Financial Daily from THE HINDU group of publications
Saturday, Jul 03, 2004
L&T steps up overseas presence To open office in Kazakhstan soon
Mumbai , July 2
LARSEN & Toubro is moving ahead stealthily on its overseas ambitions. It is currently set to open an office in Kazakhstan.
That country presents a huge opportunity for L&T because of its burgeoning hydrocarbon sector, said the L&T Chairman and Managing Director, Mr A.M. Naik. ``We should have our office open by August.''
L&T is already exporting to Kazakhstan, but through oil and gas global giant ExxonMobil, said Mr Naik.
In fact L&T's association and rapport with turnkey project giants in petrochemical, refinery and other engineering fields has paved new global pathways for the company, said Mr Naik.
``Exxon-Mobile knows L&T, Shell knows L&T; we targeted British Petroleum and now they also know us,'' said Mr Naik. The latest Shell technology is being adopted by L&T in two contracts that it recently won from China, with which country it is engaged with business worth Rs 250 crore.
``Similarly, when Bechtel gets a project in West Asia, the reactor is very likely to go from L&T,'' he said.
Mr Naik says the crusade to make L&T a global engineering brand is paying off. ``We have exported reactors of all kinds, reactors for the energy, hydrocracking, petrochemical, fertiliser, urea and other sectors to the US, Europe, West Asia and other countries, One of our biggest ammonia converters is on its way to Australia.''
``Our international engineering operations have grown five times in five years from Rs 275 crore to Rs 1,500 crore, said Mr Naik.
Not only that, said Mr Naik, where overseas business used to be without margins, there is now profit.
``As our brand is becoming more and more accepted overseas, our handicap in that area is diminishing. Two or three years ago, we had to undercut the Europeans and Japanese to buy a minimum of 10 per cent, sometimes more. We had no margins; that was an entry strategy. Today, I think we get it within one or two per cent differential.''
He said that when a company such as ExxonMobil recommends L&T, then the latter often gets the same price as global competitors "or slightly better."
And the differential between domestic and overseas margins is also narrowing. ``If my Indian margins are 15 per cent, then my overseas margins range between 10 and 12; it has improved over the last three years.''
Kazakhstan would be a new geography where L&T would have a sales and marketing office but otherwise, the chief overseas geography of concentration for the company is West Asia.
``We are concentrating on seven countries within the Gulf region - among them Saudi Arabia, UAE, Oman, Qatar, Bahrain. We have project related presence in Jordan, but not a sales and marketing presence.''
L&T has joint ventures in almost every country in West Asia through which it undertakes projects.
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