To remain “an EPC company with developmental orientation”, Larsen & Toubro plans to exit non-core projects as soon as the committed ones are complete, L&T CEO and MD SN Subrahmanyan told BusinessLine.
For the past several years L&T has been offloading non-core assets. It has earlier this month sold its electric and automation business to French giant Schneider Electric for ₹14,000 crore. It is in the process of finalising sale of its Kattupalli port near Chennai to Adani Ports.
Asked about other divestments, Subrahmanyan said L&T is looking at the special steels and heavy forgings business and the Kattupalli shipyard as the company has not been able to turn them around.
L&T Special Steels and Heavy Forgings, a joint venture with Nuclear Power Corporation of India where L&T has 74 per cent stake, runs a in Hazira a heavy forgings plant to supply mainly to the hydrocarbon and nuclear power sectors. The JV has invested around ₹1,700 crore in the first phase while the second has been put on hold. In FY17, the company reported a net loss of ₹255 crore on an operating income of ₹118 crore.
“…we don’t see the economy growing in such a way that it will bring many orders into that shop,” Subrahmanyan said.
Kattupali shipyard, in which the company had invested around ₹5,000 crore, currently has a turnover of around ₹800; it has to be at least ₹2,500 crore to be viable, according to Subrahmanyan. “We designed it to be focussed on naval shipbuilding… so we need to see how the Indian Navy comes out with more orders. Unless some big programmes come, it (the investment) will not be revived,” he said.
Building and selling
L&T plans to exit several infrastructure projects, too, including Hyderabad Metro and 1,400 MW Nabha coal-fired power plant in Punjab.
“We have done our job in terms of EPC, we are operating these assets, we have proved they can be run very efficiently, we have built good leadership and teams there, but we are not a development kind of organisation,” Subrahmanyan said.
L&T recently offloaded five road assets through a private infrastructure investment trust (InvIT) IndInfravit Trust, sponsored by L&T Infrastructure Development Projects Ltd (L&T IDPL). The Canada Pension Plan Investment Board and Allianz Capital Partners (ACP) earlier this month announced acquiring 30 per cent and 25 per cent of IndInfravit units respectively. L&T IDPL will hold 15 per cent of the units.
L&T raised around ₹4,700 crore through the InvIT and will continue to look for similar opportunities in the 10 road projects that are under construction.