Moving towards the Lakshya

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: Project Lakshya, or the ultimate aim, is what the management team of L&T took up a couple of years ago. The aim was to focus on company’s overall profitability. It seems like the initiative for this engineering giant is paying off. Little wonder then that the gross sales for FY06, at Rs 14,883.7 crore, had a growth of 12% over last year. Even the operating profit was at Rs1,434.3 crore recorded a growth. It was 9.7% aboove the previous year’s performance. The good work on profitability building has been carried in the current year as well. For the nine month period ended December 31, 2006 the sales growth is at 12.3%. The overall segment margins at 11.1% have shown healthy increase by 3.1% over the corresponding period of the previous year.

Exports constitute 20% of the company’s revenues and 15% of its order inflows. During the year the company bagged the single largest order in its history worth Rs 54 billion for the modernization of the Delhi Airport. In addition, it also registered improvement in EBITDA margins in its engineering and construction segment on account of better selection of jobs & improvement in execution of projects as well as higher proportion of margin yielding sales.

The management has been working on the classical two-pronged strategy to grow profitability—cut costs and increase volumes. With the economy growing at a rapid clip, the demand for infrastructure has been on the rise and therefore opportunities for growing volumes have been immense. However, it has been the focus on quality improvements, technological upgradation and enterprise risk management that has helped the company gain around 2.5 to 3% in operating margins. This, the management believes, will be enhanced in the years to come. AM Naik, CMD says, “In the last fewyears, L&T has invested heavily not only in its capacity, but also in its people, rewards of which we will reap in the years to come.” The management believes that it would end with a 20% clean year on year growth.

A strong order book also injects a bout of enthusiasm. Till December 2006, the order book was to the tune of Rs 35,700 crore. The management believes that it would close the year with a Rs40,000 crore order book. Naik asserts, “A healthy order backlog, increasing global presence, improving margins are a precursor to the benefits that will accrue to us.”