L&T plans big push in defence, N-power

Written by Corporate Bureau | Mumbai | Updated: May 6 2009, 08:24am hrs
Putting in place the next piece of its long-term corporate structure on Tuesday, engineering and construction major Larsen & Toubro (L&T) announced it would create three separate operating companies-for defence, aerospace and nuclear power-by 2012-13. Said CMD AM Naik, L&T will spend Rs 2,000 crore in the defence-related business over the next three to five years.

The announcement came as L&T signed a joint venture agreement with Europes EADS Defence & Security for the development and manufacture of high-end defence electronics products, mobile systems and solutions for both Indian and international markets. The formation of the JV is subject to government approval.

Last year, L&T had regrouped businesses that attained critical mass into 12 operating companies to sharpen the focus on verticals by pooling the groups resources and improving their global competitiveness. L&T is getting a blueprint for its Vision 2015 ready by March 2010. Our five-year plan will start by April 2010, added Naik.

According to Naik, L&T plans an initial investment of Rs 100 crore in the JV with EADS, and will gradually infuse more funds based on orders. Of L&Ts (FY08) group revenues of around Rs 25,000 crore, defence systems currently contribute a mere Rs 400 crorebut that figure is targeted to rise to Rs 2,500 crore in the next five years. L&T will also soon announce another JV for defence electronics in India, based in Talegaon near Pune.

EADS Defence & Security CEO Stefan Zoller said, Through JV with L&T, EADS would like to move beyond just providing high technology sales to India by creating an Indian industrial base with the development of a long-term partnership, including the transfer of technology wherever necessary.

L&T is also setting aside Rs 1,500 crore for investment in power and plans are on the anvil to open 11 new factories in the near future. In the shipbuilding business, L&Ts initial investments will be around Rs 1,500 crore, with a focus on defence vessels.

L&Ts shares on Tuesday were up 2.77% to close at Rs 978.75 on the BSE.