the same purposes, the Company also raised a 3 year foreign currency
loan of JPY 1.809 billion (USD 20 million). During the year, the Company
repaid a long term Rupee loan of Rs. 85 crore.
CAPITAL EXPENDITURE:
As at March 31, 2010, the gross tangible and intangible assets, including
leased assets, stood at Rs. 8,164.29 crore and the net tangible and
intangible assets, including leased assets, at Rs. 6,365.76 crore.
Additions during the year amounted to Rs. 1,604.25 crore.
DEPOSITS:
38 Deposits totalling Rs. 0.04 crore which were due for repayment on or
before March 31, 2010 were not claimed by the depositors on that date. As
on the date of this report, deposits aggregating to Rs. 0.01 crore thereof
have been claimed and paid.
TRANSFER TO INVESTOR EDUCATION & PROTECTION FUND:
The Company sends letters to all shareholders whose dividends are unclaimed
so as to ensure that they receive their rightful dues. Efforts are also
made in co-ordination with the Registrar to locate the shareholders who
have not claimed their dues.
During the year, the Company has transferred a sum of Rs. 78,78,362 to
Investor Education & Protection Fund, the amount which was due & payable
and remained unclaimed and unpaid for a period of seven years, as provided
in Section 205C(2) of the Companies Act, 1956. Despite the reminder letters
sent to each shareholder, this amount remained unclaimed and hence was
transferred. Cumulatively, the amount transferred to the said Fund was
Rs.8,09,04,801 as on March 31, 2010.
SUBSIDIARY COMPANIES:
During the year under review, the Company subscribed to / acquired equity
shares in various subsidiary companies. These subsidiaries are
substantially either SPVs executing projects secured through BOT route, or
holding companies making investments in companies such as power and
financial services. The investment in Larsen & Toubro International FZE is
mainly for onward investment in international ventures. The details of
investments in subsidiary companies made during the year are as under:
* 137 equity shares of Dhs. 550,500 each in Larsen & Toubro International
FZE for Rs. 97.58 crores at par.
* 10,21,91,000 equity shares of Rs. 10 each in L&T Power Limited at par.
* 9,50,00,000 equity shares of 10 each in L&T Power Development Limited at
par.
* 12,50,005 equity shares of Rs. 10 each in L&T-Gulf Private Limited at
par.
* 2,19,80,400 equity shares of Rs. 10 each in PNG Tollway Private Limited
at par.
* 10,000 equity shares of Rs. 10 each in L&T EmSyS Private Limited for a
consideration of Re. 1.
* 50,000 equity shares of Rs. 10 each in L&T Technologies Limited at par.
* 135,15,41,591 equity shares of Rs. 10 each in L&T Capital Holdings
Limited at par.
* 11,10,00,000equitysharesofRs. 10 each in L&T Special Steels and Heavy
Forgings Private Limited at par.
* 6,42,55,100 equity shares of Rs. 10 each in L&T Halol-Shamlaji Tollway
Private Limited at par.
* 5,40,05,100 equity shares of Rs. 10 each in L&T Rajkot-Vadinar Tollway
Private Limited at par.
* 6,20,05,100 equity shares of Rs. 10 each in L&T Ahmedabad-Maliya Tollway
Private Limited at par.
* 10,000 equity shares of Rs. 10 each in L&T Aviation Services Private
Limited at par.
* 2,90,00,000 equity shares of Rs. 10 each in L&T General Insurance Company
Limited at par.
* 2,600 equity shares of Rs. 10 each in L&T Samakhiali Gandhidham Tollway
Company Private Limited at par.
* 1,12,50,000 equity shares of Rs. 10 each in L&T Infrastructure
Development Projects Limited for a consideration of Rs. 245 crore purchased
from IDF.
* Further contribution of Rs. 1.25 per share & premium of Rs. 131.25 per
share on 22,50,000 partly paid-up equity shares in Larsen & Toubro Infotech
Limited amounting to Rs. 29.81 crore. With this contribution, these shares
have become fully paid-up with paid-up value Rs. 5/- and premium of Rs.
524.995 per share.
During the year, International Seaport Dredging Limited issued to the
Company 9,420 equity shares of Rs. 10,000 each in in lieu of the 9,420
preference shares of Rs. 10,000 each and 10,000 equity shares of Rs. 10,000
each in lieu of an ICD of Rs. 10 crores, The Company subsequently sold
10,298 equity shares of Rs. 10,000 each in International Seaport Dredging
Limited for a consideration of Rs. 10.30 crore.
The Company sold 15,00,000 shares representing 50% stake in Voith Paper
Technology (India) Limited on September 30, 2009 for a consideration of
Euro 10 million (Rs. 69.56 crore). The Company sold 10,000 equity shares of
Rs. 10 each in L&T Aviation Services Private Limited at par to L&T Capital
Holdings Limited.
The Company's subsidiary International Seaports Pte. Ltd., Singapore has
been liquidated during the year. During the year under review, the Company
also accepted the buy-back offers of the following companies:
* 65,500 equity shares of Rs. 10 each in L&T-Valdel Engineering Limited for
Rs. 2.10 crore. L&T-Valdel Engineering Limited has now become a wholly
owned subsidiary of the Company.
* 1,18,370 equity shares of Rs. 100 each in AUDCO India Limited for Rs.
27.22 crore.
The Company has applied for exemption from annexing the Audited Statement
of Accounts, the Reports of the Board of Directors and
Auditors of the Subsidiary companies as required under Section 212(8) of
the Companies Act, 1956 and the same is awaited.
AUDITORS' REPORT:
The Auditors' Report to the Shareholders does not contain any
qualification.
DISCLOSURE OF PARTICULARS:
Information as per the Companies (Disclosure of Particulars in the Report
of Board of Directors) Rules, 1988, relating to Conservation of Energy,
Technology Absorption, Foreign Exchange Earnings and Outgo is provided in
Annexure 'A forming part of this Report.
OTHER DISCLOSURES:
The Company has disclosed in the notes forming part of accounts the
quantitative details in respect of sales, raw materials and components
consumed and inventories as required vide sub-paras 3(i)(a), 3(ii)(a)(1)
and (2) and 3(ii)(b) of Part II of Schedule VI to the Companies Act, 1956.
The disclosures required to be made under the Securities and Exchange Board
of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999, together with a certificate obtained from the Statutory
Auditors, confirming compliance, is provided in Annexure 'B' forming part
of this Report. Pursuant to Clause 49 of the Listing Agreement entered into
with the Stock Exchanges, a Report on Corporate Governance and a
certificate obtained from the Statutory Auditors confirming compliance, is
provided in Annexure 'C forming part of this Report. PERSONNEL
The Board of Directors wishes to express their appreciation to all the
employees for their outstanding contribution to the operations of the
Company during the year. The information required under Section 217(2A) of
the Companies Act, 1956 and the Rules made thereunder, is provided in
Annexure forming part of the Report. In terms of Section 219(1 )(b)(iv) of
the Act, the Report and Accounts are being sent to the shareholders
excluding the aforesaid Annexure. Any Shareholder interested in obtaining
copy of the same may write to the Company Secretary. None of the employees
listed in the said Annexure is related to any Director of the Company.
CORPORATE GOVERNANCE VOLUNTARY GUIDELINES:
By complying with the provisions of the Companies Act and Clause 49 of the
Listing Agreement, the Company is complying with major clauses of the
Corporate Governance Voluntary Guidelines, 2009.
We have reported in Annexure 'C' to the Directors' Report -Corporate
Governance, the extent of our compliance of the Corporate Governance
Voluntary Guidelines, 2009 under the following heads:
1. Nomination & Remuneration Committee
2. Other Information
3. Audit Committee
4. General Shareholders' Information
CORPORATE SOCIAL RESPONSIBILITY VOLUNTARY GUIDELINES:
The Ministry of Corporate Affairs has released a set of voluntary
guidelines on Corporate Social Responsibility (CSR) in December 2009. The
Company is proactively practicing the guidelines laid down. The Company has
been one of the first engineering and construction companies in India to
publish its report on Corporate Sustainability.
Some of the activities carried out by the Company as a part of its CSR
initiatives are briefly described on page 87 of the Annual Report. A broad
note on the subject is featured on pages 16 to 20. The detailed Corporate
Sustainability Report is also available on the Company's website
www.larsentoubro.com.
DIRECTORS' RESPONSIBILITY STATEMENT:
The Board of Directors of the Company confirms:-
i. that in the preparation of the annual accounts, the applicable
Accounting Standards have been followed and there has been no material
departure;
ii. that the selected accounting policies were applied consistently and the
Directors made judgments and estimates that are reasonable and prudent so
as to give a true and fair view of the state of affairs of the Company as
at March 31, 2010 and of the profits of the Company for the year ended on
that date;
iii. that proper and sufficient care has been taken for the maintenance of
adequate accounting records in accordance with the provisions of the
Companies Act, 1956 for safeguarding the assets of the Company and for
preventing and detecting fraud and other irregularities;
iv. that the annual accounts have been prepared on a going concern basis;
and
v. that the Company has adequate internal systems and controls in place to
ensure compliance of laws applicable to the Company.
DIRECTORS:
Mrs. Bhagyam Ramani, Mr. Subodh Bhargava, Mr. J. P. Nayak, Mr. Y. M.
Desothalee, Mr. M. M. Chitale and Mr. N. Mohan Raj retire from the Board by
rotation and are eligible for re-appointment at the forthcoming Annual
General Meeting. The Notice convening the Annual General Meeting includes
the proposals for re-appointment of Directors.
CONSOLIDATED FINANCIAL STATEMENTS:
Your Directors have pleasure in attaching the Consolidated Financial
Statements pursuant to Clause 32 of the Listing Agreement entered into with
the Stock Exchanges and prepared in accordance with the Accounting
Standards prescribed by the Institute of Chartered Accountants of India, in
this regard.
The Auditors' Report to the Shareholders does not contain any
qualification.
AUDITORS:
The Auditors, M/s. Sharp & Tannan (S&T), hold office until the conclusion
of the ensuing Annual General Meeting and are recommended for re-
appointment. Certificate from the Auditors has been received to the effect
that their re-appointment, if made, would be within the limits prescribed
under Section 224(1 B) of the Companies Act, 1956.
L & T has submitted the Peer Review certificate dated May 6, 2009 issued to
them by Institute of Chartered Accountants of India (ICAI).
ACKNOWLEDGEMENT:
Your Directors take this opportunity to thank the Financial Institutions,
Banks, Central and State Government authorities, Regulatory authorities,
Stock Exchanges and the stakeholders for their continued co-operation and
support to the Company. Your Directors also wish to record their
appreciation for the continued co-operation and support received from the
Joint Venture partners / Associates.
For and on behalf of the Board
A.M. Naik
Chairman & Managing Director
Mumbai, May 17, 2010
The Company has since received from Central Government exemption under
Section 212 vide letter no. 47/386/2010-CL-111 dated June 23, 2010.
Accordingly, the Audited Statement of Accounts, the Reports of the Board of
Directors and Auditors of the Subsidiary companies are not annexed as
required under Section 212(8) of the Companies Act, 1956. As required by
the said letter, we have given the information on subsidiary companies in
this Annual Report. Shareholders who wish to have a copy of the full report
and accounts of the subsidiaries will be provided the same on receipt of a
written request from them. These documents will be put up on the Company's
website viz. www. larsentoubro.com and will also be available for
inspection by any shareholder at the Registered Office of the Company on
any working day during business hours.
The Company has since received from Central Government, vide its order No.
46/54/2010-CL-111 dated May 18, 2010, exemption for the financial year
ended on March 31, 2010 in respect of disclosure of the quantitative
details in respect of sales, raw materials and components consumed and
inventories as required vide sub-paras 3(i)(a), 3(ii)(a)(1) and (2) and
3(ii)(b) of Part II of Schedule VI to the Companies Act, 1956 where the
values of the individual items in each category are less than 10% of the
total value of the category.
Annexure 'A' to the Directors' Report
(Additional information given in terms of notification issued by the
Ministry of Corporate Affairs)
[A] CONSERVATION OF ENERGY:
(a) Energy Conservation measures taken:
1. Improving energy effectiveness/efficiency of equipment and systems:-
* Replacement of GLS incandescent/conventional FTL - lamps with Compact
Fluorescent Lamps (CFL) and metal ' halide lamps in various offices,
workshops and plants.
* Use of Solar power in various offices for water heaters, installation of
water heating system for canteen cooking/ washing, use of portable
electrical ovens modified with digital temperature controller, green power
generation through roof installed grid connect solar power plant.
* Replacement of high rating induction motors with low rating motors to
conserve energy.
* Energy savings by installing real time clocks to control operation of
centralized A/C plant compressors.
* Use of Variable Frequency Drive (VFD) for various applications such as
welding positioned, tank rotators, EOT cranes, etc. to improve the motor
efficiency and enhance energy saving.
* Use of solar powered street lights, installing timers, applying reduced
voltage to street lights during night time, etc. saving energy.
* Use of energy saving devices like human sensors, presence sensors, time
switches, zone controlled AC, auto hibernation for PC's, low emission films
on glass doors and windows etc. to reduce energy consumption.
* Stopping air leakages, installing new air solenoid valves in air line to
control air combustion, etc.
* Replacement of Chuck drives with the latest energy efficient drives,
procurement of new high efficiency welding inverter based welding machines.
* Replacement of Air Circulator with the latest energy efficient Almonard
make Air Circulator.
* Replacement of preheating burners with new designed ST5 burners resulting
in reduction of Gas consumption.
* Conversion of Electrical Furnace / LSR / ISR with energy-efficient PNG
Gas Fired Furnace.
* Procurement of energy efficient Fronious welding machine & Pre-heat &
Post heat panels for PNG gas control.
* Modification of portable electrical ovens with digital temperature
controller to reduce power consumption.
* Implementation of 'Powerman' software for online energy monitoring of
energy parameters.
* Consumer wise monitoring of consumption on pro-rata basis against
performance indicators.
* Monitoring system to track excess consumption and other related
parameters.
* Conducting Energy Audit of ESP & ESE business as well as Faridabad and
Baroda campus through Bureau of Energy Efficiency (BEE) certified external
agency for possible suggestions on optimizing energy consumption.
* Installations of Auto-operations (Timer control) for Forced Draft
Ventilation System & A/c plant.
* Efficiency enhancement programme for Forced Draft Ventilation plants-
regular filter cleaning, scheduled preventive maintenance, optimum damper
setting, etc.
* Installation of 'desuperheaters' in Chillers.
* Thermo conductive booster for improvement in split & package AC
performance.
* Close monitoring of AC plants- setting optimum temperatures, controlled
usage etc.
* Operating computers in Power saver mode.
* Creating awareness on global warming by showing a Documentary film 'An
Inconvenient Truth' & Energy awareness rally.
* Celebration of 'Earth Hour' to create awareness of climate change.
* Initiation of carbon footprint mapping at Hazira, Faridabad, Baroda &
Powai. The action plan for reducing GHG is under preparation.
* Replacement of DG sets (with GSEB power) from MFF Jetty operations,
resulting in optimization of costs.
* Replacement of capacitors with high frequency electronic ballast at MFF
tower lights.
* Installation of APFC (automatic power factor controller) panels in the
power circuit at MFF thus improving its power factor and enabling MFF thus
improving its power factor and enabling MFF to claim rebate in energy
bills.
* Reducing weld groove angle throughout pile fabrication work for MHN
project resulting in direct cost & energy saving.
* Replacement of older ACs with energy efficient star rated ACs.
* Use of wind power in offices in Chennai, wheeled from remote wind farms
in Tamilnadu.
* Use of solar power packs in construction sites to offset diesel
consumption.
* Use of VFD's in operating large winches
* Introduction of VVVF Drives in the place of conventional type starter
panels in new cranes and Transfer trolleys installed in new galvanizing
plant. (VVVF Drives present in Long travel and hoist operation in all 5 EOT
cranes and in all the four motorised transfer trolley)
* Conversion of Slip ring Motor - Rotor resistance starter system to
squirrel cage induction motor with WVF drive system in two areas in
existing crane.
* Replacement of old Motors used in Long travel applications in Raw
material yard EOT Cranes to Energy efficient type motors (Siemens make).
* Fixing transparent sheets in between AC sheet in Roof of shop floor to
improve indoor illumination as well as reducing indoor lights 'ON' time:
* Implementation of Lighting Circuit Energy Savers for Main Lighting
Distribution Board.
* Achieving Power Factor of 0.99 (by adding APFC panel) and maintained the
Demand at optimum level in spite of raise in loads.
* Enhancement of Capacitor Bank capacity to improve power factor.
* Various initiatives taken to reduce the fuel consumption include:
- Special Additives added in Fuel for Complete Combustion.
- Improved Preheating of Fuel.
- Frequent Cleaning & Monitoring of Burners, Valves, Nozzles & Strainers.
- Increased throughput (Production Enhancement).
* Solar Lighting at Canteen & Security Building.
* Conversion of Pin-Bush type coupling with Tyre coupling which lead to
reduced failures and reduced Motor's initial power consumption.
* Conversion of dual insulator type current collectors of EOT Cranes into
single insulator type, and modification of current collectors thus reducing
total weight and enhancing life of bus bar.
* Replacing conventional Diaphragm operated timer (BCH make) in EOT Cranes
to Electronic timer (Tele mechanique make), keeping control operation
accurate and low power consuming.
2. Improving energy effectiveness/efficiency of Manufacturing Processes
* Fitment of VFD's for EOT cranes.
* Optimization of the operation of higher cfm compressors resulting in
energy saving.
* Use of Dual track Induction melting process for optimum sharing of power
between two furnace crucibles resulting in energy saving and higher
productivity.
* Automatic switch off facility for dust extraction systems and connected
equipment when idle for more than 10 minutes.
* Centralized on / off control for compressors which will operate the
compressors based on air consumption.
* Installation of furnaces with capture hood to avoid heat loss resulting
in energy saving.
* Installation of mechanical reclamation system for furan sand recovery.
* Use of Turbo ventilators to extract heat in the non air-conditioned areas
of factory / office buildings.
* Electrode in vacuum sealed packing to eliminate baking.
* Designs Development of200MT& 300 MT Tank Rotator with Anti drift
Mechanism.
* Use of energy efficient Robotic weld overlay for Filter Vessel & Spud
welding machine.
* Implementation of Data Logger for Welding Equipment for capturing the
actual welding parameters.
* Use of energy efficient internal firing arrangement for SR Furnace &
Ceramic blanket on ground for LEMF furnaces.
* Use of energy efficient Local Stress Relieve (LSR) technique for 300 mm
thick Cr-Mo-V Reactors, Tandem (two wire) SAW PQR using Lincoln AC/DC Power
Wave Machine & 150 wide ESSC Strip overlay on thick walled CrMoV reactors.
* Design and development of Portable Flame cutting machine for Nozzle
Cutout.
* Development & implementation of energy efficient Twin-Torch GMAW for
stiffener rings to shell joint in Torpedo Weapon Complex, Square butt SAW
process for dissimilar base metal thickness (14 mm # 30 mm) & GMAW-P
process for Square-Butt joint type in Project P-26.
* Development of energy efficient hydraulic tube expansion process for
thickness tube sheet & portable pipe beveling machine.
(b) Additional investments and proposals, if any, being implemented for
reduction of consumption of energy:
* Replacement of shop floor overhead light with Metal halide light
fittings.
* Replacement of existing conventional centralized AC Plant with split air-
conditioner units.
* Installation of solar water heater in Transit houses.
* Fitment of VFD's for EOT cranes.
* Thermal reclamation system implementation work in progress to achieve 98%
furan sand recovery.
* LPG Bullet & distribution system installation in progress to replace
usage of diesel with LPG for ladle pre-heating.
* Procurement of Natural Gas based Converter Kit for Diesel Fired 1250 KVA
Generators.
* Preparation of Wind Power Proposal for Maharashtra, Tamilnadu and
Gujarat.
* Use of Sky shade Solar Light Pipe Fittings for Receiving Store and other
Areas.
* Procurement of Energy Efficient Flux Baking Ovens.
* SR Furnace Revamping / Modification to improve Combustion Efficiency.
* Use of LED Light Fittings in place of MH Light Fittings.
* Development of SS Electrodes in Vacuum Sealed Pack by EWAC.
* Use of lighting energy saver.
* Procurement of additional Inverter based welding machines instead of
rectifiers for shops.
* Use of interlock flux recovery units with welding machines.
* Modification in Autoclave machine cooling system.
* Bio gas generation plant from canteen waste at Ranoli Works.
* Use of turbo ventilators in shops.
* Use of timer in welding m/c to avoid continuous idle running
(c) Impact of measures at (a) and (b) above for reduction of energy
consumption and consequent impact on the cost of production of goods:
* The measures taken have resulted in savings in cost of production, power
consumption, reduction in carbon dioxide emissions & processing time.
(d) Total Energy Consumption and Energy Consumption per unit of production
as per Form A in respect of industries specified in the Schedule:
NOT APPLICABLE
[B] TECHNOLOGY ABSORPTION:
Efforts made in technology absorption as per Form B.
FORM-B (Disclosure of particulars with respect to Technology Absorption)
RESEARCH AND DEVELOPMENT(R & D)
1. Specific areas in which R&D carried out by the Company:
* Cement & Mineral Process:
Process Design and related aspects of Cement / Mineral projects; Coal
characterization and study of Gasification Technologies / application;
Modelling and simulation of entrained flow and fixed bed coal gasifiers.
* Chemical Engineering:
Design, analysis and simulation of chemical processes and equipment, with
special emphasis on Oil & Gas applications (Gas Dehydration and Gas
Sweetening Units); Capability development for in-house process engineering
of Process Gas Compressor modules; Fertilizer plant revamp, Hydrogen,
Ammonia and Methanol plants; Refractory engineering for chemical plant
equipment.
* Material Science & Corrosion Engineering:
Composites with functional properties, nano-materials for strategic
applications, eco-friendly corrosion inhibitors, welding of heavy thick
duplex stainless steels for oil and gas applications and surface
engineering of metals and non-metals.
* Thermal Engineering:
Dynamic simulation of captive power plant; CFD analysis of industrial
machinery and systems (such as three phase separators);
Capability development in Once through Steam Generator and Super Critical
Boiler technology.
* Rotating Machinery:
Product design / development for Coal Pulverizers of Super Critical
Boilers; Performance testing and commissioning of turbo-machinery for
Hydrocarbon (Oil & Gas) application; Advanced engineering studies in
Vibration and Acoustics for machinery and piping.
* Mechanical Engineering:
Design solutions for products through advanced Finite Element analysis;
Seismic analysis of onshore buried pipeline; Development of structural
design aspects of Waste Heat Recovery Exchangers for offshore platforms;
Development of design capability for Cofferdam; Development of capability
to analyze structural integrity of ship structures for Airbag Launch,
Development of system / configuration for proper functioning of bellows in
complex equipment; Development of capability for design of piping system
for wind tunnel application; Development of capability to check integrity
of Subsea pipeline spool; Experimental Stress measurements on HLPV during
lift test and for other industry critical equipments during load / pressure
tests.
* Ocean Engineering:
Capability development for structural design solution for Gas Compressor
Modules; Capability development for structural analysis of non-grouted
Jackets; Capability development for Hydrostatic stability analysis for
Jack-up rigs; Design analysis and optimization of complex offshore
structures; Capability development for structural design for Heli-deck
satisfying ABS and CAP 432 requirements.
* Water Technologies:
Design and detailing of water & wastewater, recycling & reuse and zero
liquid discharge systems including sea water / brackish water desalination,
membrane bio-reactor, sequential batch reactor, up-flow anaerobic sludge
blanket reactor and other advanced treatment technologies; Conducting lab
scale pilot plant studies, treatability studies and analytical studies for
water & wastewater.
* Development and trial testing of Road Miller and Primary Mobile Crushing
Plant (electric drive).
* Rubber Processing Machinery such as 130' Mechanical Tyre Curing Press for
curing Off-The-Road tyres, 46'Hydraulic Tyre Curing Press-Tie Rod Design
for curing high accuracy radial tyres, Radial Tyre Building Machine for LCV
tyres, 104791' Slide back Mechanical Press for maintaining accuracy and
life of Segmented mould operators and 46' Hydraulic Tyre Curing Press-Frame
Design for high performance passenger car radial tyres.
* Design & development of Equipment for Construction & Road Sector such as
Wheel Loader with 2 Cu.m bucket capacity, Tipper Body of 18 Cu.m size for
Mining Trucks, 20 Ton Vibratory Soil Compactor.
* All-Electric Plastic Injection Moulding Machine - 105 Ton Class.
* Weapon Launch & Control Systems (Structures, mechanisms, drives,
controls).
* Development of Futuristic Combat Vehicles.
* Development of Ship Platform Management Systems.
* Development of Missile / Airframe Components.
* Development of steam generator design for Nuclear power plant.
* Development of welding Simulation Technology.
* Development of Waste Heat Recovery Boiler for Nitric acid plant.
* Development of High Speed CFRP Tubes.
* Development of Flexible Composite Seals for Brahmos Vertical Launcher.
* Development of CFRP liner for Missiles sections.
* Development of Heat shield for launch vehicles.
* Development of core technologies for Hypersonic Wind Tunnel Systems.
* Development of new products / product ranges of Air Circuit Breakers,
Moulded Case Circuit Breakers, Miniature Circuit Breakers, Contactors,
Relays Switch-Disconnector-Fuses and Change-Over devices.
* Blume & Redecker Automatic coil winding machine for coil manufacturing at
Ahmednagar Switchgear Works.
* Induction brazing machine in component & finishing shop at Ahmednagar
Switchgear Works.
* Fully automatic test benches for product testing at Ahmednagar.
Switchgear Works with test data acquisition.
* 160 T Mechanical and 200 T Hydraulic presses
* Conveyor based assembly line for Manual Air Circuit Breakers.
* 50 kA Short Circuit test bench with fixtures.
* Microprocessor based controller on battery operated vehicles.
* Contactor magnet manufacturing process optimized & throughput time
reduced by implementing High speed lamination blanking at 650 strokes per
minute.
* Triple action riveting.
* Single pass grinding.
* Bar-coding implemented on all products.
* Modular devices sub-assembly automation for better productivity &
improved quality.
* Multi-cavity hot runner mould for better material utilization & cycle-
time reduction.
* Eight-cavity moulding for Miniature Circuit Breaker housing and cover
established with cold manifold & sprue with auto degating.
* Vision system to arrest possible discrepancies in respect of product
packing for Air Circuit Breakers.
* 'Contact-less Measurement' technique in Test benches for integration of
'Over Travel' measurement of Contactors during routine testing.
* Indigenisation of Medium Voltage Switchgear Products.
* Development of Intelligent Motor Protection Relays.
* New Design of Low Voltage Motor Control Centres.
* Power Management System.
* Terminal Automation System.
* Toll Management System.
* Highway Traffic Management System.
* Indigenization of Medium Voltage Drive Transformer.
* New metering data acquisition solution which finds its application in
Restructured Accelerated Power Development Reforms Program (R-APDRP).
* A common protocol which enables communication feature in the meters.
* Indigenous improved NIBP module, new Sp02 module and Predictive
Temperature module were developed to achieve technology independence & cost
effectiveness for the monitoring products.
* Concrete paver blocks without cement.
* Innovative panels with light weight concrete.
* High performance, high strength and self flow concrete.
* Rapid assessment of cement quality.
* Automatic vibro compaction for roads.
* Application of high end PMBs (Polymer Modified Bitumen) for extreme
traffic loads on runways.
* Application of recycled materials & construction technology in pavements.
* Application of Genetic Algorithm in reinforced concrete design.
* RFID's applications stores management.
* Development of LIMS - Laboratory information management system as per
NABL standards for Construction laboratories.
* Establishment of Transmission line research and testing station.
* Design, analysis and optimization of narrow base multi-circuit tower.
* In-house development of advance software for transmission line tower
analysis and design.
* Development of GIS based application for transmission line projects.
* Advance analytical techniques for design and detailing of transmission
tower with sub-bracing pattern.
* Capability development for in-house engineering of Photovoltaic and
Concentrated Solar power plants.
* Design and optimization of complex structure for Photovoltaic and
Concentrated Solar power plant.
* Development of tracking system for Photovoltaic based power plant.
* Experimental analysis for performance study of Photovoltaic based roof-
top grid connected system.
* Process simulation, design solutions and optimization for E&C projects
involving refinery, fertiliser and chemical plants. Refractory solutions
for high-temperature equipment in process plants.
* Successful testing / commissioning of plants and equipment in various E&C
projects, through multi-disciplinary technology support.
* Material evaluation / characterization; selection of alternative
materials; failure analysis support; preservation and corrosion protection
of critical equipment.
* Successful simulation of captive power plant. Design/ optimization of
thermal systems.
* Design upgradation and optimization of coal pulverizers; Failure analysis
/ trouble-shooting of rotary kiln drives in cement projects. Successful
conduct of acceptance testing of turbo-machinery for offshore applications.
* Development of in-house capability for analyzing flow-induced vibration
and acoustic vibration in oil & gas piping systems.
* Design / analysis of complex structures and piping systems for offshore
Oil & Gas applications. Development of design / analysis techniques and
resources for Deepwater Oil & Gas applications.
* Development of in-house expertise in high-end engineering analysis (e.g.,
advanced FEA, CFD, Dynamic Simulation, Acoustic Mapping, Rotor Dynamics,
Non-Linear Analysis, seismic analysis of buried pipeline etc.).
* Eco-friendly building components
* Improvements in roads & runways infrastructure
* Recycled use of asphalt pavements.
* Cost reduction in terms of economical design.
* Easy identification and retrieval of stocks of materials.
* Automated testing facilities
* Optimization of transmission line tower weight and reduction of
footprints of foundation.
* Process design and optimization of CSP plant.
* Development of capability for in-house engineering of solar PV and CSP
plant.
2. Benefits derived as a result of above R & D:
* Increased our Product Range coupled with Technology upgradations and cost
reduction and it has resulted in making our equipment offering more
contemporary and competitive. The R&D efforts have boosted our capabilities
to offer custom-made equipment and have fetched us orders in stiff
international competition.
* Able to quickly offer new products for Rubber Processing for varied
requirements and position our products well against offerings by global
players.
* Created and implemented procedures using PLM for Top-down design of
Mobile Equipment by 3D Modelling, Design validation & analysis of complete
equipment using ANSYS and Hypermesh and Process for deriving target
specifications for Mobile Construction / Mining equipment and Industrial
Machinery. This initiative offers tremendous business opportunity as and
when it is decided to launch new products.
* Indigenization & development of products for Indian defence sector
* Savings in Foreign Exchange
* Increased offerings from L&T meeting the expectations of Indian customer
both technically as well as commercially
* Introduction of new products with a focus on achieving global acceptance,
enhancing safety and user convenience, environment friendly features,
built-in intelligence and communication capability and conformance to
latest Indian and International standards include:
* U-Power Omega range of Air Circuit Breaker; this range won the best
product award in ELECRAMA 2010.
* Supernova range of Control gear products with 'space saving/ design and
enhanced customer convenience.
* In the patient monitoring range, Planet-10, Planet-20, Planet-30, Star
50N, Planet 50N, Skyline M, Skyline 55 V1 and ECG recorder - Orion
* In Surgical Diathermy Maestro Plus 100, a dual output machine
* Launching of two new platforms for single-phase and four new platforms
for poly-phase meters.
* Improvement in speed of construction.
3. Future Plan of Action:
* Plans on anvil for development of new / upgraded products in Surface
Miner product line.
* Plans to develop certain specific new products / upgrade existing
products for Rubber Processing with focus on energy / cost savings and
development of Hydro-Mechanical Presses for Truck and Bus Radial segment as
the trend is towards radialisation in these segments by all Tyre majors.
* Plans to work on expanding product range in Wheel Loaders and All-
Electric Plastic Injection Molding Machine.
* Creating & implementing Test protocol and field testing for Mobile
construction / mining Equipment to simulate functional requirement / field
conditions.
* Development of new / upgraded products in defence equipments.
* Complete the product offerings in Medium Voltage range by introducing
more products.
* Increase the product range in protection systems and solutions.
* Development of Cement Automation Package.
* Development of Electronic Tolling System.
* Development of Tank Farm Management System.
* Local assembly of Medium Voltage Inverters.
* Process technology for coal gasification.
* Design/simulation of Hydrogen, Ammonia processes and Pre Reformer & Auto
Thermal Reformers.
* Design/Simulation of On-shore oil & gas processing techniques.
* Study of Synfuels Technology.
* Applications of Nano Technology, development of nano-materials and
coatings.
* Application of electrochemical noise method for characterization of
stress corrosion cracking (SCC).
* Carbon-fibre from polymeric fibres.
* Technology Analysis of Super Critical Boilers
* Design and analysis of critical machinery in Jack-up Drilling Rigs.
* Study on sealing technology for turbo-machinery.
* Application of Reliability, Availability & Maintainability (RAM) studies
in process plants.
* Design/analysis of FPSO Topsides.
* Design/Analysis of Jack-up Rigs and Semi-submersible Drilling Rigs.
* Design and analysis of Jacket & Deck Installation.
* Design and Analysis of Sub-sea pipeline installation.
* Capability development for Pile Drivability analysis.
* Capability development for motion response analysis of offshore vessels.
* Recycle, Reuse and Zero-discharge Technologies.
* Dynamic Simulation of Gas Compressors.
* Solar Thermal Power Plants.
* Development of high early strength concrete for faster construction.
* Development of Sandwich Panel Construction.
* Development of Cold Mix Design.
* Improvements in mass housing.
* Piled raft foundation.
* Foundations with geo cells.
* Quick assessment of geotechnical details.
* Mechanised construction of Industrial Flooring systems.
* Bench Marking of site labs to NABL Standards.
* Improvement of bored cast -in-situ piles.
* IT enablement in construction projects.
* Development of EHV transmission line tower using tubular and cold formed
section.
* Development of techniques for improving current carrying capacity of
transmission line using high capacity conductor.
* Development of software for design and optimization of transmission tower
foundation.
* Development and performance study of solar power collector structure.
* Design, analysis and optimization of solar power plant based on CSP
technologies.
* Development of tracking system for CSP structure.
* Design and development of control and monitoring system for solar farms
4. Expenditure on R&D: Rs. crore
2009-2010 2008-2009
(a) Capital 5.56 5.07
(b) Recurring 85.98 75.18
(c) Total 91.54 80.19
(d) Total R & D 0.25% 0.24%
expenditure as a
percentage of
total turnover
TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:
1. Efforts in brief made towards technology absorption, adaptation and
innovation:
* Adaptation of emission controlled diesel engine for Surface Miner.
* Adaptation of crushing technology for various applications.
* Magma software for metal flow analysis - gives metal flow stream into the
mold, impact of metal flow, possible causes of rejection during metal flow
resulting minimum trial runs during development of new items.
* Evaluated imported equipment designs / technologies and implemented the
state-of-the-art technology through indigenous developments along with
alternative materials / components.
* Interaction with external agencies/internal customers/suppliers for
exposure to the latest products/designs, manufacturing technologies,
processes, analytical techniques and engineering protocols.
* Indigenization of membrane wall panels for Shell Coal ( Gasifiers.
* Qualified by Sasol for CTL (Coal to Liquid) & GTL (Gas to Liquid)
Reactors.
* Qualified for supplying Lurgi Gasifiers which are used first time in
India for Jindal's DRI project.
* Adaptation of previously developed technologies for delivering products
such as Winch & Mooring System for Aerostats, Torpedo Launcher mounts, ASW
Rocket launcher mounts & Anti-Tank Guided Missile launchers, Heavy Weight
Torpedo Launchers, Universal Vertical Missile launchers, Multi Barrel
Rocket Launcher System.
* Safety Systems for SIL 3 applications from HIMA Germany.
* Distributed Control System for Power Plant Applications. / Automatic
Fare Collection System for Metro Rail Projects.
* Participating in national / international conferences, seminars and
exhibitions.
* Valuation, adaptation and / or modification of imported designs /
technologies to suit indigenous requirements, alternative materials /
components.
* Parametric studies involving theoretical models duly validated by
experimental studies at in-house laboratories and pilot plants as well as
feedback and operating data during commissioning of various plants and
machinery.
* Review of patents in relevant technology areas.
* Collaborative efforts with educational / research institutions for
technology upgradation.
* Use of state-of-the-art equipment, instrument and software.
* Analyzing feedback from users to improve processes and services.
2. Benefits derived as a result of the above efforts, e.g., product
improvement, cost reduction, product development, import substitution,
etc.:
* Better fuel efficiency in the operation of Surface Miner with emission
controlled diesel engine and less air pollution.
* Indigenised various components for Rubber Processing Machinery by
designing, developing specifications and adapting to Indian conditions.
* Consequent to the establishment of facilities for design & development of
new products, there is a reduced dependence on external sources for
technology required towards new products and upgrading existing products.
* Indigenisation (import substitution) & development of products for Indian
defence sector
* Expansion of product range and export opportunities Product improvement.
* Increase in know-how within the country.
* Absorption of Application know how.
* Successful simulation/optimization of process design and engineering for
various E&C projects (Refinery, Oil & Gas, fertilizer and chemical plants).
* Appropriate refractory design for high-temperature applications.
* Energy conservation using optimal heat exchanger network analysis and
configuration.
* Building capability for Dynamic Simulation of Power Plants.
* Successful selection and characterization of materials for critical
applications and implementation of suitable preservation / corrosion
protection techniques.
* Development of modeling capability for stack emission predictions using
dispersion studies.
* Development of optimized design for Coal Pulverizers.
* Establishment of in-house capability for advanced engineering studies in
vibration and acoustic.
* Development of expertise in performance testing of critical turbo-
machinery.
* Development of in-house expertise for seismic analysis of buried
pipelines.
* Effective solutions to design / analysis problems involving complex
structures and piping systems for offshore Oil & Gas applications.
* Development of in-house analysis capabilities and resources for deepwater
Oil & Gas applications.
* Successful testing / commissioning of plants and equipment in various E&C
projects, through multi-disciplinary technology support.
* Acquisition of in-house expertise in high-end engineering analysis (e.g.,
advanced FEA, CFD, Dynamic Simulation, Acoustic Mapping, Rotor Dynamics,
Non-Linear Analysis etc.) and technologies such as composite materials,
advanced corrosion control methods and water treatment techniques.
* Establishment / upgradation of state-of-the art laboratory facilities for
material characterization, chemical analysis, corrosion control, vibration
and acoustics and experimental stress analysts, in order to provide
comprehensive technology support to business units. This has reduced the
dependence on external agencies and enabled effective execution of
projects.
* Big potential for Lurgi Gasifiers as these are suitable for Indian coals.
* Now, we are in the league of world's top three companies who can supply
CTL & GTL Reactors.
3. Information regarding technology imported during the last 5 years
S. Technology Imported Year of Status
No. Import
a) Manufacturing know-how of 2007 Absorbed
Cementing Unit
[C] FOREIGN EXCHANGE EARNINGS AND OUTGO:
Activities relating to exports, initiatives taken to increase exports;
development of new export markets for products and services; and export
plans.
Overview:
The Company has a diversified range of products. Each business division of
the Company has dedicated cells forgiving impetus to exports. The Company
has offices abroad and agents in various countries to boost exports. The
Company is intensifying efforts in selected countries and exploring new
markets. The Company is expanding reach of new products through synergy
with existing products and, International Engineering, Procurement and
Construction (EPC) projects. Export of heavy engineering equipment has been
identified as thrust area. The Company regularly participates in
prestigious international exhibitions and conducts market surveys and
direct mail campaigns. The Company has an international presence, with a
global spread of offices and joint ventures with world leaders. Its large
technology base and pool of experienced personnel enable it to offer
integrated services in world markets.
Engineering & Construction Division (E&C):
E&C (Projects) Division's track record in International market stretches
from Isthmus of Malaysia to the endless dunes of the Middle East and
Africa. Looking at the enormous business potential in the Middle East
region, the Headquarter for Gulf operations is set up in Sharjah, the third
largest emirate of the United Arab Emirates. The Division is well
established in GCC Countries and is 'Qualified' by major Oil & Gas Clients.
It has executed various projects for key clients including Saudi Aramco,
Saudi Kayan/SABIC, Petronas, KNPC, KOC, KAFCO, Qatar Petroleum, Pearl GTL
Qatar, ADNOC Group of Companies, Maersk Oil Qatar, Oman Gas Company,
Emirates National Oil Company etc. Over the last few years E&C (Projects)
Division bagged a number of prestigious orders in the Gulf. E&C (Projects)
Division has actively contributed towards clean environment through
execution of Clean Fuel projects such as Motor Spirit Quality Upgradation,
Diesel Hydro Treating, Hydrogen & Sulphur Block Projects.
The cost of oil production by OPEC is far lower than what is products
elsewhere and thus has an advantage over other producers such as Canada &
Brazil. GCC countries are seeking to develop gas fields due to rising
demand from the power and water (desalinated) sectors. Iran and Qatar have
major gas deposits. Substantial business prospects in the Hydrocarbon
segment, estimated to be in excess of USD 85 billion, exist in GCC
Countries. The Division is widening its network of overseas marketing
partners in the GCC as well as other countries in the Middle East & Far
East. The Division is looking forward to other opportunities in the MENA
region (Middle East and North Africa) and CIS countries.
As far as Engineering Construction & Contracts Division (ECC) is concerned,
the Electrical and Gulf Projects Operating Company (E&GP OC) continues to
focus on GCC Countries for Construction business. The year 2009-2010 was an
extremely challenging year. Inordinate delay / deferment of projects by
clients affected the order inflow. However, L&T's Global Foot Print coupled
with project execution capabilities helped the E&GP OC in securing certain
prestigious orders in Qatar, UAE and Oman in the Power Transmission and
Distribution Sector. The E&GP OC emerged as a market leader for the Power
Transmission and Distribution (PTD) business in Oman and substantially
improved its market share in UAE & Qatar. PTD business reported significant
increase in both revenue and profitability. The PTD Business has gained
momentum and notice inviting tenders for lot of new projects are being
announced.
The Construction Industry continues to witness slowdown and was very
sluggish during the last financial year. The property market in Dubai was
very badly affected by the economic meltdown. Even the Dubai Government
could not bail out the property developers and faced a severe liquidity
crisis and had to finally seek the support of neighboring country, Abudhabi
to bail them out. The Abudhabi Government, though flushed with funds, is
adopting a cautious approach which can be seen by the delayed announcement
of new projects due to adverse market trend.
The economic recession coupled with severe liquidity crisis has dented the
growth of the Construction Sector in the Financial Year 2009-2010. The
unprecedented volatility in commodity prices is forcing the client to defer
launching of new projects to take advantage of falling prices. However,
even under difficult period the E&GP OC has fared better than most of its
competitors mainly due to its exposure to diverse client profile and
geographies. The reinforced thrust to re-enter Saudi, Kuwait and
geographical expansion to South Africa is expected to yield good results in
the years to come. Focusing our attention on PTD Business and penetration
into the Middle East market is expected to provide lots of opportunities to
sustain the growth momentum.
Heavy Engineering Division (HED):
HED continues to take a number of initiatives to enhance export growth. In
the last financial year, exports accounted for 60% of total sales in HED.
South America in general & Brazil in particular is emerging as a major
market for process plant equipment. The Division has booked orders for the
supply of Reactors & Coke Drums for North East Refinery project of Petroleo
Brasileiro S.A -Petrobras, Brazil.
Middle East & North Africa continues to be focus market fo HED. Orders for
supply of citical equipment to fertilizer projects were received from Oman
and Algeria. China remains to be a major market for HED products. Orders
for supply of Shell Gasifiers have been bagged in Vietnam & Australia.
Almost all the materials (except for Titanium & high thickness tube-sheets)
for the feed heating equipment for Super Critical Power Plants are being
sourced locally.
A new territory was opened in Vietnam for Urea Plant and Australia for
Ammonia Plant equipment.
HED has been exploring opportunities for export of Defence, Nuclear Power
& Aerospace equipment as well. Orders
have been received from Israeli Aerospace Industries as key Offset Partner
in the areas of Weapon Systems, Radars and Aerospace. The Defence Business
is also interacting with major international players in the defence
industry for technology tie ups and indigenous manufacturing.
Impressed with our performance on Indian order, Lurgi SA has shown great
interest in taking quotes from us for other gasification projects.
Our initiative for boosting of exports includes the following:
* Offering valued added services like site work for Chinese projects
* Participation in international seminars
* Building on the success of Power Plant equipment with overseas customers
* Offering value added services like maintenance-friendly design features
for High Pressure Heat Exchangers at customer's plants.
* Establishment of Representative Offices in major overseas markets.
Electrical & Electronics Business Division (EBG):
Electrical Standard Products (ESP) has bagged orders to supply to Alfanar
and Iskara in Gulf Co-operation Council (GCC). ESP has also supplied
products to other premium projects in GCC such as Pinancle Towers and Hotel
Novotel in Dubai. However, much slower than expected recovery of GCC
remains a concern for this business.
For Electrical Systems & Equipment (ESE) business, projects in Saudi Arabia
are being delayed. However, definite signs of revival are seen. Large-size
oil & gas projects are showing positive signs of recovery. Investments in
Power Distribution, Water management continue and ESE expects good business
from these sectors.
The Control & Automation Business Unit (C&A) operates as a Turnkey
Automation System Integrator in India, the Middle East & North Africa
market in Cement, Metal, Oil & Gas, Utility, and Infrastructure verticals.
This business unit exports engineered control and automation solutions to
the Middle East countries etc.
Metering & Protection Systems (MPS) has participated in tenders in
Bangladesh. This business will also explore the business opportunities in
Indonesia in the near future. EBG filed 128 patents in 2009-10. This is
third consecutive financial year of achieving 100+ patents filing.
Manufacturing & Industrial Products Division (MIPD): The economic slow-down
greatly impacted Valve Business in 2009-10 as the investment plans of many
projects were either deferred or dropped. Valves Business Unit (VBU) plans
to increase the market reach to leverage the approvals from Oil majors and
forge the alliances in new markets such as South America, South Korea,
Iran, North Africa, etc. The thrust on upstream market through value added
product offerings is expected to yield results in the coming years. VBU is
also focusing on Power sector including overseas nuclear plants to offer
high pressure and custom built valves. With the new manufacturing plant at
Coimbatore gearing up for N&NPT stamps from ASME, the Unit is well placed
for growth in this sector.
During 2009-10, there was a drop in Industrial machinery exports from
Kansbahal primarily due to effect of economic downturn and cautious
approach of international customers. However, there was a significant
increase in Deemed exports through supply of Multi Layer Packaging Coated
Board Machine to Century Pulp & Paper. The year also saw increased inflow
of orders from the international market for Kansbahal. Geographies such as
GCC countries, Africa, SE-Asean nations offer good opportunities in the
coming years for the Crusher business. Kansbahal has opportunities to
provide Pulp & Paper equipment to Voith as supplies for its global
requirements.
Rubber Machinery Business Unit (LTM BU) has been continuously working on
development of new market in exports. During the year, the Unit has been
successful in obtaining a significant order from a new customer in Japan
for supply of Tyre Curing Press.
The following initiatives have been taken by the Company:
* Efforts for strategic alliances with Process Licensors/Technology
Providers and reputed international EPC players are underway to undertake
high value projects in international markets.
* Widening new geographical areas for augmenting its exports.
* Exploring inorganic growth opportunities for the acquisition of
specialized engineering outfits abroad.
* Membership of global forums like Engineering & Construction Risk
Institute (ECRI) and participating in international seminars.
* Implementation of Project KIRAN towards operational excellence and
creating a lean high performance organization.
* Implementation of Knowledge Management System 'KnowNet' for capturing
tacit knowledge in the form of learnings & experiences and disseminating
the same across the organization.
* Bringing in high caliber resources in the areas of front-end marketing,
engineering, project management, risk management, contract administration,
etc., to strengthen the overseas operations.
* Customized Talent Management programs including flagship Capability &
Leadership Development (CALD) programs for catering to the training and
development needs of employees.
Total foreign exchange used and earned: Rs. Crore
2009-2010 2008-2009
Foreign Exchange earned 6,866.21 7,348.23
Foreign Exchange saved/ 1,510.05 92.31
deemed exports
Total 8,376.26 7,440.54
Foreign Exchange used 9,158.88 7,899.42
Annexure 'B' to the Directors' Report
Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999 (I) Employee Stock Ownership Scheme-1999-2003
A. PRE RESTRUCTURE:
ESOP SERIES
Particulars SAR-1999 2000
(1) (2) (3)
(a) Options 10,66,000 Stock Appreciation 39,48,800 Equity shares
granted Rights (SARs)
(b) The pricing Grant price for the purpose The average market price
formula of ascertaining the on the Stock Exchange,
appreciation: Average of Mumbai, on the date of
daily High Low Averages of grant i.e., June 1,2000-
the Company's Share price on Rs.184/-per share.
Stock Exchange, Mumbai,
during the year April 1998-
March 1999. This worked out
to Rs.199/-per share.
(c) Options 10,60,750 38,64,050
vested
(d) Options 2,66,500 52,415
exercised
(e) Total number 1,04,318 52,415
of shares arising
as a result of
exercise of
Options (Equity
shares of Rs.10/-
each)
(f) Options 5,250 1,46,025
lapsed
(g) Variation of Nil Nil
terms of Options
(h) Money Rs. 10,43,180/- Rs.96,44,360/-
realised by
exercise of
Options
(i) Total Number 7,94,250 SARs 37,50,360
of Options in
force
ESOP SERIES
Particulars 2002-A 2002-B
(1) (4) (5)
(a) Options 37,81,100 37,81,660
granted Equity Shares Equity Shares
(b) The pricing The average market price The average market price
formula on the Stock Exchange, on the Stock Exchange,
Mumbai, on the date of Mumbai, on the date of
grant i.e.,April 19,2002- grant i.e.,April 19,2002-
Rs.172/-per share. Rs.172/-per share.
(c) Options 20,67,250 20,19,830
vested
(d) Options 12,750 6,250
exercised
(e) Total number 12,750 6,250
of shares arising
as a result of
exercise of
Options (Equity
shares of Rs.10/-
each)
(f) Options 1,25,300 1,07,375
lapsed
(g) Variation of Nil Nil
terms of Options
(h) Money Rs.21,93,000/- Rs. 10,75,000/-
realised by
exercise of
Options
(i) Total Number 36,43,050 36,68,035
of Options in
force
ESOP SERIES
Particulars 2003-A 2003-B
(1) (6) (7)
(a) Options 67,51,000 57,42,500
granted Equity Shares Equity Shares
(b) The pricing The average of the two weeks The average of the two
formula high and low prices of the weeks high and low prices
shares on the Stock Exchange, of the shares on the
Mumbai, preceding the date of Stock Exchange, Mumbai,
grant i.e., May 23, 2003 - preceding the date of
Rs.206/- per share. grant i.e., May 23, 2003-
Rs.206/- per share.
(c) Options Nil Nil
vested
(d) Options Nil Nil
exercised
(e) Total number Nil Nil
of shares arising
as a result of
exercise of
Options (Equity
shares of Rs.10/-
each)
(f) Options Nil Nil
lapsed
(g) Variation of Nil Nil
terms of Options
(h) Money Nil Nil
realised by
exercise of
Options
(i) Total Number 67,51,000 57,42,500
of Options in
force
Information required to be disclosed under SERI (ESOS & ESPS) Guidelines,
1999
(I) Employee Stock Ownership Scheme-1999-2003
A. PRE RESTRUCTURE (Contd.)
ESOP SERIES
Particulars SAR-1999 2000 2002-A 2002-B 2003-A 2003-B
(1) (2) (3) (4) (5) (6) (7)
(j) Employee-
wise details
of Options
granted to:-
i) Senior
Managerial
Personnel:
Mr. A.M. Naik 1,25,000 2,00,000 2,00,000 2,00,000 2,00,000 2,00,000
Mr. J.P. Nayak 60,000 1,00,000 1,00,000 1,20,000 1,20,000 1,20,000
Mr. Y.M. 60,000 1,00,000 1,00,000 1,20,000 1,20,000 1,20,000
Deosthalee
Mr. K. 60,000 1,00,000 1,00,000 1,20,000 1,20,000 1,20,000
Venkataramanan
Mr.R.N.Mukhija 30,000 60,000 85,000 80,000 85,000 85,000
Mr. V.K. Magapu 20,000 35,000 35,000 40,000 22,500 22,500
Mr. K.V. 16,000 25,000 25,000 27,000 17,500 17,500
Rangaswami
Mr. M.V. Kotwal 16,500 27,000 27,000 30,000 17,500 17,500
Mr. A. 80,000 1,25,000 1,25,000 90,000 60,000 -
Ramakrishna
Mr. P.M. Mehta 30,000 60,000 85,000 40,000 - -
Mr. M. Karnani 40,000 42,000 - - - -
5,37,500 8,74,000 8,82,000 8,67,000 7,62,500 7,02,500
ii) Any other None None None None None None
employee who
receives a
grant, in any
one year, of
Options
amounting to
5% or more of
Options granted
during that
year
iii) Identified None None None None None None
employees who
were granted
Options, during
any one year,
equal to or
exceeding 1% of
the issued
capital
(excluding
outstanding
warrants and
conversions) of
the Company at
the time of
grant
Consequent to the demerger (sanctioned by the High Court of Judicature at
Bombay onApril 22, 2004) of Cement Business of the Company and
restructuring of the share capital the outstanding SARs were converted into
equivalent number of Options and the total number of Options in force as
above were readjusted in proportion to the restructured equity capital
i.e., one option for an equity share of the face value of Rs.2/- for every
two Options and repriced at Rs.14/- per Option in respect of ESOP Series
1999, 2000, 2002-A & 2002-B and Rs.70/- per Option in respect of ESOP
Series 2003-A & 2003-B.
Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999
(1) Employee Stock Ownership Scheme-1999-2003
B. POST RESTRUCTURE (PRE BONUS ISSUE -2006):
ESOP SERIES
Particulars 1999 2000 2002-A 2002-B 2003-A 2003-B
(1) (2) (3) (4) (5) (6) (7)
(a)(1) Options 397125 1875180 1821525 1834018 3375500 2871250
granted
(outstanding
and adjusted
consequent to
restructuring
of share
capital)
(2) Options
granted during:
(a) 2005-2006 602670
(b) 1.4.2006 56460
to 29.9.2006
(Equity shares
of Rs.2/- each)
3530380
(b) The pricing Rs.14/- Rs.14/- Rs.14/- Rs.14/- Rs.70/- Rs.70/-
formula
(Adjusted grant
price per share
(c) Options 397125 1875180 1022050 1002003 Nil Nil
vested
(adjusted on
restructure)
Add: vested - - 790312 820708 2051220 1932585
post
restructure
Total 397125 1875180 1812362 1822711 2051220 1932585
(d) Options 397121 1865367 1803824 1804510 2033343 1914964
exercised
(e) Total 397121 1865367 1803824 1804510 2033343 1914964
number of
shares
arising as a
result of
exercise of
Options
(Equity shares
of Rs.2/- each)
(f) Options 4 5613 12326 14583 694997 323009
lapsed and/or
withdrawn
(g) Variation Nil Nil Nil Nil Nil Nil
of terms of
Options
(h) Money 5559694 26115138 25253536 25263140 142334010 134047480
realised by
exercise of
Options
(in Rs.)
(i) Total
Number of
Options in
force-
Vested Nil 4200 5375 14925 17389 17135
Unvested Nil Nil Nil Nil 629771 1275272
Total Nil 4200 5375 14925 647160 1292407
Q) Employee- Please refer to Part A (j)
wise details
of Options
granted
Consequent to the issue of Bonus Shares the total number of Options in
force as above as at the record date for Bonus Issue i.e., September 29,
2006 was readjusted in number in the ratio of Bonus Issue (1:1) and the
above exercise price of Rs.141- and Rs.70/- was readjusted to Rs.7/- and
Rs.35/- respectively.
Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999
(I) Employee Stock Ownership Scheme-1999-2003
C. POST RESTRUCTURE (POST BONUS ISSUE 2006-PRE BONUS ISSUE 2008):
ESOP SERIES
Particulars 1999 2000 2002-A 2002-B 2003-A 2003-B
(1) (2) (3) (4) (5) (6) (7)
(a)(1) Options Nil 8400 10750 29850 1294320 2584814
granted
(outstanding
and adjusted
consequent to
Bonus Issue)
(2) Options 718430
granted post
Bonus issue
(Equity shares
of Rs.2/-
each)
3303244
(b) The Rs.7/- Rs.7/- Rs.7/- Rs.7/- Rs.35/- Rs.35/-
pricing
formula
(Adjusted
grant price
per share)
(c) Options Nil 8400 10750 29850 34778 34270
vested
(adjusted on
Bonus Issue)
Add: vested - - - - 1235430 1990863
post Bonus
Issue
Total Nil 8400 10750 29850 1270208 2025133
(d) Options Nil Nil Nil Nil 1252754 1938270
exercised
(e) Total Nil Nil Nil 10000 1245754 1895270
number of
shares
arising as
a result of
exercise of
Options*
(Equity shares
of Rs.2/- each)
(f) Options Nil Nil Nil Nil 25840 212861
lapsed
(g) Variation Nil Nil Nil Nil Nil Nil
of terms of
Options
(h) Money Nil Nil Nil Rs.70000 Rs. Rs.
realised by 43601390 66334450
exercise of
Options
(i) Total
Number of
Options in
force
Vested Nil 8400 10750 19850 15726 81963
Unvested Nil Nil Nil Nil Nil 1070150
Total Nil 8400 10750 19850 15726 1152113
(j) Employee- Please refer to Part A (j)
wise details
of Options
granted
During the year 2007-08 50,000 shares were allocated to employees who
exercised 7,000 Options under 2003-A Series and 43,000 Options under 2003-B
Series from the shares returned by former Directors in accordance with the
consent terms approved by the Hon'ble High Court of Bombay on June 14,
2007.
Consequent to the issue of Bonus Shares 2008 the total number of Options in
force as above as at the record date for Bonus Issue i.e., October 3, 2008
was readjusted in number in the ratio of Bonus Issue (1:1) and the above
exercise price of Rs.7/- and Rs.35/- was readjusted to Rs.3.50 and Rs.17.50
respectively.
Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999 (I) Employee Stock Ownership Scheme-1999-2003
C. POST RESTRUCTURE (POST BONUS ISSUE 2008):
ESOP SERIES
Particulars 1999 2000 2002-A 2002-B 2003-A 2003-B
(1) (2) (3) (4) (5) (6) (7)
(a)(1) Options Nil 16800 21500 39700 31452 2304226
granted
(outstanding
and adjusted
consequent to
Bonus Issue)
(2) Options 318100
granted post
Bonus Issue
(Equity shares
of Rs.2/- each)
2622326
(b) The pricing Rs.3.50 Rs.3.50 Rs.3.50 Rs.3.50 Rs.17.50 Rs.17.50
formula
(Adjusted
grant price
per share)
(c) Options Nil 16800 21500 39700 31452 163926
vested
(adjusted on
Bonus Issue)
Add: vested - - - - - 1331074
post Bonus
Issue
Total Nil 16800 21500 39700 31452 1495000
(d) 0ptions Nil Nil Nil Nil Nil 1394812
exercised
(e) Total Nil Nil Nil Nil Nil 1394812
number of
shares arising
as a result of
exercise of
Options
(Equity shares
of Rs.2/-each
(f) Options Nil Nil Nil Nil Nil 107534
lapsed
Variation of Nil Nil Nil Nil Nil Nil
terms of
Options
(h) Money Nil Nil Nil Nil Nil 24409210
realised by
exercise of
Options
(in Rs.)
(i) Total Number
of Options in
force
Vested Nil 16800 21500 39700 31452 85644
Unvested Nil Nil Nil Nil Nil 1039336
Total Nil 16800 21500 39700 31452 1124980
(j) Employee- Please refer to Part A(j)
wise details
of Options
granted
The number of Options exercised and shares arising as a result of exercise
of Options shown in (d) and (e) above include 49,000 Options exercised in
March 2010 for which shares were allotted on April 1, 2010. The money
realised by exercise of Options shown in (h) includes the corresponding
application money of Rs. 8,57,500,/-.
Information required to be disclosed under SEBI (ESOS & ESPS) Guidelines,
1999 (II) Employee Stock Option. Scheme-2006
A. PRE BONUS ISSUE 2008:
ESOP SERIES
Particulars 2006 2006-A
(1) (2) (3)
(a)(1) Options 53,35,750 -
granted (Pre
Bonus Issue)
Options 1,06,71,500 -
Outstanding
and adjusted
consequent to
Bonus Issue#
(2) Options 6,94,270 29,06,240
granted Post
Bonus Issue
(Equity shares
of Rs.2/- each)
(b) The pricing The latest available closing The latest available
formula price on National Stock closing price on National
Exchange of India Limited on Stock Exchange of India
August 31, 2006, preceding Limited on June 29, 2007,
the date of initial grant preceding the date of
i.e., September 1, 2006 - grant i.e., July 1, 2007-
Rs.2,404/- per share. Rs.2,198/- per share
(Discounted grant price
per share - Rs.1,202/-)
# Consequent to the issue of Bonus Shares the total number of Options in
force as at the record date for Bonus Issue i.e., September 29, 2006 was
readjusted in number in the ratio of Bonus Issue (1:1) i.e., 1,06,71,500
Equity Shares and the above exercise price of Rs.2,404/- was readjusted to
Rs.1,202/-.
Information required to be disclosed under SERI (ESOS & ESPS) Guidelines,
1999 (II) Employee Stock Option Scheme - 2006
A. PRE BONUS ISSUE 2008 (Contd.)
ESOP SERIES
Particulars 2006 2006-A
(1) (2) (3)
(c) Options vested 20,13,200 40,524
(d) Options 12,80,677 25,034
exercised
(e) Total number 12,80,677 25,034
of shares arising
as a result of
exercise of
Options (Equity
shares of Rs.2/-
each)
(f) Options 32,72,955 1,80,428
lapsed and/or
withdrawn
(g) Variation Nil Nil
of terms of
Options
(h) Money 153,93,73,754 3,00,90,868
realised by
exercise of
Options
(i) Total Number
of Options in
force -
Vested 6,97,138 14,844
Unvested 61,15,000 26,85,934
Total 68,12,138 27,00,778
(j) Employee-
wise details of
Options granted
to:-
i) Senior None
Managerial
Personnel
ii) Any other None
employee who
receives a
grant, in any
one year, of
Options amounting
to 5% or more
of Options
granted during
that year
iii) Identified None
employees who
were granted
Options, during
any one year,
equal to or
exceeding 1%
of the issued
capital
(excluding
outstanding
warrants and
conversions) of
the Company at
the time of grant
Consequent to the issue of Bonus Shares 2008 the total number of Options in
force as above as at the record date for Bonus Issue i.e., October 3, 2008
was readjusted in number in the ratio of Bonus Issue (1:1) and the above
exercise price of Rs.1202/- was readjusted to Rs.601/-.
B. POST BONUS ISSUE 2008:
ESOP SERIES
Particulars 2006 2006-A
(1) (2) (3)
(a)(1) Options 1,36,24,276 54,01,556
granted
(outstanding
and adjusted
consequent to
Bonus Issue)
(2) Options Nil 34,54,385
granted Post
Bonus Issue
(Equity shares 1,36,24,276 88,55,941
of Rs.2/- each)
(b) The pricing Rs.601/-
formula (Adjusted
grant price per
share)
(c) Options 13,94,276 29,688
vested(Adjusted
on Bonus Issue)
Add: Vested 77,85,535 13,86,875
post Bonus
Issue
Total 91,79,811 14,16,563
(d) Options 41,86,060 6,12,599
exercised
(e) Total number 41,86,060 6,12,599
of shares arising
as a result of
exercise of
Options (Equity
shares of Rs.2/-
each)
(f) Options 5,98,241 7,66,734
lapsed and/or
withdrawn
(g) Variation of Nil Nil
terms of Options
(h) Money 251,58,22,060 36,81,71,999
realised by
exercise of
Options
(i) Total Number
of Options in
force
Vested 47,59,655 7,69,990
Unvested 40,80,320 67,06,618
Total 88,39,975 74,76,608
(j) Employee-wise
details of Options
granted to
i) Senior None
Managerial
Personnel
ii) Any other None
employee who
receives a grant,
in any one year,
of Options
amounting to 5%
or more of
Options granted
during that year
iii) Identified None
employees who
were granted
Options,
during any one
year, equal to
or exceeding 1%
of the issued
capital
(excluding
outstanding
warrants and
conversions) of
the Company at
the time of
grant
The number of Options exercised, shares arising as a result of exercise of
Options shown in (d) and (e) above include 3,78,474 Options exercised under
2006 Series and 41,382 Options exercised under 2006-A Series in March 2010
for which shares were allotted on April 1, 2010. The money realized by
exercise of Options shown in (h) includes the corresponding application
money of Rs. 22,74,62,874/- and Rs. 2,48,70,582/- respectively.
Employee Stock Ownership Scheme- 1999-2003 and Employee Stock Option Scheme
2006
(k) Diluted (a) Diluted EPS before extraordinary items Rs.70.15
Earning per Share
(EPS) pursuant to (b) Diluted EPS after extraordinary items Rs.72.39
issue of shares on
exercise of Options
calculated in
accordance with
Accounting
Standards (AS) 20
(I) The difference Had fair value method been adopted for expensing the
between employee ESOP compensation:
compensation cost (a) the ESOP compensation charge debited to P&L A/c for
using intrinsic the year 2009-2010 would have been higher by Rs.73.37
value method and crore (excluding Rs.0.68 crore on account of grants to
the fair value of employees of subsidiary companies).
the Options and
impact of this (b) Basic EPS before extraordinary items would have
difference on decreased from Rs.71.49 per share to Rs.70.25 per
profits and on share.
EPS.
(c) Basic EPS after extraordinary items would have
decreased from Rs.73.77 per share to Rs.72.54 per
share.
(d) Diluted EPS before extraordinary items would have
decreased from Rs.70.15 per share to Rs. 68.93 per
share.
(e) Diluted EPS after extraordinary items would have
decreased from Rs.72.39 per share to Rs.71.18 per
share.
(m)(i)(a) Weighted Rs.568.75 per option
average exercise
prices of Options
granted during the
year where exercise
price is less than
market price.
(b) Weighted No such grants during the year
average exercise
prices of Options
granted during
the year where
exercise price
equals market
price.
m(ii)(a) Weighted Rs.942.75 per option
average fair values
of Options granted
during the year
where exercise
price is less
than market
price.
(b) Weighted No such grants during the year
average fair
values of Options
granted during
the year where
exercise price
equals market
price.
(n) Method and
significant
assumptions used
to estimate the
fair value of
Options granted
during the year.
(a) Method Black-Scholes Method.
(b) Significant
Assumptions
(i) Weighted 6.55%
average risk-free
interest rate
(ii) Weighted 3.92 years
average expected
life of Options
(iii) Weighted 49.11%
average expected
volatility
(iv) Weighted Rs.48.96 per option
average expected
dividends
(v) Weighted Rs.1,374.09 per share
average market
price
Auditors' certificate on employee stock option schemes:
We have examined the books of account and other relevant records and based
on the information and explanations given to us, certify that in our
opinion, the Company has implemented the Employees Stock Option Schemes in
accordance with SEBI (Employees Stock Option Schemes and Employee Stock
Purchase Scheme) Guidelines, 1999 and the resolutions of the Company in
general meetings held on August 26, 1999, August 22, 2003 and August 25,
2006
SHARP & TANNAN
Chartered Accountants
ICAI registration no. 109982W
by the hand of
R.D. KARE
Partner
Mumbai, May 17, 2010 Membership No. 8820
MANAGEMENT DISCUSSION AND ANALYSIS
Macro-economic Overview:
Despite the global slowdown, the Indian economy expanded by 7.4% during
2009-2010, as against 6.7% during 2008-2009, supported by the Government's
stimulus package. The revival in consumption boosted the industry and
services sectors in the economy. The Index of Industrial Production (IIP)
continued its upward trend since June 2009, growing by 10.4% in 2009-2010
(4.1% in 2008-2009). The manufacturing sector and capital goods industry
made a significant contribution to the growth of the economy.
The world economy currently is emerging from the clutches of a wide spread
slowdown, triggered by the excesses in the global financial market. While
the developed economies are recovering albeit slowly, aided by the liberal
stimulus packages, they are grappling with many challenges such as high
unemployment, weak and volatile financial markets and impending trade
barriers. The lower expectations of growth of these economies could impact
the rate of growth in developing countries over the next 3 to 5 years. In
the Indian context, negative signs are visible in the sluggish export
growth and subdued direct capital flows into the economy. The amount of
foreign direct equity investment in the country during 2009-2010 remained
sluggish at USD 25.9 Billion.
The challenge from an adverse external environment has been recently
accentuated with the turmoil in the EU, followed by Portugal, Ireland,
Italy, Greece and Spain (PUGS) as also Hungary. Unsustainable macro
economic conditions such as high debt levels, low taxes and rigid labour
markets
have led to a situation of sovereign default in Greece, raising the risk of
contagion in the EU. A collapse has been currently avoided with the
European Union, ECB and the IMF putting together a rescue package of almost
$1 Trillion. The impact on an already nervous financial system was seen in
the rise in Credit Default Swap rates and weakening of Euro. The global
economic recovery is likely to take longer on account of the crisis.
Along with the current global challenges, the Indian economy also needs to
contend with the rising spectra of inflation and tight monetary conditions.
There is a need for a second green revolution in the agricultural sector,
as otherwise the rising food prices may continue to dominate inflationary
conditions. Needless to add, higher economic growth would also require a
significant addition to infrastructure as well as increase in across the
board productivity levels. The challenges as we know are many, yet, the
Indian economy has inherent strengths to rise above these challenges and
move towards accelerated growth in the medium to long term.
Construction & Project related business scenario:
The Infrastructure & Construction sectors in India experienced a relatively
lower growth during the year. The effect of the low growth of the
industrial sector at the beginning of the year adversely impacted the
infrastructure sector output. The core infrastructure industries grew by
5.5% in 2009-2010. However, many important initiatives were taken during
the year in order to step up the investment in core infrastructure. During
the current fiscal year, the transport sector's funding earmarked for the
national highways development program increased by 23% compared with the
previous year, while funding for railways increased by close to 45%. In the
power sector, allocations for the power development program increased by
160%. The investment climate is expected to further improve in 2010-2011
even as the other sectors of the economy pick up the growth momentum.
Infrastructure has been the focal point of the Government's budget
proposals. A combination of higher government funding and public private
partnerships (PPPs) will drive new investments in infrastructure projects.
The liberal allocation for infrastructure has been complemented by improved
liquidity conditions in the market, which will boost mega-projects in
power, highways and railways. In addition, a blue print will be created in
2010-2011 for natural gas pipeline corridors project.AII the above
initiatives taken by the Government are expected to give a fillip to an all
round economic growth in the short to medium term.
The crude prices have strengthened during the year thereby reviving the
investment opportunities in the Hydrocarbon sector. However, the domestic
upstream sector could still experience somewhat sluggish growth in the
short term due to unattractive returns and low capital flows. The
Hydrocarbon Mid and Downstream sector, may however, attract healthy
investment in the current year in its bid to augment capacity and improve
product quality.
The Middle East countries continue to reel under the impact of global
financial crisis experienced in 2008. The current hardening of oil prices
is largely due to supply constraints rather than due to hike in giobal
demand. The investment climate is expected to remain subdued in the short
term. The bursting of real estate bubble in some Gulf countries is also
expected to keep the investors at bay for some time at least in the real
estate sector.
Challenges:
Competition is expected to intensify in the domestic infrastructure and
construction sectors, post the revival of growth trajectory of the economy.
Many mid-size construction and EPC players have been active and expanding
their range of project execution skills, which in the medium term, may
adversely impact overall project margins. Further, with some of the larger
EPC packages requiring longer execution schedule, the timelines for
conversion of Order Book to Sales Revenue would be relatively longer.
Astute contract and project management have also gained importance due to
increased execution timelines and stiffer delivery terms.
Inflationary conditions have erupted in the economy due to supply side
constraints. This would have a snowballing effect on the raw materials and
input prices, which may erode the profitability of capital goods sectors in
the near to medium term.
Ensuring timely execution within the cost targets and a smart working
capital management will be critical success factors for the project
business in their efforts to reinforce the market leadership.
Collaborations for technology up-gradation, especially in the new and
emerging businesses, will continue to enhance the competitive edge and
enable the businesses to move up the value chain for realising better
margins. On the manufacturing business front, deeper market penetration,
improved capacity utilisation and cost efficient operations will be the
major success factors.
The prospects of certain new and emerging businesses like Defence, Nuclear,
Water and Railways will depend on the Government's ability to activate the
policy implementation without further delay and manage fiscal health.
Strategies:
The Company's Project Lakshya initiated 5 years ago as part of its
strategic capability build-up exercise concluded during the year with most
of the targets achieved and a few parameters surpassing the original
targets. Continuing this journey of focused growth, the Company has
embarked upon a Perspective Plan 2010 - 2015 which may see some
restructuring of its current portfolio of businesses. The Company plans to
focus on building new capabilities in areas of Power Development, Ship
Building, Nuclear Forging and Defence, besides embarking on an accelerated
growth path in its other businesses.
Hazira and Coimbatore are the major locations where the fabrication and
manufacturing facilities are being stepped up to improve the execution
capability and delivery time. A new manufacturing facility is being planned
at Baroda for catering to expanding electrical products market. The project
of new shipyard at Kattupalli, Tamil Nadu for fabricating large defence
ships is also being implemented during the budget year. Investments have
been made for operationalisation of joint ventures formed for manufacturing
super critical boilers and turbines. Power auxiliaries and large forgings
are also planned to be manufactured at Hazira to harness the potentials
emerging from mega thermal power, nuclear power and hydrocarbon sectors.
On the international front, the Company's heavy engineering fabrication
facility in Oman has commenced operations. The installation vessel being
built under SapuraCrest JV is expected to be launched shortly. The
Electrical & Electronics Division has targeted increase in the output from
its overseas production facilities in Saudi Arabia & UAE. The Division has
completed the integration of the newly acquired TAMCO group of companies by
leveraging Medium Voltage products with its existing Low Voltage Switchgear
products. In order to expand the international footprint, the Company is
planning to enter select international territories in Africa, South East
Asia and Latin America to harness the promising business potential in these
markets.
The E&C Division has enhanced its efforts in engineering & design
capabilities, improving product offerings with forays into new fields like
Floating Production Systems, Water Process Technology, High-end Pipeline
Engineering etc. The product businesses have plans to beef up marketing
infrastructure to ensure on-time deliveries and improved cost
competitiveness and customer service. The construction business plans to
focus on expanding its market reach beyond the current geography and
increase its market share.
High skilled talent acquisition and retention are critical for sustainable
growth. Various initiatives have been planned towards career planning,
competency building, succession planning etc. While the businesses have
budgeted moderate growth in manpower, emphasis is being given to build
higher competencies demanded by the customers. Maximising employee
productivity is a major area of attention for the Company to improve its
competitive edge.
A record Order Book of over Rs.1,00,000 crore at the year end 2009-2010
gives a good visibility to the revenue growth in 2010-2011 and 2011-2012,
and hence, the Company is setting its vision on a longer and sustained
growth trajectory beyond the medium term.
In this backdrop, the Company's business divisions and its Subsidiary and
Associate companies present their review of operations for the year 2009-
2010.
Engineering, Construction & Contracts Division:
Overview:
Engineering, Construction and Contracts Division (ECCD) undertakes
engineering design and construction of infrastructure, buildings,
factories, water supply & metallurgical and material handling projects
covering civil, mechanical, electrical and instrumentation engineering
disciplines. With many of the country's prized landmark constructions to
its credit, ECCD, India's largest construction organisation, uses state-of-
the-art design tools and project management techniques. Supported by a
track record of over sixty-five years, covering all buildings, industrial
sectors and infrastructure development, the Division also undertakes lump-
sum turnkey construction with single-source responsibility. The Division
takes pride in announcing that it has secured the 35m rank amongst all the
Construction companies across the globe [source: Engineering News Record
(ENR)]. The current year performance of the Division reiterates the
Company's global stature in construction.
ECCD consists of Buildings & Factories Operating Company (B&F OC),
Infrastructure Operating Company (Infra OC), Rail Infrastructure business,
Metallurgical Material Handling and Water (MMHW OC) and Electrical & Gulf
Projects Operating Company (E&GP OC).
Buildings & Factories Operating Company (B & F OC):
B&F OC continues to maintain its leadership position in construction of
major airports, IT parks, turnkey hospitals and residential buildings.
Relentless business development initiatives along with focus on key account
management and specific thrust on design & build projects helped the OC to
secure significant order inflows during the year 2009-2010. 'Concept to
Commissioning' is the theme which continues to drive the growth. This
unique capability along with focus on key account management helps the OC
to retain its customers. B&F OC is also fully geared up on the technology
front for undertaking the construction of tall towers & green buildings.
Creation of business specific segments has further boosted the growth that
helped in securing high value government projects (hospitals) and many
residential projects especially in Mumbai during the year 2009-2010. Some
of the major orders bagged during the year include India Tower, Mumbai,
Residential Towers for leading promoters like Wadhwa Group, Oberoi Realty,
Ahuja and DB Realty etc., ESI Hospitals at Kollam, Coimbatore and Kolkata,
IT Park and SEZ at Siruseri for Cognizant, JIPMER phase II, Pondichery and
factories orders from Maruti, Honda, Nestle, etc.
B&F OC has also reported significant growth in the revenues during the year
2009-2010. Some of the major airport projects under execution include the
Delhi International Airport which is in an advanced stage of completion and
would be ready for operations well ahead of the Commonwealth Games. At
Mumbai International airport, the Terminal 1C built on a Design & Build
basis has commenced operations. On the back drop of a healthy order book,
B&F OC is again poised to register a satisfactory growth on the revenues
during the year 2010-2011.
Infrastructure Operating Company (Infra OC):
Infrastructure Operating Company undertakes construction of Roads and
Runways, Bridges, Metros, Ports, Nuclear/Hydro Power Projects and Defence
Projects. During the year 2009-2010, Infra OC has completed several
prestigious projects viz. Vadodara Bharuch Road in Gujarat, Palanpur-
Swaroopgunj Road in Gujarat & Rajasthan, Vessel project at Vizag, Alain
Duhangan Hydropower project in Himachal, etc. Though India's Infrastructure
sector witnessed slower execution growth in 2009-2010, the second half of
the year showed clear signs of recovery. This was visible in the
transportation infrastructure segments like roads, metros, elevated
corridors which saw a flurry of activities in de-bottlenecking of
constraints in pre-qualification & bidding processes.
The year witnessed a resurgence of activities by Nuclear Power Corporation
of India (NPCIL) in jet setting India's nuclear power programme and Infra
OC has set a strong footprint by bagging the main plant civil package for
the first ever 2x700 MW Nuclear power plant (Indigenous technology)
upcoming in Kakrapar, Gujarat. Incidentally, this was also the largest ever
construction package configured by NPCIL so far in the Nuclear power
sector. In Hydro Power sector, Infra OC bagged an additional order at
Subansiri HEP for the Surge Tunnel works.
Metro Authorities also endeavoured to speed up the implementation of
various city metro rail projects in Bangalore, Chennai, Kolkata, Mumbai,
etc. and Infra OC has secured elevated packages of Chennai Metro and
Bangalore Metro and Underground works for DMRC. Infra OC is also currently
constructing L&T's own greenfield port cum shipyard called Kattupalli Port
near Chennai.
Public Private Partnership Projects received a huge thrust with Road sector
witnessing a revival with the grant of a large number of highway BOT
projects and with B.K.Chaturvedi Committee recommendations speeding up
highway development. The central government has announced aggressive
targets of developing 20 km of roads per day vis-a-vis the current rate of
4-5 km. The Company has secured two BOT projects - Krishnagiri Walajahpet
in Tamil Nadu and Gandhidham Samakhiali in Gujarat, construction of which
will be undertaken by Infra OC.
Rail Infrastructure business:
The Company established Railways Business Unit (RLBU) to cater to emerging
Rail Infrastructure projects in Urban Mass Transport Systems, Railway
Rolling Stock Facility, Railway Sidings and Dedicated Freight Corridor
Systems. With the opening up of Rail sector to private participation and
the growing need for urban mass transport systems, RLBU sees tremendous
opportunities for turnkey projects. Accordingly it has built a strong
engineering base at Faridabad and is leveraging on the Company's
construction and project management skills while executing the current two
mega projects in the rail infrastructure sector.
Metallurgical Material Handling and Water (MMHW OC):
MMHW OC has sustained its growth story and leadership position again during
the financial year 2009-2010. Order Book has increased significantly with
major breakthrough orders received from TATA Steel (Coke Oven and RMHS),
HINDALCO (Coal Handling Plant, Pot Shell and Pot super structure), BALCO
(Pot Shells), UPRVUNL (Coal Handling Plant), Adani Power (Coal Handling
Plant), NTPL (Coal Handling Plant), Bhushan Steel (RMHS Packages), UP Jal
Nigam (Water & Sewer Projects) and BWSSB (Water Supply Packages).
MMHW OC has proven its execution capabilities by successfully completing
the projects ahead of time. MMHW OC is currently executing largest Pellet
plant for Tata Steel at Jamshedpur and concurrently executing eight coal
Handling Plants, which is a landmark. Its key success factor is high
customer retention, efficient project management and operational
excellence.
High growth in the field of ferrous & non ferrous and power sector, and the
Government commitment towards infrastructure spending are going to be the
key drivers for the MMHW OC during the financial year 2010-2011. Healthy
Order Book gives MMHW OC visibility on the revenue growth for the year
2010-2011.
Electrical & Gulf Projects Operating Company (E&GP OC):
The demand and supply gap in power drives the business growth of E&GP OC.
'Power for all by 2012' is the mission statement as per National
Electricity Policy and 11th Power Plan creates ample power development
opportunity in India. In addition technological developments help
transmitting Quality Power over long distance with minimum transmission
losses. This has given a fillip to HT Transmission Line Projects and R-
APDRP Projects in the country. This OC is focusing on substations,
Industrial Electrification, Transmission Line Projects and Railway
Construction in the Domestic Front and Power Transmission & Distribution
Projects in Gulf Countries.
E & GP OC has successfully completed/ commissioned various projects in
India and Gulf.
Securing repeat orders from client like PGCIL, various State Electricity
Boards, RVNL, ADWEA in AbuDhabi, OETC in Oman, DEWA in Dubai, KAHRAMAA in
Qatar, testifies its superior project execution capabilities and timely
delivery. Some of the breakthrough orders bagged during the year include
construction of first of its kind 1200 kv Substation from PGCIL, EHV
Cabling Packages in Delhi for DTL, 765kv Substations for PGCIL & UPPCL, 2
nos of 800 kv HVDC TL for PGCIL, Gulf Projects include first 400 kv
OHL with Transco - 96 km, 3 nos. 33 kv S/S & Cabling works for Abudhabi
Ports Company, Breakthrough job in Qatar Petroleum - 132/11 kv S/S and
associated cabling.
With the addition of 3rd bay in its Pondicherry facilities, the installed
capacity of the Transmission Line manufacturing has crossed more than
1,00,000 MT per annum. The OC has put up a Transmission Line Research and
Testing Center (L&T TLRTC) in Kanchipuram which helps its business unit to
test the prototypes faster thereby bringing down the overall project
duration. The Gulf Operations have also reported significant growth in
revenues, key success factor for E&GP OC continues to be superior project
execution capability.
Business Environment:
The year 2009-2010 has been quite challenging for the construction industry
as a whole. The overall Order Inflow to the industry has come down by about
one fourth in comparison to the previous year. However, the Government's
focus on Infrastructure is quite apparent and the initial delays in
awarding of projects are considered to be more of a temporary phenomenon.
Corroborating this, the Order Inflows have started showing steady
improvement towards the end of the year 2009-2010.
For the construction industry, the primary drivers of growth remain robust
in many areas, the most important drivers are (a) infrastructure
development; (b) core sector capacity enhancement; and (c) urbanisation.
These growth drivers are irreversible and are underpinned by India's
domestic demand and the existing social and physical 'infrastructure
deficit'.
Construction industry is by nature pro-cyclical. Even with the cyclical
downturn in India, construction sector grew by 6.5% in 2009-2010 on top of
a growth of 5.9% in 2008-2009.
The Union Budget 2010 lays increasing emphasis on infrastructure
development with huge budgetary allocation and increased focus on promoting
the private - public-partnership route for financing of infrastructure
projects. Therefore, demand for infrastructure, especially in areas
relating to urban infrastructure, power, roads & water appears sustainable.
With manufacturing sector rebounding, there is an increase in demand of
ferrous and non-ferrous metals & chemicals. Thus, capacity addition is
again in focus. Construction industry, especially the larger firms, is set
to gain from this. Power remains the 'cornerstone' for social and economic
development in a country like India. Thus, the strong focus on power would
continue. Investment flow into this sector is less sensitive to economic
fluctuations and thus forms a stable source of business. Though real estate
in the Middle East has considerably slowed down, the planned investments in
infrastructure and oil & gas are set to continue and therefore, GCC would
continue to offer good potential for the Division's international business
particularly in Power Transmission & Distribution and Infrastructure.
The construction market shows a mixture of optimism and a few concerns.
Owing to reduced demand, some sectors like realty (especially premium
housing), capacity augmentation in some of the manufacturing sectors are
expected to move a bit slower. However, with increasing urbanisation, the
housing sector will continue to give lot of opportunities. Mass scale
affordable housing is one such opportunity to be harnessed.
As per Mid-term appraisal of 11th five year plan, the Government plans to
rely more on infrastructure investment by private sector as revised target
for private investment contribution is 36% in Eleventh Plan as compared to
30% in original projections and 25% in Tenth Plan. The opportunities in
different sectors/geographical locations implicitly offer tremendous market
potential to ail our business units.
Significant Initiatives:
The Engineering & Construction business has started witnessing the benefits
of creating Operating Companies (OCs), particularly in business development
initiatives. The OCs have identified Business Development Managers to
improve the market share in these difficult times. This initiative very
much aligns with the vision of enhancing customer relationship by engaging
with clients at the early stages of project proposals.
Focus on multi-skilling/job rotation will get a renewed attention and the
Division's initiative to train and retain workmen across India has been
strengthened by building training centres in all the regions.
Outlook:
All Business Units are engaged in developing the Strategic Plan for the
next 5 years with clear focus on increasing the market share, improving
the competitiveness and expanding beyond presently operating geographies.
Countries such as South Africa, Saudi Arabia, Qatar and Vietnam offer a
plenty of opportunities for many of the Division's businesses and
therefore, the concerned business units are carefully monitoring the
developments in these countries and will pitch in at an appropriate time.
Overall, the outlook for the Engineering:
6 Construction business remains good owing to robust order book and
diversified business portfolio. The Government's commitment to revitalise
the economic scenario through investment in infrastructure, provides
immense scope and opportunities to the business units.
Engineering & Construction (Projects) Division:
Overview:
Engineering & Construction (Projects) Division delivers 'design to build'
world-class EPC solutions in the Oil & Gas, Petrochemicals, Fertilizer,
Power and Water Technology sectors. In-house expertise and experience,
synergised with strategic partnerships enables it to deliver single point
solution for every phase of a project - right from the front end design
through engineering, fabrication, project management, construction and
installation up to commissioning. The key aspects of our business
philosophy are on-time delivery, cost competitiveness, high quality
standards with focus on best in class HSE practices. Integrated strengths
coupled with experienced highly-skilled engineers and workmen, are the key
enablers in delivering critical and complex projects in India and in select
countries overseas. Over the years, it has garnered a reputation for
executing multiple projects in parallel.
Significant strengths that have enhanced the Division's reputation in
market & contributed towards growth are:
* Design & Engineering Services: The Engineering arm is equipped with
qualified & experienced engineering talent, in-house engineering centers
with latest technology, softwares, world class office facilities & robust
IT infrastructure. Services are further complemented by specialised support
from engineering partners like L&T-Valdel Engineering Limited, L&T-Chiyoda
Limited, L&T-Gulf Private Limited. Engineering teams are located at various
strategic locations - Mumbai, Faridabad, Vadodara, Bangalore, Chennai &
Sharjah.
* Fabrication Capability: Modular fabrication facility in India over the
years has provided cost competitive advantage. Located at Hazira, it is one
of the largest of its kind in South Asia. Hazira Modular Fabrication
Facility meets international quality standards and is capable of meeting
compressed delivery schedules. A new Modular Fabrication Yard at Oman is an
all-weather yard augmenting capability to fabricate and supply a range of
large size complex modules. The Yard has facilities for heavy fabrication,
sophisticated equipment for testing and load-out facility.
* Installation Capability: To cater to offshore requirement, a state-of-
the-art heavy lift-cum-pipe lay vessel (HLPV), referred to as 'LTS - 3000'
has been developed in Joint Venture with Sapura Crest Petroleum Berhad
(Sapura Crest) of Malaysia. It has capability of lifting 3000 ST & laying
6'-60' of sub-sea Pipelines. This service is expected to offer cost
competitive advantage to the business.
* International Business Development: The Division has consolidated its
presence in international market, establishing as an emerging player in
Middle East & South East Asia. It has set up manufacturing and project
execution capabilities in select geographies and offices in UAE (Abu Dhabi
& Sharjah) & Qatar (Doha). JV Companies have been set up with reputed local
partners in Oman, Kuwait and Saudi Arabia to tap opportunities available in
these countries. Branch offices have also been registered in Libya and
Brazil to further strengthen the range of services across the international
market.
In addition to the above advantages, which are critical to the success and
provide competitive advantage, the Division is able to deliver sustainable
& successful services on account of its ability in:
* Attracting and retaining high quality professionals.
* Having Multi-locational engineering,technology and innovation centers.
* Adopting stringent quality control parameters designed to minimise cost,
ensure adherence to pre determined project parameters and reduced defvery
time.
* Compliance to highest standards of health, safety, environment and
information security.
* Usage of web enabled technology in the complete cycle of execution of EPC
projects.
* Capitalising on knowledge management system for providing solutions
* Providing professional project management for accelerating delivery time
of large projects.
To drive an accelerated growth and lay closer focus. Hydrocarbon Upstream
Operating Company, Hydrocarbon Mid & Downstream vertical and Power
Development & Construction vertical have been created.
Hydrocarbon Upstream Operating Company (Upstream OC):
Upstream OC provides a wide range of EPC solutions for Offshore Oil and Gas
Exploration projects such as Process Platforms, Wellhead Platforms, Subsea
Pipelines, and Floating Systems. During the year, it has bagged largest
ever project order over Rs.5,300 crore from ONGC for an integrated process
platform complex. Having a track record of successful completion of
projects, it has moved into execution of the largest jacket structure
fabrication for Indian waters of 12000 MT at MFY Oman. In order to enhance
fabrication capacity and leverage on locational advantages, additional
Modular Fabrication Facility at Kattupalli in Chennai is under
construction.
With the economy recovering from recessionary trends and demand for crude
gaining momentum, expansion in oil exploration investments is envisaged. In
order to focus on marketing, dedicated teams have been established in India
& Abu Dhabi to tap opportunities in Middle East, South East Asia, Australia
and West Africa.
Hydrocarbon Mid & Downstream Vertical:
Hydrocarbon Mid & Downstream vertical provides wide range of EPC solutions
for turnkey projects in petrochemical industry, green fuel projects,
fuel up-gradation, polyolefins, aromatics, hydrogen, fertilizers, gas
processing, reformers, cracking furnaces, cross country oil & gas
pipelines, gas gathering stations, and crude oil terminals.
During 2009-2010 initiatives on operational excellence for the timely
completion of ongoing projects were undertaken. We have to our credit,
successful commissioning of complex projects like onshore gas processing
terminal, at Kakinada, which is the largest of its kind in India (80
MMSCMD) and execution of the insulated pipeline project from Barmer in
Rajasthan to Salaya in Gujarat which is one of the longest insulated
pipelines in the world.
Prospects of growth in refinery sector are promising, owing to domestic
demand and favourable investment policies by the Government. Petrochem &
fertilizer plants are new areas of our business development and have
contributed to significant order inflow in 2009-2010. During the year, we
bagged a large order from ONGC Mangalore Petrochemical Ltd. of over
Rs.2,000 crore and orders from the fertilizer sector projects of over
Rs.3,000 crore.
Business Environment:
With the Government support measures in place, domestic recovery began in
the later part of 2009-2010 as reflected in growth in industrial
production, sustained Fll inflows, rise in credit growth and improved
liquidity conditions. Stability in crude oil prices has brought investments
and expansion plans back on track in India and in the Gulf.
Despite slow & uncertain economic conditions in the first half of the year
and challenging competitive environment, Division was able to maintain an
impressive strike rate. The Division was rewarded with orders in excess of
Rs.16,500 crore during the year demonstrating the continued trust of
domestic and international energy companies.
Significant Initiatives
* Growth & Expansion:
Looking at the enormous business potential in the Middle East region,
initiatives have been taken to enhance and strengthen our presence in GCC
countries. These include pre-qualification for large projects with major
oil & gas sector clients, alignment with major EPC companies for large
construction packages & setting up of JV companies. Division has not only
spread its wings along geographies but also undertaken significant steps in
boosting its own manufacturing capabilities like expanding its facilities
at the Modular Fabrication Facility at Hazira, the setting up of the Oman
Modular Fabrication Yard and the commissioning of new installation and pipe
laying vessel LTS 3000. Work is on for the development of Kattupalli
Modular Fabrication Facility near Chennai.
* Risk Management:
Risk Management is looked upon as a facet of governance contributing
towards greater predictability in performance and value creation.
Identification, assessment, mitigation of various risks for every project,
is done from pre-bid to completion stage. Increased competition, pressures
on cost and deliveries, forex and commodity price variations, impact of
recessionary trends on award of jobs and manpower attrition are some of
major risks faced by the Division.
Measures such as advanced quantitative tools, global sourcing, standard
operating procedures, and operational excellence initiatives have been
implemented so as to protect the profitability & sustainability of the
business. Comprehensive risk templates have been introduced for continuous
review, focused assessment and monitoring. Adoption of ECRI (Engineering &
Construction Risk Institute) Practices & Procedures added to development
and gnating of the best practices in risk management.
To mitigate the adverse effect of some of these risks, cost control, cost
reduction and hedge management policies were put in place. Focused and
dedicated teams have been established to combat and manage currency
exposures from bidding till completion stage of the project.
* Talent Management:
People are prime engines of growth. Hence, hiring of qualified individuals
and grooming them for leadership roles is essential. A menu of career
growth options and training are offered to young aspiring professionals for
achieving excellence in engineering and project management skills. Setting
up of knowledge city at Vadodara, Gallup e-Voice - Employee Engagement
Survey, team building programmes were some important initiatives undertaken
during the year. Leadership identification and development has been
institutionalised in the Division for developing leaders at every level of
organisation.
* Operational Excellence:
To improve business value chains, various key cost & time reduction
initiatives such as, easy track for better cash management and crashing
invoicing time, project Disha for construction management were undertaken.
* Strategic Plan:
Division has embarked on developing Strategic Plan, 'LAKSHYA 2010-2015,: as
a part of company-wide launch. Identification of the strengths, addressing
key gaps in service offerings, enhancing competitiveness and expanding
geographical presence were undertaken through a structured process. As a
part of LAKSHYA 2010-2015. strategic initiatives are being identified along
with milestone-driven roadmaps for ensuring timely and speedy
implementation of the strategy.
Outlook:
Domestic economy has regained momentum and has shown positive signs of
recovery in terms of industrial growth. India is emerging as a global
refining hub owing to cost competencies over other countries. Gas demand in
India is dominated by the power and fertilizer sectors, which are on the
rise. This coupled with the Government's conducive policy and regulatory
framework has made investments in energy sector attractive.
E & C Projects Division will be focusing on opportunities in key growth
areas such as oil and gas extraction, floating systems in deepwater, subsea
field development, gas processing, fertilizer, and petrochemical and
onshore pipeline business. The Division is looking forward to building
capabilities in an accelerated manner to harness the upcoming business
opportunities on the East coast of India, which has large potential for oil
& gas production. It is also building comprehensive high-end FEED detailed
engineering capabilities for these emerging areas by exploring various
options including inorganic growth and entering into joint ventures. The
Division also plans to enter into new geographies, establishing new
clientele and entering into strategic alliances.
Clearly drawn out pre-bid strategies, intense marketing efforts and
enhanced execution capabilities will drive the performance in the coming
year. Considering positive business environment, strategic positioning and
initiatives taken by the Division coupled with a healthy order book at the
end of the March 2010, the Division expects to perform well in the year
2010-2011.
EPC Power Division
Overview:
EPC Power division has been organised as a separate Operating Company with
effect from April 1, 2009. Financial year 2009-2010 has been the first year
of operations in pursuit of the Company's mega vision to become 'the most
preferred provider of equipment, services and turnkey solutions for fossil
fuel-based power plants and a leading contributor to the nation's power
generation capacity'.
EPC Power division's offerings comprise Supercritical Steam Generators,
Steam Turbine Generators and Balance of Plant. The business organisation
which includes the Joint Venture Companies with Mitsubishi Heavy
Industries, Japan, is geared to address the opportunities tendered by the
customers. The customer profile comprises State Utilities, Private Sector
IPPs and large corporates seeking to build captive generation capacity.
The Company has strong engineering, procurement, construction and project
execution capabilities built over past few decades, which underpin the
foray into EPC for thermal power plants, especially coal-based generation
projects.
The engineering capabilities are housed in L&T-Sargent & Lundy Limited, a
joint venture company. The fast upcoming manufacturing facilities at Hazira
Complex will establish the capacities to build Steam Turbine Generators,
Boiler pressure parts and Pulverisers based on MHI technology in a phased
manner over the next 18-24 months. In addition, the Operating Company will
also manufacture Critical piping, Electro-static precipitators, Air-
preheaters and Axial fans. This would give the Operating Company
comprehensive capabilities to offer world class thermal power plant
solutions.
Performance Highlights:
EPC Power Division secured new orders of Rs.13,797 crore. New orders, which
spanned the entire range of offerings, were received from the prestigious
customers such as GMR Group, Maharashtra State Power Generation, Madhya
Pradesh Power Generation, Jayaprakash Group, who are setting up mega power
plants.
During the year, the Division progressed with the execution of its projects
for Indian Oil Corporation Limited at Panipat, Andhra Pradesh Power
Development Company Limited at Krishnapatnam and GMT Rajamundhry Energy Ltd
at Vemagiri.
Business Environment:
India needs to build substantial power generation capacity. The reliance on
coal and natural gas as fuel for power plants will continue for several
years to come. With coal-based plants continuing to form a major share of
fresh capacity addition, the Division's offerings based on supercritical
technology have huge potential.
The capacity addition target for the 11th five year plan ending in 2012 is
78,700 MW and for the 12th plan, the target is 100,000MW. It is expected
that a sizeable capacity will be in coal-based power plants with
supercritical technology. The Power ministry and the Planning commission
are expected to come up with various policy measures to encourage
investment in supercritical technology as well as local manufacture.
EPC Power Division faces aggressive competition from Chinese players whose
faster deliveries and cost advantage pose a formidable challenge. Major
international power plant equipment producers are also setting up
capacities in India. The leading established domestic players enjoy the
leadership position in the space of power plant equipment.
In addition, an acute shortage of HR talent could adversely impact the
growth aspirations of the Division. In the medium to long-term, possible
technological break-through in non-conventional power generation, a faster
nuclear power program, sanctions against coal as a fuel and availability of
water also present considerable risks to company's business. The company
expects customers to increasingly demand shorter project schedules and more
competitive pricing.
Initiatives:
The Division has undertaken several initiatives such as accelerated
indigenisation of manufacturing program for Steam Generators and Steam
Turbine Generators, standardisation of product designs, enlargement of
vendor base to improve price competitiveness and achieve reliability in
project schedules. It has set clear targets in this regard to be realised
over the next couple of years.
Outlook:
The Division expects the policy regime to decisively discourage sub-
critical technology and support supercritical technology in coal-based
power generation. PSU-utilities already require establishment of local
manufacturing capacities of power generation equipment. This is in the
national interest and should augur well for the Division. With robust
demand for power and resultant opportunities for power generation equipment
infrastructure, EPC Power Division is confident of growing into a major
business for the Company.
Heavy Engineering Division
Overview:
Heavy Engineering Division (HED) manufactures and supplies custom designed
and engineered critical equipment and systems to the core sector industries
like Fertilizer, Refinery, Petrochemical, Chemical, Oil & Gas, Thermal &
Nuclear Power, Aerospace and Equipment & Systems for Defence applications.
The Division's Ship Building business is engaged in construction of
commercial ships as well as warships for the navy and the coast guard.
The Division has manufacturing & fabrication facilities at Mumbai in
Maharashtra, Hazira & Baroda in Gujarat and Visakhapatnam in Andhra
Pradesh. A Strategic Systems Complex for integration & testing of Weapon
systems, Sensors and engineering systems is located at Talegaon in
Maharashtra. A Precision Manufacturing Facility has been set up at
Coimbatore in Tamilnadu to cater to needs of precision machined/
manufactured components and assemblies.
Defence Electronics Systems design & engineering is supported through a
dedicated Strategic Electronic Center at Bangalore in Karnataka. Dedicated
engineering centers support manufacturing at all locations. Three
'Technology Development Centers' operate from Powai - for new product
development in process plant equipment and for defence/nuclear equipment as
well as one focused on electronics systems/sub-systems.
Presently the Division has its Ship Building facility at Hazira in Gujarat.
Construction of a new modern Shipyard is in progress at Kattupalli in
Tamilnadu. The new facility will mainly concentrate on construction/refits
- repairs of naval ships and submarines and repair of commercial vessels.
A heavy fabrication facility set up as a joint venture in Oman was
inaugurated during 2009-2010. The facility will manufacture a range of
equipment for the hydrocarbon & power sector - mainly for the GCC
countries.
Heavy Engineering Division's operations are managed through two Operating
Companies viz. Heavy Equipment & Systems Operating Company and Shipbuilding
Operating Company.
Heavy Equipment & Systems Operating Company (HES OC)
Business Environment:
HES OC achieved a significant increase in customer sales during 2009-2010
on the back of a robust Order Book at the start of the year. However, the
Order Inflow was impacted adversely due to the global economic meltdown.
Export orders particularly were sharply down due to deferment/cancellation
of planned projects across geographies. This may have adverse impact on
customer sales of the OC during 2010-2011.
Though the world wide economic situation has been improving,
internationally many new projects are still awaiting due to inadequate
refining margins. There is intense competition for business - mainly from
Korean & Italian competitors. HES OC sees some of the international
refinery and gas projects taking off with the oil price hovering around
$80/bbl. Middle East, Iran and
South America offer good potential. However, the policy of Chinese
Government of offering credit to Iran and the African countries for
promoting Chinese suppliers is putting the OC at a disadvantage.
Coal gasification business from China continues to show promise in the
short to medium term, though competition from local Chinese fabricators is
increasing with active support from the Chinese government. During 2009-
2010, the economic crisis had slowed down the pace of work in new power
projects. Domestic power plant equipment business has now started looking
up. Competition from Chinese and Korean suppliers is putting pressure on
power plant equipment prices. Fertilizer sector shows promise. There is
potential from the new grassroot fertilizer plants as well as the planned
expansion projects of existing plants. New investment in fertilizer plants
is expected in Iran and Brazil.
As the Central Government has maintained the ratio of Defence expenditure
to GDP even during the economic slow down, the Defence sector shows
definite promise in the medium to long term. With the growth momentum
maintained, the government continues to simplify procurement procedures,
initiate creation of policy environment for increased indigenisation and
inclusion of private sector in the modernisation of India's armed forces.
Defence Procurement Policy 2008 Amendment 2009 (DPP) introduced a new
procurement category called 'Buy and Make (Indian)' for the Indian Defence
programs. Under this category, while Indian industry will be the lead
bidder for these programs, it can have foreign collaboration/ technology
providers for up to a maximum of 50 % value of the program. The new policy
facilitates understanding the Industry view through Apex Chambers of Indian
Industry before making decisions on categorisation of programs for
procurement. The Defence sector thus shows definite promise in the medium
to long term in the segments of interest to the OC.
The pace of liberalisation, however, has slowed down and imports continue
to remain at 70 % of the Defence budget for past more than a decade.
Indigenous product development & system integration capability in private
sector is not yet well harnessed towards cutting imports. The much awaited
grant of Raksha Udyog Ratna (RUR) to system integrators in private sector
is still awaited and not in sight in the short run.
There is a Nuclear Power Renaissance the world over, which offers growth
potential both in domestic as well as international market. A number of new
projects are planned in India, USA, Russia, China & UK. There is potential
for supply of equipment & systems for new build as well as refurbishment of
existing Nuclear Power Plants in USA & Europe.
Significant Initiatives:
The Operating Company has launched a number of key initiatives aimed at
maintaining a leadership position in the global process piant equipment
market and for gaining an early mover advantage in the Defence equipment
sector.
Capability Building:
HES OC is moving ahead on a major initiative 'Enterprise-wide Collaboration
for Alignment with Strategy' (ECAS), launched in 2008-2009, which aims to
align operations to the strategy of Customer Intimacy, concurrent with
enhancement of Organisational Excellence for improved performance. An apex
body and 10 councils comprising members from across functions and locations
have been formed to launch and monitor specific projects for Organisational
Excellence.
The Technology Development Centers focus on continuous development/
adaptation of manufacturing technology and development of new products as
well as up-gradation/modification of existing products. Tie-ups and
partnerships with national laboratories for joint development keep the
Technology Development Centers at the forefront of technological
development. Technology Development Centers are working closely with select
customers for analysing plant performance to develop ways to improve plant
efficiency.
HES OC focuses on talent acquisition to enhance organisational performance
for growth by fostering a learning & development culture. Various
initiatives for skill/capability building include tie-ups for training,
knowledge sharing & up gradation.
The Operating Company lays a great emphasis on protection of its
Intellectual Property Rights. During 2009-2010, the operating company
received two patents while three patent applications are awaiting
clearance.
Capacity Augmentation:
An ultra modern Heavy Fabrication facility has been commissioned at Sohar,
Oman as a joint venture for manufacture of a range of process plant
equipment -principally targeting the market in the GCC countries.
The heavy fabrication facilities at Hazira continue to be upgraded to
maintain a competitive edge. The doubling of assembly - integration
capacity for Weapon Systems and Engineering Systems at the Strategic
Systems Complex at Talegaon is under implementation and will get ready
during the first half of 2010-2011.
Securing Supply Chain:
Reliable supply of nuclear grade heavy forgings is a major requirement of
the Indian Nuclear Power program. Supply of these forgings has been a major
bottleneck globally. During the year a Joint Venture Agreement was signed
with Nuclear Power Corporation of India Limited (NPCIL) for setting up a
fully integrated special steel and heavy forgings facility. This facility
will produce heavy forgings required for both the Hydrocarbon sector and
the Nuclear power sector.
The OC has put in place a Materials Portal for offering better visibility
during negotiations and for making spend decisions. A common system based
vendor performance evaluation system is planned for implementation during
2010-2011.
Productivity Improvement Initiatives:
For improving operational efficiency, the Operating Company continues its
focus on ''Operational Excellence'. A number of teams are working on
various improvement projects. 'Critical Chain Project Management'
methodology of the 'Theory of Constraints' is used for managing planning &
execution of projects and for improving delivery performance.
A Product Life Cycle Management solution implemented across the Operating
Company's locations helps improve knowledge management and collaborative
working across functions. The Operating Company is using automation of
design and drawing activities for reducing the cycle time of engineering
activities and for improving quality of the design process.
The Operating Company is making use of I.T. enabled re-engineering to
improve its systems & processes. Special efforts are taken to improve
productivity using extensive automation in manufacturing operations.
Shipbuilding Operating Company (SHBD OC)
Business Environment:
The international shipbuilding market is still volatile having gone through
a down turn due to falling demand for bulk cargo resulting in low freight
rates. This in turn led to a great fall in ship prices and negligible
ordering activity. Globally, the shipyards were under constant pressure of
cancellations mainly in the bulkers segment. However, by the end of 2011,
there could be some upswing depending on the availability of financing for
new builds.
Last year, the Government of India had committed to grant shipbuilding
subsidy to all eligible orders for ships booked prior to August 14, 2007.
The Shipbuilders Association of India has made representations to the
Government for continuation of the subsidy scheme to enable Indian
shipyards to compete with foreign yards effectively.
The domestic naval shipbuilding market continues to be promising. The
Indian sJavy is moving ahead with its major expansion programs. The Indian
Coast Guard is also expected to accelerate their fleet expansion program.
During 2009-11'. a maiden order for construction of 36 numbers fast speed
interceptor boats was reived by the OC.
Significant Initiatives:
The Warship & Submarine Design Centre is being strengthened to support m-
nouse aesign of naval vessels. The centre is equipped with the latest
software tools and is supported by a Virtual Reality facility. The team for
design work of commercial vessels is also being strengthened. Resources and
facilities at Hazira for shipbuilding are being further augmented. The
Operating Company is focusing on proper systems and processes to increase
operational efficiencies and reduce cycle time to meet customer
expectations on quality and delivery. The construction of the modern ship
yard at Kattupalli is proceeding at a fast pace.
Outlook:
Many of the projects deferred due to the global economic crisis have
started moving forward. Middle East, Iran and South America offer good
prospects in the short to medium term. The Division expects good prospects
from overseas Refinery and Gas/LNG projects. Fertilizer sector in India
gets preferential allotment of gas. This will attract investment in new
grassroots projects as well as expansion projects of existing players.
There are prospects from Iran as well as Brazil for Fertilizer projects.
There are prospects for coal gasification projects from China as well as
Australia.
India is in the process of getting inducted in a global civilian nuclear
commercial trade after NSG clearance, signing of India specific IAEA
safeguards and Indo -US nuclear deal. The Division has signed Memorandums
of Understanding with major technology providers like
Westing house, GE Hitachi, Atomstroy export, Atomic Energy of Canada
Limited and Rolls Royce, which will offer business opportunities in the
medium to long term.
Though the international commercial shipbuilding sector has been badly
affected by the economic crisis, the heavy lift multipurpose cargo carriers
segment is relatively less affected by the global downturn. The Division
envisions itself to be a total solutions provider for specialised ships
giving services from designing to building and repairing of ships in about
3-5 years. The Division has a strong presence in naval vessels business
where it is currently executing Hull fabrication, Outfitting, Weapon
Launchers and Marine Equipment on standalone basis. The next step is to
offer the complete platforms to Indian Navy. The Division sees good
prospects in the naval vessels business in the medium to long term.
Overall, the Division envisages good market opportunities in the medium to
lonq term.
Electrical & Electronics Division
Overview:
Electrical & Electronics Division comprises of Electrical and Automation
Operating Company (EAOC) and business unit Medical Equipment & Systems
(MED). Petroleum Dispensing Pump & Systems (PDP) was divested to Gilbarco
Inc. during the year and the business transfer got concluded in March 2010.
The four Strategic Business Units under Electrical and Automation Operating
Company are: Electrical Standard Products (ESP), Electrical Systems &
Equipment (ESE), Control & Automation (C&A) and Metering & Protection
Systems (MPS).
Electrical Standard Products business has manufacturing facilities at Powai
and Ahmednagar in Maharashtra. Electrical Systems & Equipment has
manufacturing facilities at Powai, Ahmednagar and at Coimbatore in
Tamilnadu. Control & Automation business operates from its 'Automation
Campus' at Navi Mumbai. Metering & Protection Systems business is based at
Mysore in Karnataka while Medical Equipment Business operates from newly
constructed manufacturing facility in Mysore, Karnataka.
At L&T group level, Electrical and Electronics Division has four subsidiary
companies. L&T Electricals Saudi Arabia (LTESA), with manufacturing
facility at Dammam- Saudi Arabia; L&T Electrical Automation Free Zone
Enterprise (LTEAFZE), with manufacturing facility at JebelAli- UAE; L&TWuxi
(LTW), atWuxi in China and TAMCO with manufacturing facilities in Malaysia,
Indonesia, Australia and China.
Business Environment:
Post economic slowdown, government's initiatives to stimulate economy and
recovery of domestic demand have acted as prime drivers of growth. With
Government's investments in ports, airports, metro and monorail projects,
'infrastructure' sector has shown positive signs of growth. Similarly power
sector continues to grow with major projects coming under execution and
many of the projects under implementation. However, Core sectors such as
metals and cement had fewer opportunities in 2009-2010.
Under Restructured Accelerated Power Development Reforms Program (R-APDRP),
Control & Automation business has been awarded a contract by Maharashtra
State Electricity Distribution Company Limited (MSEDCL) for automation,
metering and IT implementation work.
Majority of the international business of EAOC comes from the Gulf region.
Projects in Gulf region got affected due to economic slowdown in
international market and Dubai debt crisis. Many projects which were in
anvil were deferred by the customers thereby affecting the international
business.
Medical business has strengthened its presence through various road shows
and service camps, despite the competition from multinational companies.
The year 2009-2010 witnessed aggressive efforts by multinational companies
with newly built up capacities, to push the piled up inventory. Given this
scenario, the Division had to compromise somewhat on realisation to remain
competitive in the market. Going ahead, the major challenge in 2010-2011
will be to improve upon gross margins while achieving top line as per the
budget.
2009-2010 was the year of awards for this Division. It bagged 'five star
health and safety award' from British Safety Council for its Powai campus.
Electrical Standard Products business won the prestigious Golden Peacock
National Quality Award 2010, Ram Krishna Bajaj National Quality Award 2009
and the best product prize for its U-Power Omega Air Circuit Breaker at
ELECRAMA 2010.
Significant Initiatives:
A pan-India advertisement campaign, carried out by Standard Products
business was aimed at building L&T brand and improving visibility of the
products offered. A preferred integrator agreement was signed with Toshiba
Mitsubishi Electric Industrial Systems Corporations. This agreement would
cover specific control system solutions in the metal sector and paper
industry. There has been an effort to reduce credit to the market by
focusing on cash sales and increasing channel finance through third party
financing in standard products business.
On human resources front, the Division took an initiative to analyse and
improve upon employee satisfaction index.
Medical business has moved to a new environment-friendly facility in Mysore
in October 2009. Further, LEAN initiatives such as 5S and Value Stream
Mapping are inherently implemented in this facility. With recently launched
customer interaction centre, Medical business will be able to offer better
service levels to its customers.
Process Improvement:
Business operations across the Division were integrated with SAP ECC 6.0 in
2009-2010 to achieve significant improvement in terms of process
capability. Six-sigma is the one of the most important tools that all line
managers in the Division use to improve satisfaction level of both internal
and external customers. In 2009-2010, 224 six sigma projects were completed
as against 130 last year. An initiative was taken to monitor and improve
'product sigma' for all the products in order to elevate the quality of
products offered to the customers.
Through 5S journey the Division has been trying to create a LEAN
environment. 5S process has not remained restricted just to our factories;
but it has been extended to our vendors. With certain manufacturing
locations already reached 5S level, we have created a pool of internal
auditors for 5S certification. Going through LEAN journey, it also focused
on Value Stream Mapping as it offers proven and universal approach to
eliminate waste, simplify the process and in turn improvement in bottom
line.
Value engineering is another tool that is extensively used to improve the
bottom line. Total number of value engineering projects has crossed a mark
of 1500 since we started this initiative in early 2000.
New Product Development:
Development of new products and technologies continues to be the top
priority for the Division. Standard Products business completed development
of U-Power Omega series of Air Circuit breakers in 2009-2010 which also won
the 'best product prize' award in ELECRAMA 2010. Development of D-sine
Moulded Case Circuit Breakers with new protection release was also
completed in the same period. Standard product portfolio was further
enriched with development of new frames of changeover switch, complete
range of MO contactors and new thermal overload relays.
A complete new range of Low Voltage distribution board, T-ERA, has been
unveiled by Electrical Systems & Equipment business. This product offers
increased safety, reduced maintenance time and environment-friendly design
to the customer.
Metering business launched two new platforms for single-phase and four new
platforms for poly-phase meters. With this, meter costs dropped
substantially making this business further cost competitive in the market.
New metering data acquisition solution was developed which finds its
application in Restructured Accelerated Power Development Reforms Program
(R-APDRP). Metering business also developed a common protocol which enables
communication feature in the meters.
An Advance Traffic Management System (ATMS) along with its toll management
system has been developed by Control and Automation business. The systems
comprise newly developed advanced software called Lane-XTM. This business
also introduced a standard package which offers remote control of
substation at an affordable cost, power monitoring, management & control of
electrical substation. Most of the new products introduced by Electrical
and Automation Operating Company were showcased in ELECRAMA 2010.
In 2009-2010, Medical business completely revamped its product basket by
offering new products in the segments of patient monitoring system and
surgical diathermy. In the monitoring range 8 new products were released
namely Planet 10, Planet 20, Planet 30, Skyline M, Planet SON, Star 50N,
Skyline 55 V1 (ECG full disclosure), Orion (ECG machine with Bluetooth PC
interface) and in Surgical Diathermy, Maestro plus 100 (Dual output
surgical diathermy).
Intellectual Property Rights (IPR):
This Division has continued its commitment towards development of
intellectual property. Encouraging employees to generate new ideas helps in
development of new, better and technologically advanced products. In 2009-
2010 Electrical and Electronics Division filed 128 patents, 22 trademarks
and 22 design registrations. In fact, 2009-2010 is the third consecutive
year where the Division filed more than 100 patents. With this total number
of live patents filed so far stands at 560.
Out of 128 patents filed in 2009-2010, 6 patents were filed by Medical
business taking their tally of total live filings to 82.
Outlook:
Indian industrial manufacturing is showing recovery and it is led by
investments in infrastructure and power. On international business front,
the Gulf market continues to be sluggish; however, the outlook for markets
like Abu Dhabi and Qatar is positive. Various Oil & Gas sector projects in
Saudi Arabia are showing revival and utility industries are coming up with
new projects. Even though Dubai was adversely affected by the credit
crunch, it is expected to show signs of recovery in 2010-2011. In 2010-
2011, the Division expects about 31% of business including that of group
companies from international market.
The growth in Energy, Infrastructure and Building segments will be
favorable. Development in energy management and smart grid will open
opportunities for the Division. In 2010-2011, all the businesses will add
new geographies to their existing portfolios.
With regard to Medical business, the medical sector in India is
experiencing growth due to increased government expenditure under the
National Rural Health Mission. Also there is growth seen in corporate
hospitals chains driven by increased health insurance coverage and increase
in medical tourism.
In summary, the Division's budget theme aim at expanding its products and
services offerings in the domestic market, enhancing its capability to
serve power sector and focusing on new geographies outside India.
Machinery & Industrial Products Division
Overview:
Machinery and Industrial Products Division (MIPD) consists of Industrial
Products & Machinery Operating Company (IPM OC) and Construction Machinery
Business Sector (CMBS).
Industrial Products & Machinery (IPM OC):
IPM OC has two distinct business streams - Industrial Products and
Industrial Machinery. Industrial Products comprises Industrial Valves,
Welding Products and Cutting Tools while Industrial Machinery consists of
Machinery for Paper & Pulp, Crushing, Mining. Mineral processing, Steel and
Rubber & Plastic Processing Industries. IPM OC consists of the following
Strategic Business Units and Joint Venture Units.
Industrial Products Valves Business Unit (VBU):
VBU markets Industrial Valves and allied products manufactured by Valves
Manufacturing Unit (VMU), Audco India Limited (AIL) and Larsen & Toubro
(Jiangsu) Valve Company Limited, China, besides a few Indian & overseas
manufacturers. VBU is one of the few select suppliers of Valves for global
oil majors.
AIL is a 50:50 JV with Flowserve Corporation USA and manufactures a wide
range of Industrial valves at its 3 factories in southern India. Larsen &
Toubro (Jiangsu) Valve Company Limited is a 100% owned subsidiary of LTIFZE
set up in Yancheng in Jiangsu province, China, for manufacture of certain
ranges of Industrial Valves for global markets.
VMU has set up a plant at Coimbatore to manufacture Valves for Power Sector
and also offers Valves supplied through contract manufacturing in ranges
not fully supported by AIL, besides providing the technology support for
new product development of Valves.
Welding Products Business (WPB):
WPB markets products manufactured by EWAC Alloys Limited. It also markets
Inverter based welding machines from Fronius, Austria, and Oxy-Fuel
Equipment such as Industrial Gas Regulators and Gas Torches from Messer,
Germany. WPB also markets indigenously developed MIG Welding Machines and
Inverter Welding Machines. In addition, WPB provides comprehensive
solutions to its major clients towards Repair & Maintenance of critical
Industrial Components.
EWAC Alloys Limited (EWAC) is a 50:50 JV between Larsen & Toubro Limited
and Messer Eutectic + Castolin Group of Germany. EWAC is a market leader in
the business of maintenance & repairs welding & welding solutions.
Industrial Cutting Tools Business (INP):
INP provides metal cutting solutions to the domestic manufacturing industry
covering Automobile, Engineering and Machine Tool segments through
marketing of Industrial Cutting Tools manufactured by ISCAR Limited,
Israel.
Foundry Business:
L&T has set up a state-of-the-art Casting Manufacturing Unit at Coimbatore
having an annual capacity of 30,000 tonnes to manufacture large sized SG
Iron and Special Iron Castings for Wind Power and other Engineering
Sectors. The Foundry can produce castings in the weight range of 3T to 28T.
In addition, this Business Unit also has a Foundry operating at Kansbahal
Works, Odisha (Rourkela Campus) manufacturing Steel, Alloy Iron, SG Iron &
Grey Iron castings and also addresses requirement of large Wear and
Abrasion resistant castings for Power and Cement sectors.
Industrial Machinery Rourkela Campus (KBL):
Rourkela Campus, which includes Kansbahal Plant, is involved in design,
manufacturing & marketing of Mineral Crushing Solutions (Limestone, Coal
and other minerals), Surface Miners and Specialised Equipment for Steel
Plants (such as Torpedo Ladle Cars) and Machinery for Paper & Pulp.
LTM Business Unit (LTM BU):
LTM BU manufactures and markets Rubber Processing Machinery for the Tyre
Industry across the globe. Currently, the unit has manufacturing facilities
at Manapakkam, Chennai and Kancheepuram near Chennai.
L & T Plastics Machinery Limited (LTPML):
LTPML manufactures and markets Injection Moulding Machines and Auxiliary
Units for the plastics industry and its products find applications in
diverse industries like Automobiles, Electrical Goods, Packaging, Personal
Care Products, Writing Instruments and White Goods.
Product Development Center (PDC):
PDC based at Coimbatore renders engineering and product development support
to all the businesses across MIPD.
Construction Machinery Business Sector (CMBS):
CMBS markets and renders support for Construction & Mining Equipment. The
Sector comprises;
* Construction & Mining Business Unit (CMB) which markets equipment
manufactured by L&T-Komatsu Limited, India and the entire range of
equipment available from Komatsu worldwide. It also markets Mining Tipper
Trucks available from Scania.
* L & T-Komatsu Limited (LTK) is a 50:50 JV with Komatsu that manufactures
Hydraulic Excavators and Hydraulic Components, all of which are distributed
in India by CMB.
* L & T-Case Equipment Private Limited (LTCEPL) is a 50:50 JV with CNH
Global N.V., which manufactures and markets Loader Backhoes and Vibratory
Compactors.
* Tractor Engineers Limited (TEIMGL) is a wholly-owned subsidiary, which
manufactures and markets Undercarriage Systems for Excavators and Material
Handling Systems like Apron Conveyors etc.
Business Environment:
The businesses of IPM OC are yet to come back to the levels which prevailed
in early 2008 before the on set of financial crisis.
The global valves market showed a decline in orders in the year due to
postponement of investments in various projects; though the domestic market
started improving in the second half of the year. The fewer number of
projects in Oil & Gas segment resulted in severe price competition from the
existing players in the valves market. The customers also encouraged entry
of new players and re-visited supplies from China giving considerations to
the low prices quoted by them. As a result, the margins in the valves
market remained under pressure.
The scenario for Rubber Processing Machinery in the international market
was slightly dull, as the regular customers in Europe did not go in for
expansion, resulting in lower order inflow from overseas market. However,
the demand from the domestic market compensated for the reduced off-take
from international players. The domestic tyre industry market witnessed a
surge in the requirement of Tyre Curing Presses, fueled by the increasing
demand of automobiles and shift of Truck and Bus tyre technology from
'Bias' to 'Radial'. Almost, all the domestic tyre majors companies have
expansion plans in place and have placed or committed orders.
Triggered by ample growth opportunities in Infrastructure sector, Indian
Cement Industry saw a spurt in activities post previous years' recessionary
'wait and watch' approach. Nearly 60MT cement-capacity additions are now in
different stages of execution. This helped good order growth in Crusher
business.
All the industries which WPB and INP BUs cater to are showing positive
growth. There has been a gradual recovery to normal conditions by most of
the customers in key business segments such as Automobile and General
Engineering industry, where customers have shown faster recovery.
Government's focus on renewable Wind Energy sector continued ensuring
consistent growth in business from wind mill products.
The Infrastructure focus of the Government of India coupled with various
proactive stimulus measures enabled the CMBS to register a growth over
2008-2009 demand as against initial expectation of further deterioration.
However, the competition is increasing in the sector. Key players in the
Construction equipment market have added the capacity in the last few
years. Apart from this, new players have either made announcements of new
capacities or are offering imported equipment. Most international players
are present in the Indian market on their own or in joint ventures with
Indian players.
The market for Hydraulic Excavators during 2009-2010 grew by 5% as against
a reduction of 21% during 2008-2009. Similarly market for Loader Backhoes
and Vibratory Compactors also grew by 54% and 17% respectively during 2009-
2010 as against reductions of 43% and 25% respectively during the previous
year.
Significant Initiatives:
In Valves business, additional distributors have been appointed to increase
MRO sales and initiatives taken to enhance the customer coverage in India.
Sales personnel have been posted in Abu Dhabi and UK to increase the
geographical coverage and secure additional business. Valves Business Unit
is currently working on obtaining on approval of its products in Algeria,
Brazil and Mexico.
A new initiative for development of valves to address the growing Power
segment went on stream at Valves Manufacturing Unit, Coimbatore. The
manufacturing licence in LTJVCL, China was obtained, which will allow
marketing of LTJVCL products within China. We have also obtained the
approval from Pemex, Mexico for our products.
Several new products for Rubber Processing Machinery such as a new range of
Hydraulic Presses, Hybrid presses and slide back presses were introduced
during the year 2009-2010. The product offering was also expanded by
offering Tyre Handling Automation solutions to the tyre Industry jointly
along with CIMCORP of Finland.
A dedicated workshop area within Kansbahal Works is being remodeled for
manufacture of Wheel Loaders. The commercial production of Wheel Loaders is
slated to begin by first quarter of the year 2010-2011. Also, new products
such as indigenously developed Cold Milling Machine (used for milling of
roads before asphalting them afresh) were indigenously developed.
A number of initiatives are in the pipeline in the Welding business, some
of them being launching new products, expanding manufacturing capacity of
indigenous inverter and wear plate. It is also proposed to start new
training & development centre at Kolkata which shall be operational in June
2010.
The Foundry project of 30,000 TPA for manufacturing of wind mill castings
at Coirrtbatore was inaugurated in December 2009 and has now begun its
commercial production of castings. The foundry at Coimbatore has the latest
pollution control, fire control, conservation of environment and natural
resource measures including Furan Sand system with Mechanical & Thermal
Sand Reclamation systems.
Many new cutting tools used in drilling, milling and turning have been
launched successfully in the market. These new introductions are expected
to enhance the competitive position and build market share for the Iscar
Cutting Tool business.
All the businesses continue to maintain their efforts that were started
through 'War Room meetings' towards close monitoring to ensure reduction in
Working capital and in particular, Receivables, besides ensuring healthy
order booking and execution.
Other initiatives taken during the year are:
* Enhancement of after-sales support capability through long term Full
Maintenance Contracts and Site Support Agreements for the products to help
improve machine uptime and capping operating costs thus helping customers
in improving their competitive position.
* Tie-up with major financiers for providing attractive finance options to
dealers and customers.
* Launch of PC300 Mighty Excavator to address heavy applications
* Triple Offset Butterfly Valve is increasingly replacing large-size Gate
Valves and we plan to develop the full range of Triple Offset Butterfly
Valves. Also, in order to address the upstream market, Audco is expediting
development of Trunnion Mounted Metal Seated Ball Valves.
* Customers prefer ready-to-use wear components rather than using welding
electrodes for building the worn out components. This opens up new business
opportunities even while this may gradually shrink the market size for
Maintenance & Welding products.
Outlook:
The Indian economy has shown consistent growth and remarkable resilience
after the slump in 2008-2009 and early part of 2009-2010. Power and
Infrastructure sectors in India are set to witness strong growth in the
coming year with the boost from policy measures and budgetary allocations.
India is likely to emerge as the 'Refining Hub' of the world with capacity
additions planned.
Government's focus on exploration and production to meet the growing energy
requirement of the country through NELP, the Natural Gas discoveries in the
East Coast and Oil discovery in Rajasthan and Gulf of Cambay, plan for
cross-country pipelines provide promising business prospects to valves
business in the medium term.
Demand for machinery from Mineral processing Industries are expected to
grow in 2010-2011 backed by huge infrastructure requirements.
The outlook for Wind Mill Castings is positive driven by good demand and
backed by readiness of world class foundry facility in Coimbatore.
The Global tyre manufacturing facilities are moving more towards Asia due
to lower manufacturing costs.
The market demand for Construction Equipment is expected to improve on
account of the increase in spending in the urban infrastructure, general
construction sectors and spending by the Government on various
infrastructure projects. Gap between coal demand and supply continues to
provide a growing opportunity for Mining Equipment. CMBS is well placed to
take advantage of these opportunities through supply of large size
construction and mining equipments.
Overall, the Division envisages improvement in Industrial trends in the
coming year and a return to better growth trends around second half of the
year.
Integrated Engineering Services
Overview:
Integrated Engineering Services (IES) headquarter is at Vadodara, Gujarat
and its design centers span the cities of Bangalore, Chennai, Mysore, and
Mumbai. It has about 2,700 employees delivering high-quality engineering
and design solutions. The end-to-end services are product design, analysis,
prototyping & testing, embedded system design, production engineering,
plant engineering, buildings & factories design, asset information
management & sourcing support using cutting-edge CAD/CAM/CAE technology in
the engineering domains of Automotive, Aerospace, Marine, Off-highway
Machinery, Railway, Industrial Products, Consumer Electronics, Medical
Devices, Consumer Packaged Goods, Pharmaceuticals, Minerals & Metals, Oil &
Gas and Utilities.
Business Environment:
The evolution of the outsourced engineering services market has been
phenomena! over the past few years. In the initial years, the bulk of
engineering services work coming to India was of comparatively low-end,
such as drafting, legacy conversions, and elementary design. The current
trend in outsourcing space shows a larger share of IT enabled engineering
services ranging from complete product design, complex turnkey project
design, value analysis/ cost reduction projects, design of assembly lines,
fixtures etc.
With an increase in the volume of work and a challenging business
environment, IES is keeping ahead of the competition by leveraging the rich
engineering heritage of L&T. IES focuses not just on providing high-quality
services to its esteemed customers but also ensures that customers have a
memorable service experience. This has enabled IES to build a strong brand
for itself and become synonymous with customer satisfaction in the
outsourced engineering services industry.
Significant initiatives:
IES has taken major steps to realign it self into Verticals, Horizontals,
Platinum and Strategic Accounts to set new benchmarks of customer
satisfaction in the engineering services industry and start a journey of
multi-fold growth. Specific initiatives include:
* A Center of Excellence (CoE) of Aerospace has been set up at Bangalore in
which about 70+ engineers from Mechanical and Avionics domains have come
together to set up a one-stop shop for Aerospace clients.
* IES has realigned its mechanical engineering and embedded systems
engineering services in line with the industry domains, known as Vertical
Business Units. VBU ensures that a customer from its domain gets all its
engineering services needs met from a single window.
* The Sales force has been organised geographically with special emphasis
on North America, Europe, Asia Pacific, Middle East and Africa.
* Platinum Accounts have been crafted-with complete profitability
responsibility to enable closer coordination between sales and delivery and
hence faster decisionmaking.
Through these and other actions, IES continues to reaffirm its commitment
to customer satisfaction and its desire to propel itself on the fast track
to growth.
In order to prepare itself for upcoming opportunities, IES has put in place
several measures including structured training of new recruits, transfer of
experienced domain specialists from L&T's other operating divisions into
this new business area, developing sound processes for engineering
activities and operational efficiency measures.
Outlook:
The economic recession, along with the tightening of outsourcing norms, has
dented the growth of all sectors in the current year. However, even in such
a difficult environment, IES has managed to hold its own.
With the winds of economic recession yet to die down completely and the
competition in the outsourced engineering services market being stiffer
than ever, the year promises to be challenging one. However, IES with its
new look is confident of taking on the challenges and deliver excellent
results on the back of the initiatives described above.
Power Development Group (Thermal)
Overview:
Power Development Group has been formed with the objective of developing,
investing, operating and maintaining grid linked Independent Power Plants,
Cogeneration and Captive Power Plants on Build-Own-Operate (BOO), Build-
Own-Operate-Maintain (BOOM) and Build-Lease-Operate (BLO) basis.
Some of the key activities of the Power Development group include:
* Identification of new opportunities for grid-connected & captive power
plants
* Evaluation of risks and strategies for mitigation of these risks.
* Ensuring various statutory clearances for the development of power
project.
* Evaluation of various financing structures and arranging the requisite
financial package for investment.
* Setting up joint ventures with government undertakings and PSUs with
equity participation.
Power Development Group has a good track record of development and
construction of power plants. Some of the projects developed by the Group,
which are working successfully, are:
* 116 MW Naptha-fired combined Cycle Co-generation Power Plant on BOO basis
to deliver 116 MW of Power and 120 TPH Steam for Haldia Petrochemicals
Limited, Haldia, West Bengal.
* 90 MW Naptha/Natural gas-fired Co-generation Power Plant on BLO basis to
deliver 90 MW of Power and 240 TPH of process steam for Indian
Petrochemicals Corporation Limited, Gandhar, Gujarat.
Power Development group is currently developing a 1400 MW (2x700 MW)
supercritical coal-fired power plant in Punjab.
The Power Development Group is organised into two teams:
* Business Development
* Fuel Sourcing
All projects implemented by the Group would be through Special Purpose
Vehicles (SPV). These SPVs will be financed through non-recourse project
financing. This strategy will help in de-risking or ring fencing the
business of parent company and at the same time help in leveraging the
project. This strategy also helps the Company to endeavour large size
projects with lower equity investment.
Business Environment:
Persisting power shortage is the major impediment in the path of economic
development in India. There was a shortage of 10.1 % in terms of total
energy requirements and 13.3% in terms of peak demand requirements in the
year 2009-2010.
The demand/supply gap for electricity in India has been primarily due to
the slow pace of capacity addition. During the 10lh plan period, capacity
addition achieved as compared to target was 51.5%. During the 11lh plan
period, 28.3% capacity addition has been achieved till date.
India has one of the lowest electricity consumption levels in the world at
approx. 750 units in 2009, compared to the world average of 3000 units and
2650 units in China. This presents a significant potential for sustainable
growth in the demand for electricity in India.
The Government of India (Gol) has taken significant steps to restructure
the industry, attract investment and plan for fast track capacity addition
through incentivised policy initiatives. These included measures such as
restructuring the State Electricity Boards (SEBs) to improve their
financial condition, regulatory and policy intervention such as the
Electricity Act, the National Electricity Policy 2005, the Tariff Policy
2006, Tariff Based Bidding Guidelines 2005 and the National Hydro Policy
2008, among others.
Given the significant supply deficits, high growth potential and conducive
government policies, a large opportunity exists for private players to
enter the power generation segment.
While there are a number of opportunities in the power generation sector,
there are also a number of challenges. Delay in land acquisition,
environmental clearances and approvals remain an area of concern. In
addition, availability of coal continues to be one of the biggest
challenges for coal-fired power projects in India. The development of mines
has not kept pace with our ambitious program for the addition of generation
capacities.
Significant Initiatives Power Plant in Punjab:
The Group is currently developing a 1400 MW (2x700 MW) supercritical coal-
fired power plant in Punjab. This project was won through the process of
competitive tariff-based (Case-2) bidding. The Plant site is around 28 kms
from Chandigarh airport, while Patiala and Ambala towns are at 28km and 20
km distance respectively.
The sale of electricity from the Power Plant to PSEB is backed by a 25-year
Power Purchase Agreement. Coal requirement for the plant would be sourced
from South Eastern Coal Fields (SECL) Korba mines in Chhattisgarh.
The steam generator & turbine are being sourced from the L&T-MHI JV
companies which employ cutting edge technology to manufacture proven state
of the art supercritical equipment. The BTG-BOP and related civil and
electrical works would be carried out by the Company.
The performance of the plant is expected to match the best operating power
plants worldwide, in terms of reliability and efficiency leading to lower
coal consumption and therefore, lower emission of green house gases.
The Power Development Group is also looking at other opportunities
including in the state of Chhattisgarh & Odisha.
Outlook:
According to the 17th Electric Power Survey (EPS) report, India's energy
requirement will grow at a CAGR of 7.1 % over a period of 10 years (Fiscal
2007 to Fiscal 2017). Demand drivers for growth of the power segment would
largely emanate from growth in manufacturing sector, increase in per capita
electricity consumption, rural electrification and demand for refurbishment
of old power plants with the new super-critical technology.
There has been a paradigm shift in Government policies so as to create a
facilitating and enabling environment conducive to private participation in
power development projects. Consequently there are now ample opportunities
to develop power projects through Public-Private partnership. In the light
of the above, Power Development Group has set for itself ambitious targets
in the power generation space. The vision is to achieve capacity of 10,000
MW by 2015, out of which 5,000 MW would be operational and financial
closure would be achieved for the balance 5,000 MW.
Financial Review 2009-2010 L&T Standalone
I. LAYING A STRONG FOUNDATION FOR LONG TERM GROWTH:
On the back of the Indian economy emerging stronger from the global
meltdown, the Company consolidated its leadership position in the
Engineering and Construction business during 2009-2010. Alongside newer
business opportunities being explored in the Nuclear and Railways sectors,
the Company has succeeded in bagging a slew of prestigious orders in the
Power, Hydrocarbon, Fertiliser, Infrastructure and Defence sectors during
the year.
The Company, during 2009-2010 secured fresh orders totaling to Rs.69,572
crore recording a healthy growth of 35% over the previous year. Large
project orders over Rs.300 crore constituted over 60% of the total Order
Inflow.
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
Order Inflow 22370 30611 42019 51621 69572
The Company closed the year 2009-2010 with a record Order Book of
Rs.1,00,239 crore. The composition of projects in its Order Book involves a
longer average execution period of 27 months, largely due to increased
share of power sector orders, in its Order Book. Over the past 5 years, the
compound growth rate of Order Inflow is 33% and of Order Book is 42%.
Sales & Service Income:
Gross Sales and Service income at Rs.36,996 crore grew by 10.6% over 2008-
2009 on like to like basis (after excluding the Ready Mix Concrete sales
from the previous year). The tightening of credit on the aftermath of
global financial crisis impacted certain clients' preparedness to proceed
on projects, thereby adversely affecting project execution in the first
half of the year. The moderate sales growth was also due to drop in demand
for Industrial Machinery and Products during a major part of the year.
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010
Gross Sales 14966 17901 25187 34045 36996
The Company registered a compound growth of 25% in its revenues over the
last 5 years, underlining its premier position in the industry.
Operating Cost and Margin Analysis:
Manufacturing, Construction and Operating expenses for the year 2009-2010
amounted to Rs.28,454 crore, translating to 75.0% of the Total Income of
Rs.37,945 crore excluding exceptional/extraordinary items. As compared to
the previous year, the costs reduced by 80 basis points due to a
combination of favorable factors, such as improved product mix, favourable
input prices, improved productivity and operational excellence initiatives.
The Company continued its strategy of inducting fresh talent into its
existing and new ventures. There was a net addition of 1,428 employees
during the year, taking its strength to 38,785 as at March 31, 2010. The
Staff Expenses for the year 2009-2010 at Rs.2,379 crore increased by 20% as
compared to the previous year, which as a percentage of Total Income
excluding exceptional/extraordinary items, increased by 60 basis points.
Excluding exceptional/extraordinary items, Sales, Administration and Other
expenses for 2009-2010 at Rs.1,387 crore represented 3.6% of Total Income.
There was a reduction by 150 basis points in the expenses during 2009-2010
over that of previous year. Over the past two years, concerted efforts were
made to reduce the administrative and marketing overheads so as to improve
the Company's operating margin. During 2009-2010, the provisions towards
defect liabilities, foreign exchange variations and doubtful customer
receivables were lower than the previous year.
Profit before Depreciation, Interest and Tax (PBDIT), excluding
exceptional/extraordinary items for the year 2009-2010 at Rs.5,726 crore
increased by 23% over the previous year. PBDIT at 15.1% of Total Income
excluding exceptional/extraordinary items improved by 170 basis points over
the previous year. The Company took adequate risk mitigation measures so as
to safeguard the margins in the ongoing projects.
The improvement in margins seen in the recent years reflects the Company's
ability to select, compete, win and execute turnkey and construction
projects within the agreed cost and time lines consistently, year after
year.
Other Income:
The Company disposed of some of its strategic investments at an exceptional
gain of Rs.1,115 crore. These investments consisted of the Company's
holding in UltraTech Cement Limited (gain of Rs.1,020 crore), holding in
one of its associate companies (gain of Rs.68 crore), and buy back of the
Company's part equity holding by one of its associate companies (gain of
Rs.27 crore). Net of tax exceptional gain works out to Rs. 1,095 crore.
Other gains on sale of investments included a gain of Rs.86 crore made on
sale of part investment in the equity shares of Satyam Computer Services
Limited.
Dividend income from long term investments during the year 2009-2010 at
Rs.109 crore mainly comprised dividend from Group companies. Temporary
surplus funds, invested judiciously in low risk short term investments,
also earned a dividend income of Rs.278 crore.
Finance Cost:
The Company mobilised additional average borrowings of Rs. 1,608 crore
during 2009-2010 to finance its capital expenditure and working capital
requirements resulting in increased interest expense at Rs.505 crore. The
weighted average interest cost on borrowings at 7.2% for the year was still
low, though marginally higher as compared to the previous year. Major part
of the foreign currency borrowings were hedged against currency and
interest rate risks.
Profit Growth:
The overall Profit after Tax, inclusive of exceptional and extraordinary
items, at Rs.4,376 crore registered a growth of 26% over the previous year.
Despite infusion of addiontal equity capital, the Earnings per Share (EPS)
at Rs.73.77 showed a growth of 24% over the previous year.
The Company made a net exceptional gain of Rs.1,075 crore during the year
2009-2010 comprising (a) an exceptional gain of Rs.1,115 crore (net of tax
Rs. 1,095 crore) from sale of its strategic investments as elaborated under
'Other Income' above and (b) an exceptional provision of Rs.40 crore
towards diminution in the carrying value of investment in an associate
company.
The extraordinary gain of Rs.136 crore made by the Company during the year
comprised (i) Rs.73 crore from disposal of Petroleum Dispensing Pumps &
Systems business, as a part of the Company's strategy to exit non-core
businesses and (ii) Rs.63 crore from reversal of proportionate provision
made in respect of investment in Satyam Computer Services Limited, pursuant
to the part sale of the said investment in 2009-2010.
Excluding the exceptional and extraordinary items, PAT stood at Rs.3,185
crore. Over a period of 5 years, PAT excluding exceptional and
extraordinary items registered a compound growth of 38% and EPS multiplied
by almost 4 times from Rs.19.02 in 2005-2006 to Rs.73.77 in 2009-2010,
reflecting the uninterrupted track record of healthy performance of the
Company.
Funds Employed and Returns:
As a % of sales, gross working capital fortheyearended March 31, 2010 at
Rs.26,362 crore has increased by 5,7 percentage points due to higher work
in progress, customer receivables and increased advances towards equity,
given to subsidiary companies pursuing growth initiatives. Net customer
receivables as at the end of the year stood at Rs.11,164 crore,
representing 110 Days of Sales. Concerted efforts are being initiated to
expedite the collections.
Net working capital at Rs.5,119 crore was marginally lower due to better
inflow of customer advances and improved credit terms from suppliers.
While the funds employed for 2009-2010 declined by nearly 6% over the
previous year at the operating segment level, allocation of capital for new
ventures as part of growth initiatives neutralised this reduction at the
Company level.
The Company incurred Rs.1,604 crore towards capital expenditure during the
year. While Project businesses invested in creating additional fabrication
facilities and adding construction equipment, the Product businesses
expanded the existing production facilities at Coimbatore, Ahmednagar and
Talegaon.
At the Company level, investments and loans to subsidiary & associate
companies increased by Rs.2,571 crore. Major investments were made in Power
Development, Ship Building, Infrastructure Development and Financial
Services ventures. Proceeds from capital raised during 2009-2010 were
temporarily deployed in current investments. The increase in current
investment portfolio was Rs.3,085 crore during 2009-2010. Accordingly, the
overall Funds Employed by the Company at Rs.25,190 crore as at March 31,
2010 increased by Rs.6,126 crore as compared to the previous year end
position.
Both the Return on Net Worth and Return on Capital Employed have declined
in 2009-2010. The Return on Net Worth for the year 2009-2010 at 20.7% and
the Return on Capital Employed (ROCE) at 15.9% showed reduction by 400 and
260 basis points respectively, as compared to the previous year. The
relative reduction in the returns is attributable to the investment in the
growth needs of emerging businesses and expansion of facilities that are
yet to generate returns. Economic Value Added from normal operations
correspondingly reduced to Rs.590 crore, pulled down by the additional
capital charge due to the increased strategic investments.
Liquidity & Gearing:
Cash accruals from the operations significantly increased by Rs.4,004 crore
as compared to the previous year lending a strong support to the Company's
capital expenditure and investment plans. The divestment proceeds of Rs.
1,576 crore further supplemented the operational cash accruals. The Company
successfully mobilised additional capital of Rs.1,873 crore by way of
Qualified Institutional Placement and also issued Foreign Currency
Convertible Bonds to the tune of Rs.929 crore. The response which the
resource raising programmes commanded signified the investor confidence in
the Company's long term growth prospects.
Liquidity & capital resources Rs. crore
2009-2010 2008-2009
Cash & cash equivalents at 775 964
the beginning of the year
Add: Net cash provided/
(used) by:
Operating activities 5483 1479
Investing activities (7648) (4430)
Divestment proceeds 1576 1121
Financing activities 1246 1641
Cash & cash equivalents 1432 775
at the end of year
With a significant increase in Net Worth of the Company, the Gross Debt
Equity ratio improved from 0.53:1 as at March 31, 2009 to 0.37:1 as at
March 31, 2010. The creditable performance of the Corporate Treasury during
the difficult days of global financial crisis earned laurels and awards for
the Company in domestic and international forums. The strong financial
position of the Company will support its ambition for long term growth and
higher shareholder value creation.
BUSINESS SEGMENT WISE PERFORMANCE
Engineering & Construction Segment (E&C):
The performance of the E&C segment during 2009-2010 was good considering
the depressed investment climate during the first half of the year arising
out of global meltdown. Despite the reduced ordering from infrastructure
sectors and Gulf region, the E&C segment was successful in bagging project
orders worth Rs.63,899 crore from the diverse sectors such as Power,
Hydrocarbon Upstream and Midstream, Fertiliser and Industrial, Commercial &
Residential buildings registering a growth of 41% over the previous year.
The gross revenue for the year at Rs.32,316 crore grew by 12.6% over the
previous year, driven by Construction and Heavy Equipment businesses. The
revenue growth was impacted by the economic slowdown, delayed financial
closures and clients' unpreparedness to proceed with the new projects
already committed by them.
Good execution coupled with prudent risk mitigation measures enabled the
Segment to report healthy improvement in EBITDA margins for 2009-2010 by 80
basis points over the previous year. With the liquidity position improving
in the last two quarters, the Segment obtained project advances from its
customers and also improved the vendor credit position enabling it to
reduce the funds employed by Rs.170 crore to Rs.6,291 crore by the end of
March 2010.
Electrical & Electronics Segment (E&E):
Continued global downturn and uncertainties in the domestic industrial
sectors impacted adversely the demand for Electrical Standard Products in
the first half of 2009-2010. Though the segment recovered during the second
half, its revenue for the year 2009-2010 at Rs.2,987 crore could only grow
moderately by 7%. The administered petroleum product pricing regime
continued to depress the demand for Petroleum Dispensing Pumps & Systems
through-out the year, until the eventual disposal of this business in March
2010.
Not-with-standing the subdued volume growth, the Segment achieved healthy
improvement in margins by 180 basis points during 2009-2010 over the
previous year. Increased margin at 14.5% was possible due to higher
proportion of Standard Products sales and improved performance by Metering
Protection & Systems business. With increase in manufacturing products
sales by 9%, the capacity utilisation also improved. The segment closing
Funds Employed at Rs.1,132 crore reduced by 9% as compared to that of
previous year, due to tighter control on working capital.
Machinery & Industrial Products Segment (MIP):
The segment performance was adversely affected during 2009-2010 due to
depressed capital expenditure plan of the industrial sectors, both within
and outside the country. Particularly the Industrial Valves business unit
had to bear the brunt of global meltdown as its volumes shrunk
significantly during the year. While other businesses of the segment
recovered during the second half of the year, the overall segment revenue
for 2009-2010 at Rs.2,220 crore was lower by 10% as compared to the
previous year.
The segment margins however, continued to show improvement during 2009-2010
largely due to improved performance of Rubber Processing Machinery business
and Construction & Mining Equipment business. The Net Funds Employed in the
segment at Rs.224 crore showed a decrease of 46% as compared to the
previous year, largely due to significant reduction in the year end working
capital, aided by close monitoring of receivables and inventory.
'Others' Segment:
Performance of Integrated Engineering Services (IES) included as part of
the 'Others' Segment, was adversely affected by lower outsourcing by US and
European customers and stronger Indian rupee. The gross revenue of IES
business for 2009-2010 at Rs.330 crore was lower by 10% as compared to the
previous year. The business, however, could improve the working capital to
22% of the revenue as against 36% for the previous year, through tighter
control on Receivables.
II. RISK MANAGEMENT:
The Company is exposed to a variety of risks across its entire range of
business operations. To ensure its long-term success, risks are regularly
identified, analysed and appropriately mitigated.
Indian economy experienced low growth conditions in the first half of 2009-
2010 in the wake of global economic slowdown. All the major sectors
experienced slowdown, consequently delaying their capital expenditure
plans. This also led to increased competition in the wake of declining
number of opportunities. In spite of this adverse situation, the Company
was able to achieve healthy growth in order inflow, revenue and
profitability due to a number of appropriate measures backed by a
comprehensive Risk Management framework within the Company.
The Risk Management process practised in the Company is comprehensive and
enterprise-wide. The process being followed in the business units of
Engineering and Construction Segment was extended during the year to the
other new businesses like Railways and Power as well. A separate policy for
MIP Segment EBITDA Margin:
Environmental and Social Risk Management was also implemented throughout
the organisation.
The Company has been successfully following a process of Pre-Bid Risk
Review which assesses the complexion of projects on risk-return profile
prior to bidding. Once a project is awarded by the client, the impact of
various risks is monitored throughout the project life cycle.
Risk Management forms an integral part of the Company's business processes
and constitutes an important element of decision-making. Both qualitative
and quantitative methods are employed for risk assessment in a uniformly
structured way across the Company. The methods include value at risk (VaR)
calculations to continuously determine the Company's exposures. Latest
simulation techniques are used while calculating contingencies for the
pricing of project proposals.
The Company is a sponsor of the Engineering & Construction Risk Institute
(ECRI) USA and conducts regular interaction with other sponsoring world-
class corporations to benchmark its Risk Management processes with the
global best practices. The Company believes in spreading a culture which
encourages risk taking for commensurate returns after appropriate due
diligence. The Risk Management processes are periodically reviewed and
revised to keep in tune with the changing business requirements. Corporate
Audit Services conduct targeted reviews of risk management processes to
check compliance. The Audit Committee of the Board also periodically
reviews the reliability of the Risk Management structure and the efficiency
of the process.
The Company was able to effectively counter the market risks in the face of
the business downturn, through its diversified portfolio of businesses
spanning both manufacturing and projects. A well thought-out approach
towards international presence helped the Company to enhance its
opportunities globally.
Internal Controls:
The Company believes that a strong Internal Controls framework is one of
the important pillars of Corporate Governance.
While internal control is embedded in most of the processes of the Company,
a separate corporate cell oversees the Internal Controls of business
processes, corporate functions and information technology systems. The
Company, through its corporate policy on
Internal Controls, provides a structured framework for identification,
rectification, monitoring and reporting of Internal Control status in the
Company. It specifies the responsibilities and tasks enjoined upon
employees in all positions.
The Company has well documented policies, procedures and authorisation
guidelines commensurate with the level of responsibility and standard
operating procedures specific to the respective businesses. The
effectiveness of internal control mechanism is reviewed by independent
internal audits carried out by Corporate Audit Services from time to time.
There is also an independent review of Internal Control systems by
statutory auditors. Any significant deficiency in internal control observed
during the audits is reviewed by the Audit Committee of the Board along
with the status on implementation of recommended remedial measures.
III. FINANCIAL RISKS:
a) Capital Structure, Liquidity and Interest rate risks:-
The Company started the year 2009-2010 with adequate liquidity and
conservative gearing levels. During the year it enabled itself for
financing medium-to-long term growth initiatives by raising equity and
equity-linked capital. Apart from adding to liquidity, this contributed to
a lower gearing, creating head room for debt capital as and when necessary.
Sale of its minority stake in UltraTech Cement Limited further added to
liquidity and to a larger equity base. These activities led to an increase
in investible surpluses during the year. The Company managed its portfolio
of investible surpluses judiciously to optimise liquidity, safety and
return considerations. Simultaneously, the Company has also increased its
working capital lines with banks, which may be used to finance business
needs at short notice. The borrowings of the Company are generally for long
term and are raised on favourable terms / security structures.
The Company manages the risks relating to capital structure by adopting
conservative gearing policies and focusing on long term growth
perspectives. It manages liquidity risks by holding adequate investible
surpluses in line with economic situations and business needs, expanding
access to suppliers of long-term and short-term capital, and maintaining a
strong credit profile. The interest rate risks are managed through a mix of
fund-raising and investment products across
maturity profiles, and through various tools approved under a robust risk
management framework.
b) Foreign Exchange and Commodity Price Risks:-
The Company is exposed to changes in foreign exchange rates and commodity
prices across its various business segments. Further, the Company also has
exposures to other foreign currency denominated assets and liabilities. In
many cases, such exposures are partly off-set by suitable pass-through
clauses built into contracts with customers. For the balance portion, the
Company has institutionalised risk management mechanism to effectively
manage the risks. Appropriate hedge tools are used under the framework of a
Board approved Risk Management Policy. The review of exposures and
underlying hedges under respective business segment are conducted at
regular intervals. The Risk Management mechanism is also subject to
periodic review by the Audit Committee.
IV. REVITALISING HUMAN CAPITAL:
The Company believes that the development of employees is one of the most
important enablers for an organisation like ours, engaged in nation
building. This is being done at both individual and team levels. Sustained
development of its employees, professional and personal, is the hallmark of
its human resource policies.
Recruitments across all levels, extensive training and skill enhancement
activities are carried out at all locations, in line with the Company's
expansion and growth plans.
* Being an engineering conglomerate, the Company needs a large pool of
engineering talent. In line with the growing business needs, the Company
has recruited Graduate and Diploma Engineer Trainees from engineering
colleges across the country during 2009-2010. Further addition of
capability is underway from the best engineering colleges to match the
Company's growing order book and execution needs.
* Apart from the wide variety of initiatives already running to develop
talent, including core-development & competency-based programmes and e-
learning, the Company has launched a new Management Education Programme in
it: association with IIM Ahmedabad. Two batches j4 are already undergoing
this programme.
* In the Company's endeavour to stay abreast of the current global
scenario, many new initiatives have been planned including a Programme on
Management of Change, Business Simulation on Corporate Entrepreneurship
etc.
During 2009-2010 the Company took many major steps towards transforming the
Company's Management Development Centre (MDC) at Lonavla into a world-class
centre for learning. New initiatives included releasing management updates
on latest industry trends and publishing the MDC journal 'Corporate
Entrepreneurship' with an excellent collection of articles by eminent
academicians and industry practitioners. Such initiatives aimed at
transforming MDC into a truly holistic reservoir of learning resources and
modern infrastructural facilities.
The Company recognises the importance of human leadership in realising its
growth ambitions and believes in nurturing talent within the organisation
to take up leadership positions. Towards achieving this, the Company has in
place a structured leadership program to identify leaders and to develop
them. The Company continues to build a leadership pipeline in a systematic
and scientific way, using the most sophisticated human technologies so as
to achieve the targets to be set out under Perspective Plan 2015.
The Company has well-established processes to attract talent and identify
strengths, as also areas of improvement. An array of structured alternative
avenues are provided to employees to build competencies. The Company also
provides customised solutions to employees to set the pace for their
learning and thereby support their growth within the organisation.
V. LEVERAGING IT FOR BUSINESS BENEFITS: OPTIMISING IT COSTS:
The Company has experienced the beneficial role of Information Technology
systems in enabling efficiency and increasing productivity of the employees
through automation of all business processes since many years. Over the
years, the investments in Information Systems are being balanced between
standard systems like the ERPs for business process automation and niche
systems and cutting-edge technologies to provide leverage and competitive
advantage to our businesses.
During 2009-2010, many implementations that commenced in the previous year
for the new businesses were completed. Some systems were upgraded to
current technology versions with increased functionality and new systems to
enable better analytics and decision making were also implemented. Benefits
realisation and usage studies were conducted regularly to extract returns
from the investment being made in Information Technology.
A number of measures were taken towards optimisation of IT costs through
standardisation, consolidation and application of new technologies. The
Company also did some pilot rollouts of collaboration and communication
portals using new web 2.0 technologies to tap into the collective
creativity and knowledge of the employees for innovation. All the facets of
IT I nfrastructure were enhanced to ensure high performance, high
availability and therefore increased productivity. Information Security and
Disaster Recovery were beefed up as an ongoing process through a systematic
framework and adherence to global standards. IT Governance processes were
followed as designed, to provide appropriate oversight to the IT functions
to deliver value to the business and to manage associated IT risks.
VI. CORPORATE SUSTAINABILITY INITIATIVES:
The Company has undertaken several initiatives in the areas of Water and
Energy conservation and Occupational Health and Safety. Manufacturing units
and project locations endeavor to control fresh water consumption and have
adopted 'Zero Discharge Approach'. This was achieved by implementation of
3R's principles i.e. Reduce, Reuse and Recycle.
Energy has been identified as one of the key natural resources for
operations. Sustainability targets related to energy conservation included
conducting energy audit at all manufacturing & office locations, monitoring
& conserving energy and developing location wise roadmap for increasing the
use of renewable energy. Process optimisation, process re-engineering,
conversion and retrofitting of equipment, change in schedule and
rationalisation of lighting patterns etc. are some of the energy
conservation initiatives implemented at the Company's manufacturing
locations.
Occupational health and safety continues to be an unremitting focus area
for the Company. The safety strategy is to nurture a 'Zero Accident'
culture and to reinforce it with fail-safe procedures, the best protective
gear, continuous training and vigilant inspection. The Company's Heavy
Engineering and Electrical Business divisions based in Powai campus, Mumbai
won the Prestigious 'Swords of Honour' from the British Safety Council
(BSC), after receiving Five Star rating for their exemplary performance in
the field of Occupational Health and Safety Management.
The Corporate Social Initiatives (CSI) Cell works closely with community
leaders and local NGOs to assess pressing community needs. The Cell then
applies management experience and expertise to harness the most effective
levers and enable long term solutions to their needs. The CSI Cell based in
Mumbai acts as an apex body to bring in consistency and to extend as well
as expand community initiatives across various locations
GROWING SUBSIDIARIES & ASSOCIATES PORTFOLIO:
As on March 31, 2010, Larsen & Toubro Group comprised 110 subsidiaries, 21
associate companies and 12 joint venture entities within its fold. These
Group companies broadly operate in and focus on the following sectors:
i. Information Technology Services;
ii. Financial Services;
iii. Engineering & Construction services;
iv. Power Equipment manufacturing;
v. Power Development projects;
vi. Infrastructure and Property Development projects;
vii. Electrical & Electronics;
viii. Machinery and Industrial products;
ix. International Investments
L & T has invested in companies incorporated both in India and abroad. Most
of the investments in companies incorporated overseas are through L&T's
wholly owned subsidiary company, L&T International FZE based at Sharjah. In
view of the vast opportunity landscape both within and outside India, L&T
over the past years has been investing in its subsidiary & associate
companies to accelerate their growth in the medium to long term. Some of
the ventures are capital intensive in nature and are in the formative
stage. Most of the special purpose entities formed for the development of
infrastructure projects under the public private partnership programme are
in the construction stage or in their initial phase of operations. These
ventures are yet to contribute significantly to the Group's revenues.
For the year ended March 31, 2010, Consolidated Sales and Operational
Income was at Rs.43,970 crore after elimination of inter-company sales at
the group level. Profit after tax for the Group at Rs.5,451 crore increased
by 44% over the previous year.
The consolidated gross Debt:Equity ratio as at March 31, 2010 was 1.08:1,
an improvement over the previous year DebtEquity ratio of 1.32:1.
A review of the major operating subsidiary & associate companies is
presented below:
I. INFORMATION TECHNOLOGY SERVICES
A. LARSEN & TOUBRO INFOTECH LIMITED (L&T Infotech):
Subsidiary Company
Overview:-
L&T Infotech, a wholly owned subsidiary of L&T, is a global IT services and
solutions provider to various industries, and helps its clients to maximise
the value through IT spend. The Company offers comprehensive, end-to-end
software solutions and services in industry verticals like banking &
financial services, insurance, energy & petrochemicals, manufacturing and
product engineering services, including telecom sector. The Company's key
service areas are application maintenance & development, application
outsourcing, legacy modernisation, package implementations in SAP/Oracle,
infrastructure management services and specialised services like data
warehousing and business intelligence. These have been augmented by newer
offerings like testing services, consulting services, business analytics
and system integration.
Operations & Performance:
In the wake of global recessionary condition, some of the large clients
have had to curtail their discretionary IT spend resulting in lower
outsourcing orders, particularly during the first half of 2009-2010. With
the clients' renegotiations on the pricing of on-going projects and rupee
appreciating during the year, the profitability came under pressure.
However, with increased focus on building better offsite ratio and taking
adequate financial risk mitigation measures, L&T Infotech was able to
improve the operating margin during 2009-2010.
* L & T Infotech has achieved total revenues of Rs.1812 crore during the
year 2009-2010 compared to Rs.1799 crore (on a comparable basis excluding
revenues from engineering services) achieved last year, registering an
increase of 1%. On consolidated basis including subsidiaries in Canada,
Germany and GDA Technologies Inc., the total income stood at Rs.1915 crore
in 2009-2010.
* Profit after tax at Rs.281 crore grew by 6% as compared to 2008-2009.
With an increase in offshore development by 4%, the operating costs reduced
by 9% as compared to the previous year, thereby improving the margin.
The export business continues to be predominantly USA based, the
contribution being 65% for 2009-2010. Europe and Asia-Pacific contributed
17% and 10% respectively, while contribution of Middle East & Africa
increased to 8%. Onsite services accounted for 49% of L&T Infotech exports.
Outlook:
Business process outsourcing spend in 2010-2011 is expected to be
increasingly driven by back-end processing in Finance & Accounts segment
and procurement, followed by HR outsourcing. Significant opportunities
exist in core vertical of Banking Financial services & Insurance (BFSI) as
also in other vertical markets such as retail, healthcare and public
sector. Business prospects exist in the core geographic segment viz. USA,
and emerging geographies of Asia-Pacific (specially Japan, Singapore and
Australia). During 2010-2011, discretionary spending specially in areas of
application development is expected to rebound. Non-discretionary spending
especially in application maintenance, where the Company has significant
presence, remote infrastructure management and BPO are also expected to
grow. With rapidly changing customer expectations, emergence of new
offshore locations, along with new service providers delivering services
through the cloud, the IT industry is expected to undergo significant
changes in the medium term.
To take advantage of emerging opportunities, L&T Infotech is focusing on
internal efficiencies and cost reduction. Given the industry's resilience
to withstand various challenges as demonstrated in the recent past, the
Company is confident to sustain the growth momentum in the medium term.
B. LARSEN & TOUBRO INFOTECH GmbH (L&T Infotech GmbH);
Subsidiary Company:-
L & T Infotech GmbH, wholly owned subsidiary of L&T Infotech, provides
software services in Banking & Finance, Insurance & Communication and
Embedded technology businesses in Germany. During the year 2009-2010, L&T
Infotech GmbH recorded total income of Rs.64 crore, registering a growth of
23% over 2008-2009.
C. LARSEN & TOUBRO INFORMATION TECHNOLOGY CANADA LIMITED (LTIT Canada):
Subsidiary Company:-
LTIT Canada, wholly owned subsidiary of L&T Infotech, provides software
services in financial, Insurance and Oil & Gas sectors in Canada. During
the year 2009-2010, the total income of LTIT Canada amounted to Rs.17 crore
as against Rs.26 crore in 2008-2009. The decrease was mainly on account of
recessionary condition witnessed in the market and curtailment on
discretionary IT spend by the major clients.
D. GDA TECHNOLOGIES INC. (GDA):
Subsidiary Company:-
GDA, a wholly owned subsidiary of L&T Infotech, was acquired in 2007 to
strengthen IT outsourcing business in USA. Since then, GDA has been
integrating its business development with L&T Infotech's foray into the
outsourcing business.
The Company has been scaling up its revenues largely through the offshore
design centres, besides its conventional segments of property and custom
design & manufacturing services.
Despite the impact of global economic downturn, GDA clocked total
income of r Rs.66 crore for year ended March 31, 2010 ] >. against Rs.60
crore in 2008-2009. Profit after tax was Rs.2 crore vis-a-vis loss of Rs.2
crore in 2008-2009.
II. FINANCIAL SERVICES
A. L&T CAPITAL HOLDINGS LIMITED (L&TCHL):
Subsidiary Company
Overview:
L & T CHL, a wholly owned subsidiary of L&T, was incorporated in 2008, with
a view to consolidate L&T's investments in the financial services business
and give a distinct identity to the business segment. L&T CHL is the
holding company for L&T's investments in the non banking financial
companies and mutual fund business and also a few other strategic
investments in the sector. It is registered with the Reserve Bank of India
as a non-banking financial company.
Operations & Performance:
The Company's investments in its subsidiaries and strategic investments
increased from Rs.1076 crore as at March 31, 2009 to Rs.1629 crore as at
March 31, 2010. During the year, the Company has reported dividend income
of Rs.5 crore and profit after tax of Rs.3 crore.
B. L & T FINANCE LIMITED (LTF):
Subsidiary Company
Overview:
LTF, a wholly owned subsidiary of L&T Capital Holdings Limited, is a
diversified non-banking financial company with product offerings catering
to diverse segments of the corporate and retail sectors. LTF has a growing
presence in microfinance and is also engaged in the distribution of various
financial products.
LTF, with its pan India presence backed by a robust credit appraisal,
operational and credit delivery model, is well equipped to cater to
customers across the country.
Operations & Performance:
LTF recorded significantly improved performance during the financial year
2009-2010, in comparison to the preceding financial year. This was
facilitated by the growth in India's economy, increased investment in
infrastructure and higher rural incomes. The positive environment for
raising resources was also a contributor to the improved performance. The
highlights of the Company's financial performance are as below:
* Total assets grew to Rs.7567 crore on March 31, 2010 from Rs.5327 crore
on March 31, 2009;
* Total income grew to Rs.966 crore in 2009-2010 vis-a-vis Rs.830 crore in
2008-2009;
* Profit after tax grew to Rs.156 crore in 2009-2010 vis-a-vis Rs.99 crore
in 2008-2009.
Outlook:
With India's economic growth likely to gain further momentum in financial
year 2010-2011 and with the Government's continued thrust on
infrastructure, credit growth off-take is expected to be robust. Growth of
the agricultural sector will lead to higher disposable rural incomes which,
in turn, would offer continued demand for rural credit. However, current
inflationary pressures may lead to monetary tightening, leading to higher
interest rates and pressure on net interest margin.
C. L & T INFRASTRUCTURE FINANCE COMPANY LIMITED (LTIFCL):
Subsidiary Company
Overview:
LTIFCL, a wholly owned subsidiary of L&T Capital Holdings Limited is a non-
banking finance company focused on financing of infrastructure projects,
covering various sectors. LTIFCL leverages L&T's domain knowledge in the
engineering and construction fields to provide infrastructure financing
solutions through a mix of debt, sub-debt, quasi-equity and equity
participation. It also offers project advisory and loan syndication
services.
Operations & Performance:
LTIFCL recorded improved performance during 2009-2010, on the strength of
the growth momentum of the Indian economy and investment flow into
infrastructure projects, supported by a positive environment for resource
raising. The highlights of its financial performance are as below:
- Total assets grew to Rs.4,249 crore on March 31, 2010 from Rs.2,398 crore
on March 31, 2009.
- Total income grew to Rs.450 crore in 2009-2010 from Rs.296 crore in 2008-
2009.
- Profit after tax grew to Rs.111 crore in 2009-2010 from Rs.76 crore in
2008-2009.
Outlook:
The increased focus on infrastructure investment through the public private
partnership model on the back of strong economic fundamentals would provide
the required growth impetus to LTIFCL. Notwithstanding the increasing
competition, LTIFCL, with its ability to offer timely and appropriate
solutions to the customer, is positive about its growth outlook. While
inflationary trends may lead to tightening of credit and money supply, it
is expected that the demand for infrastructure ;. and Government's focus on
the sector would ;,? provide the required drivers for continued growth.
D. L&T CAPITAL COMPANY LIMITED (LTCCL):
Subsidiary Company
Overview:
LTCCL, a fully owned subsidiary of L&T, is a portfolio manager registered
with the Securities and Exchange Board of India, with over Rs.1650 crore
under its fund management. It is also a mutual fund distributor/advisor.
LTCCL holds and monitors a significant portion of the L&T Group's strategic
investments.
Operations & Performance:
Mutual fund markets were buoyant in 2009-2010. Major stock market indices
and net asset values of most equity mutual funds improved. The improved
capital market had its positive impact on LTCCL's income and profits.
During 2009-2010, the company's gross income clocked at Rs.20 crore,
registering a jump of 215% over 2008-2009. The profit after tax was
significantly higher at Rs.14 crore, an increase of 292% over 2008-2009.
The company declared an interim dividend of Rs.4 per share during the year.
III. ENGINEERING & CONSTRUCTION SERVICES
Domestic Companies:
A. L&T-SARGENT & LUNDY LIMITED (LTSL):
Subsidiary Company
Overview:
LTSL, a company where L&T has 50% stake, renders power plant engineering
services to its customers in India and abroad. Besides being a major
provider of integrated engineering solutions through 3 D modeling, LTSL has
established itself as a global consultant backed by a competent engineering
talent pool and technology support.
Operations & Performance:
LTSL received fresh orders aggregating to Rs.144 crore during the year
2009-2010, reflecting a growth of 58% over 2008-2009. Besides orders
received from L&T, LTSL bagged a number of orders from Sargent & Lundy LLC,
third party international and domestic customers.
The sales and other income for 2009-2010 at Rs.67 crore registered a growth
of 7%. Exports accounted for 44% of the total income. Profit after tax
registered a 25% growth at Rs.13 crore for 2009-2010 as compared to 2008-
2009 level of Rs.10 crore, aided by lower operating cost.
Outlook:
LTSL will leverage the increased demand for power in the country supported
by the 11th and the 12th plan capacity addition planned in India. LTSL also
expects a few international projects to materialise this year by focusing
on the Middle East market which is on the recovery path. Given the good
opportunities both in India and abroad,
LTSL has bright prospects in the medium to long term.
B. L&T-CHIYODA LIMITED (LTC):
Associate Company
Overview:
LTC, a company where L&T has 50% stake, is an internationally reputed
design & engineering consultancy company for hydrocarbon processing
industry. LTC was set up in the year 1994 as a joint venture (JV) between
Chiyoda Corporation of Japan and L&T with an equal stake. LTC offers total
engineering solution to hydrocarbon sector and related industries including
petroleum refineries, petrochemical units, oil and gas onshore processing
facilities, LNG/LPG plants, fertilizer plants and chemical plants.
Operations & Performance:
With a healthy order book at the beginning of the year, the Company
reported sales revenue of Rs.83 crore recording a growth of 8% over 2008-
2009. However, the profitability was lower due to relatively higher sub
contracting costs resulting in lower profit after tax at Rs.9 crore as
compared to Rs.10 crore in 2008-2009.
C. L&T-VALDEL ENGINEERING LIMITED (LTV):
Subsidiary Company
Overview:
LTV, a wholly owned subsidiary of L&T, provides complete engineering
solutions for upstream oil & gas sector and offers design engineering
services as well as project management services globally.
Operations & Performance:
The order book for the financial year 2009-2010 stood at Rs.90 crore. Sales
revenuefortheyearwas subdued at Rs.60 crore as compared to Rs.72 crore for
2008-2009. Profit after tax for 2009-2010 was lower at Rs.11 crore as
compared to Rs. 16 crore in 2008-2009 due to decrease in capacity
utilisation.
D. L&T-RAMB0LL CONSULTING ENGINEERS LIMITED (LTR):
Associate Company
Overview:
LTR, a consultancy firm where L&T has 50% stake, was established in 1998 by
L&T and RAMBOLL A/S of Denmark. LTR provides engineering and project
consultancy services for transportation infrastructure projects relating to
Ports & Marine, Roads & Airports, Bridges & Metros and SEZ Planning &
Environmental Engineering.
Operations & Performance:
The Company has consolidated its position in the domestic market as
advisors and consultants to developers of projects. Backed by order inflow
at Rs.50 crore, LTR registered a growth of 15% in total income for the year
2009-2010 to Rs.34 crore. The profit after tax at Rs.10 crore grew by 63%
over 2008-2009.
E. SPECTRUM INFOTECH PRIVATE LIMITED (SIPL):
Subsidiary Company
Overview:
SIPL, a wholly owned subsidiary of L&T, provides capabilities in defence
electronics and systems. SIPL concentrates largely on product development
in embedded solutions, control and signal processing for defence sector. It
has grown from designing and development of sub-systems to a full-fledged
production organisation delivering sub-systems.
Operations & Performance:
Sales revenues during the year 2009-2010 stood at Rs.9 crore, same as in
2008-2009. Profit after tax remained flat at Rs.2 crore for 2009-2010.
F. L & T SHIP-BUILDING LIMITED (LTSB):
Subsidiary Company
Overview:
LTSB, a wholly owned subsidiary of L&T, has been formed for setting up a
Shipyard Cum Minor Port Complex at Kattupalli, near Chennai. L&T has
identified shipbuilding as a major thrust area in the heavy engineering
sector for growth. The port complex of LTSB is expected to meet this
requirement and is planned to operate on a commercial basis with a capacity
of 2 million TEUs per annum.
Operations & Performance:
LTSB has a Joint Venture agreement with TIDCO to set up the port and
shipyard at Kattupalli, Tamil Nadu. LTSB has taken possession of 1143 acres
of patta land at Kattupalli on 99 year lease basis.
The Company has commenced construction activities from October 2009 and has
also received the formal SEZ approval from the Ministry of Commerce and
industry. LTSB has entered into a Licence agreement with Tamilnadu Maritime
Board (TNMB) for using 76.86 acres of coastal land at Kattupalli required
by the project.
The Company has obtained environmental clearances from the Government. The
Company has tied up entire equity and debt funds for meeting the project
cost and achieved financial closure recently.
International Companies
G. LARSEN & TOUBRO ELECTROMECH LLC (L&T Electromech):
Subsidiary Company
Overview:
L & T Electromech is a Joint Venture between L & T and The Zubair
Corporation, Oman (TZC). L & T, through its wholly owned subsidiary L&T
International FZE holds 65% in the Company.
The Company is a leading Civil, Mechanical and Electrical & Instrumentation
Construction Company in Oman undertaking projects in Oil and Gas,
Refineries, Petrochemicals, Power and Water Treatment sectors.
Operations & Performance:
During the year under review, the Company bagged orders worth Rs.390 crore
against Rs.237 crore in 2008, thus registering a growth of 65%. However, as
the award of these orders were delayed due to the global meltdown, sales
for the year (Rs.249 crore) fell by over 24% vis-a-vis 2008.
Not-with-standing the reduction in sales, profit after tax at Rs.34 crore
grew by a healthy 55% over 2008. The improvement in profitability was
largely attributed to risk mitigation measures and pre-bid tie-ups with
vendors.
Outlook:
The Company has established itself as one of the major construction
companies providing composite construction service in Civil, Mechanical,
Electrical & Instrumentation (CMEI) works in Oman. Considering its eminent
position in the oil & gas sector of Oman, the current growth momentum is
expected to continue in the medium term.
H. L & T MODULAR FABRICATION YARD LLC, OMAN (LTMFYL):
Subsidiary Company
Overview:
LTMFYL is a Joint Venture company between Zubair Corporation and L&T
International FZE established in Sultanate of Oman. L&T, through its wholly
owned subsidiary L&T International FZE holds 65% in the Company. The
Company has developed core competencies in manufacture of high end
equipment like Jack up Drill Rigs, Floating Production Storage & Offloading
(FPSO) Vessels, Integrated Decks, Skid mounted equipment, in addition to
fabrication of large size offshore platforms.
Operations & Performance:
During the year 2009, LTMFYL's sales revenue stood at Rs.137 crore,
registering a growth of 33% compared to 2008. Profit after tax for the year
2009 stood at Rs.2 crore vis-a-vis Rs.1 crore in 2008.
I. LARSEN & TOUBRO ATCO SAUDIA COMPANY LLC(L&TATCO):
Subsidiary Company
Overview:
L & T ATCO is a strategic Joint Venture of L&T International FZE and
Abdulrahman Ali Al -Turki Group of Companies (ATCO) Dammam, a renowned
Saudi conglomerate. L&T-ATCO was incorporated as an In - Kingdom Company in
2007 to take advantage of the electro-mechanical construction opportunities
arising in the areas of oil & gas, petrochemicals, power and water related
projects in Saudi Arabia. L&T, through its wholly owned subsidiary L&T
International FZE holds 49% in the company.
Operations & Performance:
During 2009 the Company's total income stood at Rs.7 crore against Rs.1
crore in 2008. The company has bagged a major order of Rs.74 crore from a
leading Korean Company in Saudi Arabia, for mechanical erection works for
SATORP in Jubail, Saudi Arabia. The Company registered a loss of Rs.4 crore
in 2009 vis-a-vis a loss of Rs.3 crore in 2008.
Outlook:
* Future looks encouraging with large projects on the cards in the field of
hydrocarbon, power, water and oil & gas. Specific tie-ups with prominent
EPC players who are aware of L&T's capability in refinery & petrochemical
and demonstration of on-ground resources could open windows of
opportunities for the Company.
J. OFFSHORE INTERNATIONAL FZC (OIFZC):
Subsidiary Company
Overview:
Offshore International FZC (OIFZC) is a Joint Venture between L&T
International FZE and M/s Petro-Plus Sdn Bhd, Malaysia, a wholly owned
subsidiary of SapuraCrest Petroleum Bhd, Malaysia for construction and
operation of a Heavy Lift cum Pipe Lay Vessel (HLPV). L&T, through its
wholly owned subsidiary L&T International FZE holds 60% in the Company.
An element of risk was always associated with dependence on external sub-
contractors for installation part of the project for Oil and Gas industry.
This risk is being mitigated in the form of having own in-house
installation capability through this JV SapuraCrest Petroleum Berhad
(SapuraCrest) is a leading company in Malaysia with diversified activities
having expertise in offshore installation services including sub-sea pipe-
laying, platform and related installations. The JV offers both the
companies greater competitive advantages especially in the Indian and
Malaysian markets - two of the fastest growing oil and gas services markets
in the region.
The vessel will provide offshore installation services including sub-sea
pipe laying, platform installation across India, the Middle East, South
East Asia, Australia and the Sakhalin region. The vessel is available for
commercial use in 2010.
K. LARSEN & TOUBRO (OMAN) LLC (LTO):
Subsidiary Company
Overview:
LTO, a Joint Venture with Zubair Corporation LLC, provides engineering,
construction and contracting services for the last 15 years in Sultanate of
Oman. Its track record in civil projects has been excellent and continues
to enjoy customer preference in the country. L&T, through its wholly owned
subsidiary L&T International FZE holds 65% in the company.
Operations & Performance:
Despite the slowdown in the economy due to global recessionary condition,
LTO secured order inflows of Rs.1511 crore during the year. The revenue for
2009 stood at Rs.1549 crore as against Rs.1491 crore achieved during 2008.
The profit after tax for the year 2009 grew by 74% to Rs.99 crore.
Outlook:
After the global economic crisis witnessed in 2008 and first half of 2009,
the economy of Oman has stabilised and is heading towards a phase of
recovery. The Government of Oman is expected to increase allocation of
funds to the urbanisation, infrastructure, health and development
activities in 2010 which will augment the opportunity landscape for the
Company in power transmission & distribution, infrastructure and the
buildings & utilities sectors.
L. LARSEN & TOUBRO KUWAIT CONSTRUCTION GENERAL CONTRACTING COMPANY
WLL(LTKC):
Subsidiary Company
Overview:
LTKC is a strategic Joint Venture between M/s Bader Almulia and Brothers
Company WLL, a Kuwaiti company & Larsen & Toubro International FZE. L&T,
through its wholly owned subsidiary L&T International FZE, holds 49% in the
Company.
LTKC executes construction projects in Oil & Gas and Power sectors in the
State of Kuwait.
Operations & Performance:
LTKC recorded sales revenue of Rs.56 crore and profit after tax of Rs.1
crore for year 2009. LTKC, however, could not bag any new orders during
2009 due to subdued market conditions in the country.
M. LARSEN & TOUBRO READYMIX CONCRETE INDUSTRIES LLC (RMC LLC):
Subsidiary Company
Overview:
RMC LLC is a Joint Venture between Mr. Majed Al Mehairi (51%), UAE and
Larsen & Toubro International FZE (49%), a wholly owned subsidiary L&T.
Operations & Performance:
With the construction and real estate activity slowing down consequent to
financial crisis, the demand for ready mix concrete reduced in 2009.
Accordingly, the sales revenue at Rs. 108 crore was lower by 17% as
compared to 2008. Profit after tax at Rs.15 crore grew by 1% due to
introduction of high value added products like coloured concrete and light
weight concrete.
IV. POWER EQUIPMENT MANUFACTURING
A. L & T-MHI TURBINE GENERATORS PRIVATE LIMITED:
Subsidiary Company
Overview:
L & T has entered into Joint Venture with Mitsubishi Heavy Industries,
Japan (MHI) to manufacture super critical steam turbines & generators (STG
package). L&T-MHI Turbine Generators Private Limited was formed in 2008
through L&T Power Limited (a wholly owned subsidiary of L&T) holding 51%
share to leverage on the parent company's EPC capabilities in the emerging
mega power sector. The JV's manufacturing facility at Hazira-Gujarat will
produce STG equipment of capacity ranging from 500 MW to 1000 MW and is
expected to be on stream during 2011.
Operations & Performance:
While the maiden order obtained during the previous year is being executed
with 100% import from MHI, the orders received for 5 more STG package
during the year 2009-2010 are expected to be manufactured from the new
facility being constructed at Hazira. With order inflow worth Rs.2136 crore
on hand, the Company is gearing up for efficient execution. The total
capacity being installed is 4000 MW. The first order under execution has
enabled the Company to report Sales revenue of Rs.422 crore for 2009-2010.
As the equipment package is being supplied by the JV partner, the Company
is not likely to make any profits from this order.
B. L&T-MHI BOILERS PRIVATE LIMITED:
Subsidiary Company
Overview:
L & T and MHI have entered into another Joint Venture to manufacture &
supply Supercritical Boilers for large coal based power utilities. L&T-MHI
Boilers Private Limited has been formed with L&T holding the majority share
of 51% of the equity, through its subsidiary L&T Power Limited.
The JV has envisaged manufacturing of equipment in the capacity range of
500 MW to 1000 MW for sale in India.
Operations & Performance:
The Company has secured orders of Rs.5550 crore. The Company is
establishing a state-of-the-art manufacturing facility at Hazira, Gujarat.
The Company proposes to commence operations with the manufacture of 2
Boiler packages in 2012-2013. The total capacity being installed is 4000
MW.
Outlook:
The power sector presently provides a window of both an opportunity and
challenge to manufacture high technology and complex power equipment with
comprehensive range of services. The primary growth driver for the sector
is the government's favorable policy to encourage super critical power
projects and 'Power for all by 2012' programme, which is designed to
develop substantial power generation capacity in the country. Both the
companies viz. L&T-MHI Boilers Private Limited and L&T-MHI Turbine
Generators Private Limited are confident of meeting the market requirements
in super critical technology with focused efforts to manufacture/deliver
the products and to become cost competitive in the coming years.
V. POWER DEVELOPMENT PROJECTS
A. L&T POWER DEVELOPMENT LIMITED (L&T PDL):
Subsidiary Company
Overview:
L&T PDL, incorporated in September 2007, is a wholly owned subsidiary of
L&T. The company has been formed as a power development arm of L&T with the
objective of developing, investing, operating and maintaining power
generation projects of all types namely thermal, hydel, nuclear and other
renewable form of energy including captive and co-generation power plants.
Operations & Performance:
During the year 2009-2010, the Company has been awarded two projects under
competitive bidding process; 1320 MW Rajpura thermal project in Punjab
(being developed through a
wholly owned subsidiary, Nabha Power Limited) and 149 MW Sach-Khas hydro
electric project in Himachal Pradesh.
In addition to this, the Company is developing a 60 MW Tagurshit hydro
electric project in Arunachal Pradesh. Detailed project report is under
preparation and survey & investigations work is being carried out.
The 99 MW Singoli-Bhatwari hydro electric project is also being developed
by the Company through a wholly owned subsidiary, L&T Uttaranchal
Hydropower Limited (L&T UHPL).
During the year 2009-2010, the Company has reported a total income of Rs.7
crore by way of project facilitation and advisory service fees. Profit
after tax stood at Rs.3 crore.
Outlook:
The Power Sector in India presents tremendous opportunities forprivate
developers. Thecontinuing power deficits encourage private players to set
up merchant power plants. Also, large hydel projects are being planned in
the himalayan states of India. The Company has appropriately positioned
itself to realise the emerging opportunities and is actively pursuing
opportunities to develop thermal and hydro electric projects in India and
abroad.
B. L & T UTTARANCHAL HYDROPOWER LIMITED (L&T UHPL):
Subsidiary Company
Overview:
L&T UHPL, is a wholly owned subsidiary of L&T PDL. The Company was formed
to undertake the development, construction and operation of 99 MW Singoli
Bhatwari Hydro Electric Project on Build-own-operate-transfer (BOOT) basis
for a period of 45 years including the construction period. The Project is
located in the Garhwal region of the state of Uttarakhand, District
Rudraprayag, on Mandakini River, the right bank tributary of Alaknanda.
The Company signed the Implementation Agreement with Government of
Uttarakhand in 2009 which enables it to commence full-fledged construction
at the site. The project is in implementation phase and is expected to
achieve financial closure in first half of FY 2010-2011. The total cost of
the project is estimated to be Rs.1045 crore.
VI. INFRASTRUCTURE AND PROPERTY DEVELOPMENT
A. L & T INFRASTRUCTURE DEVELOPMENT PROJECTS LIMITED (L&TIDPL):
Subsidiary Company
Overview:
L & TIDPL has been set up as an infrastructure development arm of the
Group, where L&T has 84.27% stake. L&TIDPL, a holding company in this
segment, works on a 'value creation' model so that the Special Purpose
Vehicle (SPV) floated for each infrastructure project is nurtured till it
reaches a stage of matured operation. The Company has, over a period of
time, built up capabilities in identifying and developing infrastructure
projects, operation & maintenance of these projects and providing advisory
services relating to financing & engineering of the projects. Considering
the large potential in the portfolio, the Company has decided to re-acquire
the private equity investors' holding at a valuation.
L & TIDPL portfolio is well diversified with a mix of projects under
development across various sectors such as roads & bridges, ports, and
urban infrastructure. L&T Urban Infrastructure Limited, a subsidiary of
L&TIDPL, houses the property development and urban infrastructure project
development business.
Operations & Performance:
L&TIDPL has reported a total income of Rs.698 crore and a profit after tax
of Rs.512 crore. This includes exceptional gain of Rs.462 crore arising
from divestment of its stake in Bangalore International Airport Limited and
Second Vivekananda Bridge Tollway Company Private Limited.
As of March 31, 2010, L&TIDPL's portfolio includes:
I. Transportation and Infrastructure
Major SPVs Status Stage Roads and Bridges:
L & T Panipat Elevated Subsidiary Operational
Corridor Limited
Narmada Infrastructure Subsidiary Operational
Construction Enterprise
Limited
L & T Krishnagiri Thopur Subsidiary Operational
Toll Road Limited
L & T Western Andhra Subsidiary Operational
Tollways Limited
L & T Transportation Subsidiary Operational
Infrastructure Limited
L & T Interstate Road Subsidiary Operational
Corridor Limited
L & T Vadodara Bharuch Subsidiary Operational
Tollway Limited
Ports:
The Dhamra Port Company Joint Venture Under Implementation
Limited
International Seaport Associate Operational
(Haldia) Private Limited
II. Urban Infrastructure:
Major SPVs Status Stage
L&T Urban Infrastructure Subsidiary Operational
Limited
Cyber Park Development Subsidiary Operational
and Construction Limited
L & T Tech Park Limited Subsidiary Operational
L & T Arun Excello IT SEZ Subsidiary Operational
Private Limited
L & T Infocity Limited Subsidiary Operational
L & T South City Projects Subsidiary Under Implementation
Limited
CSJ Infrastructure Private Subsidiary Under Implementation
Limited
L&T Arun Excello Commercial Subsidiary Under Implementation
Projects Private Limited
L&T Infrastructure Subsidiary Under implementation
Development Projects
Lanka (Private) Limited
L&T Vision ventures Limited Subsidiary Under Implementation
Transportation and Infrastructure
Financiai performance summary of key operational SPVs: Roads and Bridges
A. Projects completed: Rs.crore
Total Income PAT
Sr. Name of Project Project 2009-2010 2008-2009 2009-2010 2008-2009
No. Subsidiary & Cost
Project Detail
1. L&T Panipat
Elevated Corridor
Limited
Widening of the 422 36 26 (45) (31)
existing Road on
National Highway
No.1 (NH-1) on
BOT basis.
2. Narmada
Infrastructure
Construction
Enterprise
Limited
Construction, 142 53 38 23 17
development,
operation and
maintenance of
Second Two-Lane
Bridge at Zadeshwar
across the Narmada
River in Gujarat
on National Highway
8 (NH-8).
3. L & T Krishnagiri
Thopur Toll Road
Limited
Widening of the 525 67 9 (30) (5)
existing Road from
the end of proposed
Krishnagiri flyover
to Thumpipadi on BOT
basis.
4. L&T Western Andhra
Tollways Limited
Construction, 373 32 2 (21) (2)
development,
operation and
maintenance of the
road from Jadcherla
to proposed Kotakatta
bypass on NH-7 in the
State of Andhra
Pradesh.
5. L&T Transportation
Infrastructure Limited
Building a bypass at 104 37 34 13 9
Coimbatore Section of
National Highway
(NH-47) and
construction of
additional bridge at
Athupalam on River
Noyyal on BOT basis.
6. L&T Interstate
Road Corridor
Limited
Construction, 537 89 1 8 (1)
operation and
maintenance of
the road on Palanpur
Swaroopgunj section
of NH-14 in the state
of Gujarat and
Rajasthan on BOT
basis.
7. L&T Vadodara
Bharuch Tollway
Limited
Widening the existing 1461 135 - (73) -
road of Vadodara to
Bharuch section on
NH-8 in the State of
Gujarat on BOT basis.
B. Projects under implementation: Ports
THE DHAMRA PORT COMPANY LIMITED (DPCL):
Joint Venture
Overview:
DPCL, a 50:50 Joint Venture between L&TIDPL and TATA Steel has been set up
to build a deep water all weather port at Dhamra, under Build-Own-Operate-
Share-Transfer (BOOST) model with a concession awarded by the Government of
Odisha for a period of 34 years (including period of construction).
Operations & Performance:
With a draft of 18.5 meters, the port can accommodate super cape size
vessels up to 1,80,000 DWT. This will be an advantage to the mineral
hinterland of north Odisha, Jharkand, West Bengal and Chattisgarh where a
large number of steel plants and mineral based industries are located. The
project includes 62.5 km rail connectivity to the main Howrah-Chennai lines
at Bhadrak.
The port is expected to become an infrastructural hub of Eastern Coast of
India by providing the efficient port facilities for the industrial and
economic development of the region and the country. The Construction of the
port is nearing completion and the port will be commissioned in 2010-2011.
Roads and Bridges:
The Status of other major projects under execution is summarised below:
Name of Subsidiary : 1. L&T Ahmedabad - Maliya Tollway Private Limited
Project Details : Widening the existing Two-Lane Road covering
Ahmedabad, Viramgam Maliya section in Gujarat, to
Four-Lane Road along with the divided Carriage-way
facility.
Project Cost : 1497
(Rs.crore)
Project Status : Financial closure completed during the year. The
commercial operation expected by the end of year
2011.
Name of Subsidiary : 2. L&T Halol-Shamlaji Tollway Private Limited
Project Details : Widening of existing Two-Lane Road,covering Halol-
Godhra-Shamlaji section in Gujarat to Four-Lane
Road along with divided Carriageway facility.
Project Cost : 1305
(Rs.crore)
Project Status : Financial closure concluded during the year. The
commercial operation expected by the second half
of year 2011.
Name of Subsidiary : 3. L&T Rajkot-Vadinar Tollway Private Limited
Project Details : Widening of existing Two-Lane Road, covering
Rajkot-Jamnagar-Vadinar section in Gujarat, to
Four-Lane Road along with the divided Carriage-way
facility.
Project Cost : 1096
(Rs.crore)
Project Status : Financial closure completed during the year. The
commercial operation expected by the end of year
2011.
Name of Subsidiary : 4. L&T Chennai-Tada Tollway Limited
Project Details : Widening of existing Chennai - Tada section of
NH-5 in the state of Tamil Nadu on BOT basis.
Project Cost : 848
(Rs.crore)
Project Status : Project is in the initial stage of execution.
II. URBAN INFRASTRUCTURE
L&T URBAN INFRASTRUCTURE LIMITED (L&TUIL):
Subsidiary Company
Overview:
L&TUIL, the real estate arm of L&T Infrastructure Development Projects
Limited, has built a balanced portfolio of Urban Infrastructure related
projects in IT/ITES, Commercial, Hospitality and Residential sectors over
the past 4 years. L&T though its subsidiary L&TIDPL holds 75% in the
Company.
Operations & Performance:
L&TUIL increased its portfolio investment to Rs.613 crore as at March 31,
2010, bulk of which is in the Commercial & Hospitality sector. The Company
earned total income of Rs.29 crore with a profit after tax of Rs.10 crore
for the year 2009-2010.
The ongoing projects under the Residential sector are Serene County at
Hyderabad, Eden Park at Siruseri, Chennai, Estancia Residential at GST
Road, Chennai. While Serene County, at Hyderabad has successfully marketed
about 80% of its development, Eden Park at Chennai is progressing well with
good number of bookings. The total space developed so far under this sector
is about 3 mio sft.
Under Commercial and Hospitality segment, the first phase of hotel project
at Bangalore is under advanced stage of construction and is expected to go
on stream by end of 2010. The commercial cum mixed development project at
Chandigarh has commenced construction and is expected to become partially
operational by 2011-2012.
As part of the portfolio review policy, L&TUIL does strategic divestments,
especially in projects which attain a mature stage. During 2009-2010,
L&TUIL divested its stake in one of its IT/ITES infrastructure projects,
L&T Phoenix Infoparks Private Limited, Hyderabad. Stake held by L&T
Infocity in its subsidiary at Lanka is slated for sale during the early
part of 2010-2011.
Financial Performance Summary of key operational SPVs:
(Urban Infrastructure)
A. Projects completed Rs. crore
Sr. Name of Project Details A B C D
No. Subsidiary
1. Cyber Park Construction of an IT park at 5 48 0.35 11
Development and Electronic City, Hosur Road,
Construction Bangalore. Multi-tenanted
Limited facility with BUA of 3 Lakh
sq.ft (Phase I) and BUAof
2 Lakh sq. ft. (Phase II)
completed.
2. L&T Tech Park Company formed to set up an IT 11 17 (4) (2)
Limited SEZ within the Infopark, at Kochi,
Kerala, as a co-developer. Phase I
of the project, with a built up
area of 3.86 lakh sq.ft. has been
completed.
3. L&T Arun Company formed for Developing a 1 1 (3) (0.31)
Excello IT SEZ built up area of 3 lakh sq.ft of
Private Limited office space for IT/ITES at
Vallancheri Village, Kancheepuram
District, Tamil Nadu. Total area
developed 3.67 lakh sq.ft.
4. L&T Infocity Company focuses on (i) Operating 206 196 57 53
Limited and maintaining the multi-
tenanted IT Parks (ii) Operating
the Built to Suit IT facilities
(iii) Facility Management and
(iv) Development and Sale of
Residential Units in Mega
Residential Project 'Serene
County'.
5. Hyderabad The modern trade exposition 12 10 0.07 (1)
International centre developed on a 52.79
Trade Expositions acre plot.
Limited
3. L&T Arun Company formed for Developing a 1 1 (3) (0.31)
6. L&T Infocity Development of a Built to Suit 6 5 3 2
Lanka Private Project for HSBC at Colombo,
Limited Srilanka.
A = Total Income 2009-2010
B = Total Income 2008-2009
C = PAT 2009-2010
D = PAT 2008-2009
B. Projects under implementation (Urban Infrastructure)
Nq Name of Subsidiary Project Details Project Status
1. L&T South Developing a township consisting The SPV is currently
City Projects of residential complex, school, executing phase-l of the
Limited public health centre, shopping project. Around 50% of
complex etc., over 83.5 acres of the apartments under
land situated at Siruseri Village, phase-l are expected to
Chenglepet District. be handed over from July,
2010.
2. CSJ Infra- The Company formed for development The company has achieved
structure of Commercial complexes in the financial closure
Private Chandigarh. during the year. The
Limited project is under
implementation stage.
3. L&T Arun Commercial constructions Land has been acquired
Excello comprising of a star hotel, a for development and
Commercial shopping mall and a school on construction of
Projects 13 acres of land in the Estancia residential complex, IT
Private Township at Vellanchery on GST park and commercial
Limited Road in Chennai. complex.
4. L&T Hitech Company floated by L&T infocity Phase-l of the project
City Limited Limited, in partnership with comprising construction
APIIC, to set up an IT SEZ at of IT park has been
Vijayawada. completed during the
year.
5. L&T Infra- Development, construction, The project is expected
structure operation and maintenance of a to achieve financial
Development multipurpose hi-rise tower closure in 2010-2011.
Projects comprising residential apartments
Lanka (Pvt.) and commercial space in Colombo,
Limited Sri Lanka
VII. ELECTRICAL & ELECTRONICS A. TAMCO GROUP OF COMPANIES:
Subsidiary Companies
Overview:
The TAMCO Group comprises of four companies. Companies operating from
Malaysia, Australia and China are wholly owned by L&T International FZE and
the company operating from Indonesia is wholly owned by L&T International
FZE and Tamco Switchgear (Malaysia) SDN BHD. The TAMCO Group has
manufacturing facilities in each of these countries. L&T, through L&T
International FZE, acquired TAMCO Group in 2008 to strengthen its global
offering in medium voltage switchgears to complement L&T Group's
established range of low voltage products. TAMCO Malaysia has established
its brand for Medium Voltage (MV) switchgear not only in the home country
but also in Dubai, Qatar, Abu Dhabi, South and West African countries. The
utility 1A, segment in the Gulf countries is also being well % catered to
apart from the foray in Indian markets. Operations & Performance
Notwithstanding the impact of global slowdown particularly in the Gulf
countries, TAMCO Group was able to secure order inflows worth Rs.651 crore
during 2009, recording a growth of 7% over 2008. Buoyed by the surge in
demand for its products particularly in Qatar, TAMCO group registered
customer sales of Rs.707 crore for the year 2009. Profit after tax stood at
Rs.79 crore for the year 2009, bolstered by the turnaround in performance
of Indonesian and Australian companies.
TAMCO has applied for registration of its brand with 23 new countries to
realise the scale benefits. It has recently launched Vacuum circuit
breakers in the Indian market after obtaining all '- the necessary
certifications. i Outlook
With the oil prices hardening in the recent past, the economies in the Gulf
region will accelerate the investment in new utility and infrastructure
projects. TAMCO products having penetrated the j. Indian market,
localisation of its product range . coupled with L&T's low voltage range
would provide ample market potential. Besides, new customers are likely to
be added in UAE, UK, Thailand and Philippines for the MV range of products.
The Group will endeavor continuous research and development so as to bring
out new products in the market and sustain the growth momentum in the
coming years.
B. L&T ELECTRICALS SAUDI ARABIA COMPANY LIMITED, LLC (LTESA):
Subsidiary Company
Overview:
LTESA, a Joint Venture between Larsen & Toubro International FZE, UAE and
Yusuf Bin Ahmed Kanoo Group was formed in September 2006 with its
headquarters at Dammam in the Eastern Province of Saudi Arabia. L&T,
through its wholly owned subsidiary L&T International FZE, holds 75% equity
stake while the partner holds 25%. LTESA is in the business of
manufacturing and marketing Switchgear, Controlgear, PLC Panels, AC/DC
Drives and part assembled switchboards; including design, Installation,
maintenance and operation of these products,in accordance with Saudi
Arabian General Investment Authority (SAGIA).
Operations & Performance:
The Company ended the year with low Order Inflow of Rs.35 crore due to slow
down in gulf region. However, due to healthy opening order book, LTESA
reported higher sales revenue at Rs.56 crore in 2009 as compared to the
level of Rs.30 crore achieved in 2008.
Outlook:
LTESA remains competitive in high end offering and system business. LTESA
has obtained approvals from Saudi Aramco for Low Voltage Switchgear and
MCCs, and MV Switchgear from Saudi Basic Industries Corporation (SABIC)
which will help in participation in major projects.
C. LARSEN & TOUBRO (WUXI) ELECTRIC COMPANY LIMITED (LTW):
Subsidiary Company
Overview:
LTW is a wholly owned subsidiary of L&T International FZE. It is located at
Wuxi in the Jiangsu province of People's Republic of China. The factory was
established in 2006 with manufacturing facilities, quality control and
testing equipments. LTW supports L&T activities related to brand labeling
of U-Power Air Circuit Breakers (ACBs) and D-Sine Moulded Case Circuit
Breaker (MCCB) range. Operations & Performance Sales revenue for 2009 stood
at Rs.31 crore against Rs.29 crore in 2008. Due to the economic slowdown,
many projects were either delayed or cancelled.
VIII. MACHINERY & INDUSTRIAL PRODUCTS Domestic Companies
A. TRACTOR ENGINEERS LIMITED (TENGL):
Subsidiary Company
Overview:
TENGL is a wholly owned subsidiary of L&T principally engaged in
manufacture of undercarriage systems for crawler machines, material
handling systems like apron feeders and scrapper conveyors, mud pump spares
and centrifugal pumps for the oil and gas sector. TENGL's centrifugal pumps
and mud pump expendables have wide usage in oil exploration. Operations &
Performance Sales and other income for 2009-2010 stood at Rs.140 crore as
against Rs.167 crore for 2008-2009. The Company has made a profit after tax
of Rs.1 crore in 2009-2010 as against loss of Rs.24 crore in 2008-2009.
B. AUDCO INDIA LIMITED (AIL):
Associate Company
Overview:
AIL is a Joint Venture with equal equity holding by L&T and Flowserve
Corporation, USA. AIL is a leading manufacturer of Industrial Valves. AIL
caters to all major industries viz Refineries & Pipelines, Power, Offshore
Platforms, Petro Chemicals, Chemicals, Fertilizers, Food & Pharma, etc. AIL
Valves are approved by international Oil majors such as Shell, Chevron,
EXXON, Aramco, PDO, ADCO, which helps in participating in their worldwide
projects. Operations & Performance During the year 2009-2010, AIL posted
gross revenues of Rs.401 crore as against Rs.766 crore in 2008-2009 and a
profit after tax of Rs.32 crore as compared to Rs.71 crore in 2008-2009.
Outlook
During the end of 2009-2010, there have been signs of recovery and AIL
hopes to capitalise on the recovery momentum.
C. L&T-KOMATSU LIMITED (LTK):
Associate Company
Overview:
LTK is a 50:50 Joint Venture between L&T and Komatsu Asia Pacific Pte.
Ltd., Singapore, a wholly owned Subsidiary of Komatsu Limited, Japan.
Komatsu is world's largest manufacturer of Hydraulic Excavators and has
manufacturing and marketing facilities worldwide. LTK is engaged in the
manufacture of Hydraulic Excavators and other associated hydraulic
components. L&T markets and provides after sales support for Hydraulic
Excavators manufactured by LTK. Operations & Performance The revival in
demand of construction equipment was slow in the first half of 2009-2010,
but picked up in the later half of the year. In particular, Hydraulic
Equipment Industry registered 6% growth in 2009-2010 as against the decline
of 28% in 2008-2009.
Net sales at Rs.1,110 crore for 2009-2010 was higher by 3%, though in terms
of the volume the growth was better at 5% arising from improved market
share of models PC 71 & PC 130. With the favourable rupee parity vis-a-vis
the Japanese Yen and implementation of cost optimisation initiatives, the
material cost significantly reduced, thereby resulting in higher profit
after tax at Rs.66 crore in 2009-2010 compared to Rs.19 crore for 2008-
2009. Outlook
With the Indian economy on revival path and Government's aspiration to
drive GDP growth to double digit in next few years, outlook for Hydraulic
Excavator market is positive. Based on current economic condition, the
market is expected to grow significantly with further scope to improve on
the back of mega infrastructure projects taking off.
D. L&T-CASE EQUIPMENT PRIVATE LIMITED (LTCEPL):
Associate Company
Overview:
LTCEPL, a company with L&T's stake at 50%, is engaged in manufacture &
marketing of construction & earthmoving equipment, namely, loader backhoes
and vibratory compactors. In highly competitive Indian market for loader
backhoes and vibratory compactors, LTCEPL has an overall market share of
about 11%, and 29% respectively. The manufacturing facility situated at
Pithampur, Madhya Pradesh has been expanded during the past two years to
cater to the increased demand.
Operations & Performance:
LTCEPL reported 48% increase in total income at Rs.497 crore in 2009-2010.
The profit after tax for 2009-2010 was Rs.29 crore which grew by more than
150% over 2008-2009.
Outlook:
Growth momentum is likely to continue in 2010-2011 in view of Government's
focus on infrastructure spending and upturn in real estate sector. LTCEPL
has set an ambitious target of improving its market share in loader market
while maintaining market share in compactors.
E. EWAC ALLOYS LIMITED (EWAC):
Associate Company
Overview:
EWAC, a company in which L&T has 50% stake, is a renowned welding solutions
provider. EWAC is formed as a Joint Venture between L&T and Messer Eutectic
Castolin Group of Germany. EWAC is a market leader in the business of
maintenance and repairs welding & welding solutions for conservation of
global metal resources. L&T markets EWAC's products in India with a strong
dealer network. Operations & Performance EWAC reported a total income of
Rs.143 crore in 2009-2010 against Rs.157 crore in 2008-2009. Profit
aftertax stood at Rs.24 crore vis-a-vis Rs.20 crore in 2008-2009. Although
sales declined by 8% due to slowdown in the Industrial sector, there was an
improvement in profit after tax by 17%. The growth in profitability was
mainly on account of change in product mix as compared to last year
resulting in lower overall material cost.
Outlook:
With a positive outlook for the Indian economy in general and Industrial
sector in particular, EWAC expects to improve its volume in the year 2010-
2011.
F. L&T-PLASTICS MACHINERY LIMITED (LTPML):
Subsidiary Company
Overview:
LTPML is a wholly-owned subsidiary of L&T.
The Company is in the business of manufacture of Injection Moulding
Machines and Auxiliary Systems for the plastics industry. The Company's
products find applications in diverse industries like automobiles,
electrical goods, packaging, personal care products, writing instruments
and white goods.
Operations & Performance:
Due to the recovery of market and strict control of expenses, in the
year 2009-2010 all the operating parameters were higher than 2008-
2009. In comparison to the year 2008-2009, order booking registered an
increase of 67%. Sales for 2009-2010 at Rs.133 crore grew by 54% over
2008-2009. Profit after tax for 2009-2010 stood at Rs.6 crore as against
loss of Rs.6 crore for 2008-2009.
Outlook:
The business for the Company's products is expected to continue the growth
during the year 2010-2011. The demand for plastic products is also expected
to grow in the near future leading to continued demand for the company's
products in the domestic market.
International Companies:
G. LARSEN & TOUBRO (JIANGSU) VALVE COMPANY LIMITED (LTJVCL):
Subsidiary Company
Overview:
LTJVCL is a wholly owned subsidiary of L&T International FZE. LTJVCL
manufactures a range of valves for global markets. Effective November 2009,
LTJVCL became a fully owned subsidiary of L&T International FZE upon buy-
out of 30% stake from its erstwhile JV Partner.
Operations & Performance:
The Company's revenue for the year 2009 stood at Rs.28 crore with a net
loss of Rs.3 crore.
Outlook:
The gradual improvement in the prospects of the refining sector provides
opportunities for LTJVCL to secure sizeable orders in 2010 and thereafter.
H. LARSEN & TOUBRO (QINGDAO) RUBBER MACHINERY COMPANY LIMITED (LT QINGDAO):
Subsidiary Company
Overview:
LT QINGDAO is a 100% subsidiary of L&T International FZE, set up in
Jiaonan, Qingdao, PRC. Effective November 2009, L&T Qingdao became a fully
owned subsidiary of L&T International FZE upon buy-out of 5% stake from its
erstwhile JV Partner. LT QINGDAO develops and supplies Tyre Curing Presses
and other Rubber Processing Machinery on par with the quality of products
being supplied by L&T to its global clients.
Operations & Performance:
During the year 2009 LT QINGDAO posted revenues of Rs.52 crore as against
Rs.26 crore in 2008. Profit after tax clocked at Rs.1 crore during 2009.
Outlook:
LT QINGDAO has been successful in securing sizeable orders including
important orders from Pirelli for Hybrid Presses. The Company has a healthy
order book at the end of the year and has plans to further enhance volumes
in the year 2010 thereby increasing market share as well.
I. LARSEN & TOUBRO LLC, HOUSTON, USA (L&T LLC):
Subsidiary Company
Overview:
L&T LLC, a wholly owned subsidiary of L&T, is based in Houston, USA and
represents L&T for stock and sale of industrial valves in the North
American market.
Operations & Performance:
During the year 2009 the revenues stood at Rs.60 crore as against Rs.26
crore in 2008.
Outlook:
Given the current market scenario, with a view to enhance the presence in
USA, appropriate steps are being implemented.
IX. LARSEN & TOUBRO INTERNATIONAL FZE (LTIFZE):
Subsidiary Company
Overview:
LTIFZE, a wholly owned subsidiary of L&T, has been incorporated in the
Hamriyah Free Zone, Sharjah as a Free Zone Establishment (FZE). The Company
is engaged in providing strategic support to L&T's growth aspirations in
the Middle and Far East. Apart from owning strategic equipments
facilitating L&T group's prequalification for construction contracts in the
Middle East, LTIFZE functions as a holding Company by investing in country
specific Joint Venture companies and other strategic entities in Middle and
Far East. The aggregate value of investments made by the Company in several
ventures of L&T group outside India amounts to Rs.602 crore (USD 13
Million).
Operations & Performance:
The Company's total income and profit after tax for 2009 amounted to Rs.56
crore and Rs.9 crore respectively. The income mainly comprised of revenue
from hire of plant & machinery and dividend income from investments in
subsidiary companies.
LTIFZE has made additions to plant & machinery aggregating to Rs.27 crore
during the year. The gross block of fixed assets at the end of the year
stood at Rs.176 crore. |