Construction major Larsen & Toubro has decided to hive off its fastest growing ready-mix concrete business into a separate entity. The company will soon float a new entity, L&T Concrete, to run the Rs 1,000 crore ready-mix concrete business and the new entity will be headquartered in Chennai, said KV Rangaswami, director, board member and president, construction division, L&T.
The board of directors, which met recently, has given its in-principle approval for the new entity, he added.
“It is a different business with a different character. It needs attention to become larger in size and it has to be spread geographically. It will be fully owned by the parent,” he said. Rangaswami said, “Any smaller business needs focused attention. The move is aimed at giving full freedom on decision-making and chart out its own marketing strategy and roadmap.”
As compared to global markets, in India, the ready-mix concrete holds only 3% of the total concrete offtake. “We foresee a five-fold increase in the ready-mix concrete demand in next five years, when it will touch 15%,” Rangaswami said.
The company started the ready-mix concrete business 11 years back and currently has 66 plants spread across the country. “On an average, we will be adding 10 plants every year and the cost per plant varies between Rs 5 crore to Rs 10 crore, depending on the size,” he said.
Each unit will have a capacity of 5,000 to 6,000 cubic metres a month and the total capacity of all the units is estimated to be around 3 to 4 million cubic metres per annum, he said.
“Our ready-mix concrete business is worth Rs 1,000 crore now and is growing at 25% annually. We are the market leaders in this segment with a market share of 25%,” he added.
He said the proposed entity will be fully owned by L&T and will consider listing it over a period of time.
