Engineering and construction major Larsen & Toubro is expanding its technology business portfolio and plans to invest in data centres and startups. SN Subrahmanyan, CEO and MD, in an interview with FE’s Rajesh Kurup, said that going forward, the company’s tech services portfolio will grow to 26% from the current 21% by FY26, while projects and manufacturing businesses would possibly shrink from the present 68% to 64%. Excerpts:
How do you plan to go about making L&T a tech company and why this change in focus?
In this inflationary world, tech spends can be the only possible deflationary force. We view technology-driven solutions to be a differentiator. For instance, our smart world and communications business are involved in executing many smart city projects across the country. Our financial services portfolio will transform over time into providing a lot more retail services through the digitisation push. We also have a significant presence in the IT and technology services space via our listed subsidiaries. Now, we have also incubated Edtech and B2B ecommerce platforms which will grow over time. In the medium-to-long term, our business portfolio will largely comprise EPC projects, manufacturing and services with tech being a common thread.
How will this change the present revenue mix?
Projects and manufacturing businesses that contributed about 68% to revenues in FY22 will possibly shrink to about 64% of the targeted group revenues in FY26. Some additions to the projects and manufacturing portfolio over time will be green hydrogen EPC opportunities, electrolysers for hydrogen and batteries for grid scale applications. Through our listed subsidiaries LTI, Mindtree and LTTS, we have incubated two new platforms — Edutech and Sufin — and we will invest in data centres. Thus, IT and tech services will grow from 21% of revenues currently to about 26% by FY26. The remaining portfolio of about 8% in FY26 will comprise businesses such as financial services, realty and green energy. We will exit from roads and power concessions in the near term and would have substantially de-risked the Metro by FY26.
Could you elaborate on your plans of entering the startups domain?
We will be entering into manufacturing of electrolysers used for green hydrogen production. We propose to set up 500 MW capacity by 2026 which could be ramped up to 1 GW by 2028. Green energy EPC should also give us plenty of opportunities. On a selective basis, we will also target green energy BOO (build, own, operate) opportunities. We will be looking for 5 GWh of advanced chemistry cell manufacturing capacity and 3 GWh battery module capacity by 2027. This will be achieved with a technology partner on board.We will also add a new business around data centres. For data centres, we are looking to set up a pilot plant of 2.5 MW in the near term and intend to set up capacity of 90 MW by the end of the current plan period.
What’s the update on the monetisation plans for Hyderabad Metro?
The Telangana government is giving us a soft loan of `3,000 crore to make the project viable. We are also in talks with some equity investors for a stake in the Metro. Then there is the transit-oriented development (TOD) monetisation which we are exploring in the SPV. The daily passenger traffic is also improving, which is helping us cover the operating costs. Since it is a long concession of around 60 years, hopefully we will be able to make a complete exit over time.