Description
L&T undertakes engineering, design and construction of
infrastructure and industrial projects covering civil,
mechanical, electrical and instrumentation engineeringsectors through its ECC
(Engineering, Construction and
Contracts) Division. ECC is
India’s largest construction
organization, having many of
the country’s prized landmark
constructions to its credit.
Construction, which was
recognized as “industry”
recently, serves projects worth
Rs.240,000 crore and employs
over 35 million people.
However, construction industry
still remains very fragmented
with traditional methods and
manual skills dominating, with very little mechanization.
The strengths of ECC Division are in contrast to this
scenario. ECC Division offers complete turnkey solutions
including engineering and use of mechanized methods
of construction and modern management principles on
the lines of construction majors of the developed world.
This has helped the Division to establish itself as an
undisputed leader in the construction industry. In-house
engineering skills available at the Engineering Design
and Research Centre enable the Division to undertake
complete turnkey projects across sectors. L&T’s customers
have the advantage of getting the project completed on
time – many a time setting world records - to high quality
and at competitive prices.
LARSEN & TOUBRO LIMITED
27
CONSTRUCTION
1. AN OVERVIEW
L&T undertakes engineering, design and construction of
infrastructure and industrial projects covering civil,
mechanical, electrical and instrumentation engineering
sectors through its ECC
(Engineering, Construction and
Contracts) Di vi si on. ECC i s
Indi a’s l argest constructi on
organization, having many of
the country’s prized landmark
constructions to its credit.
Construction, which was
recogni zed as “i ndustry”
recently, serves projects worth
Rs.240,000 crore and employs
over 35 mi l l i on peopl e.
However, construction industry
still remains very fragmented
with traditional methods and
manual skills dominating, with very little mechanization.
The strengths of ECC Division are in contrast to this
scenario. ECC Division offers complete turnkey solutions
including engineering and use of mechanized methods
of construction and modern management principles on
the lines of construction majors of the developed world.
This has helped the Division to establish itself as an
undisputed leader in the construction industry. In-house
engineering skills available at the Engineering Design
and Research Centre enable the Division to undertake
complete turnkey projects across sectors. L&T’s customers
have the advantage of getting the project completed on
time – many a time setting world records - to high quality
and at competitive prices.
2. BUSINESS ENVIRONMENT
Inadequate investment in industrial and infrastructure
projects has resulted in lower business available for
construction companies in the large project segment.
Increased opportunities in individual house constructions
and road projects have helped some smaller contractors
to join hands with international companies, especially
from Malaysia, for the road sector. Contracts awarded
under the National Highway Development Programme
showed a decline in prices by nearly 4% over the last
year’s prices. The inputs from the international companies
for road projects, however, being minimal, this could
probably affect the quality of the projects.
Consequent to the slowdown in the investment climate
with no major industrial projects, the business mix of the
Division has tilted more towards social and physical
infrastructure projects such as housing, hospitals, IT
parks, expressways, bridges, ports, water and effluent
treatment projects. In the changed business environment,
the Division has positioned itself in the area of application
of technologically innovative solutions to deliver quality
and in shortest time. For instance, in the Housing sector
the Division chose to concentrate only on system housing
where application of mechanized forms of construction
leads to speedy completion and economy. Similarly, in
road & bridge construction the Division is credited with
i ntroduci ng many technol ogi cal i nnovati ons – l i ke
segmental construction for the first time in India.
3. SIGNIFICANT INITIATIVES
Gi ven the present busi ness scenari o i nvol vi ng
international competition and consequent pressure on
operating margins, the Division has evolved strategies to
exploit its strengths and enhance business prospects and
profitability. In addition to the large domestic market,
opportunities abroad, especially in the neighbouring
countries, are also considered while formulating the
strategies. Some of the strategies are detailed below:
a) Operational Improvements
The Division has streamlined many of its operations
to become more efficient, productive and profitable.
munug.n.n:'o 11o.uoo1on & AnuI,o1o
The management of Larsen & Toubro Limited presents below its
analysis covering the segment-wise performance of the Company
for the year 2001-2002 and an outlook for the future. The report
conveys expectations on future performance based on an
assessment of the current business environment. These could
vary based on future developments.
The Company has performed well during 2001-02 to maintain its
leadership position in the various businesses. The business
conditions during the year under review were quite challenging,
with domestic industrial sector registering a marginal growth of
2.7%. The industrial downturn has been most visible in the capital
goods sector which witnessed a negative growth of 4.0%. A
higher agriculture sector growth supported by a good performance
by the services sector moderated the impact of low industrial
growth.
To overcome the challenging environment, the Company has
launched several focussed initiatives such as cost reduction,
value chain migration, resource optimization, extensive use of
information technology and new HR processes. All these initiatives
have contributed to sharpening the competitive strengths of the
Company. Well-defined value drivers and benchmarking against
the best practices have percolated to all the business segments
of the Company. The positive outlook derived from such internal
process developments can only be sustained and enhanced in
an improved external environment. The Government’s thrust on
further reforms articulated through the recent Union Budget and
the Exim policy reflects an effort to create a more vibrant industrial
climate in the country.
The Company’s major focus is to strengthen the competitive
positioning of its businesses and with the renewed thrust on
international business, transform the organization into a successful
Indian multinational corporation.
The Company’s business is organized around the following
major segments :
Name of Segment % of Segment Revenue
G Engineering & Construction (E&C) 57
Construction E & C Projects Heavy Engineering
G Cement 30
G Electrical & Electronics 8
G Others 5
In the backdrop of a demanding business environment, given
below are the highlights of the performance of the Company
during the financial year 2001-2002 along with the near term
business perspective. A brief summary of the activities of major
subsidiary and associate companies is also included.
A. Ramakrishna
LARSEN & TOUBRO LIMITED
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The Division strives for maintaining a high level of
equipment reliability and availability. A subsidiary
company, L&T Equipment Leasing Company Ltd., has
been formed to lease out surplus equipment to
improve Plant & Machinery utilization. Competency
Cells are created in specialist areas such as use of
system formwork and blended cement. Achieving
global standards in safety has given the Division an
edge over competi ti on and hence the safety
standards are continuously being monitored and
maintained. People-centered HR systems is another
focus area for the Division.
b) Cost Reduction
The Di vi si on i s focussed on achi evi ng cost
leadership. Prudent benchmarking with international
leaders operating under similar circumstances, cross
project comparisons, target productivity for resources
and close monitoring have been the key aspects of
cost reduction exercise. Development of specialist
sub-contractors, allocation of project risks and long-
term rate contracts for material procurement is
expected to aid in achieving cost reduction. As
materials constitute a major portion of operating cost,
adopting efficient materials procurement methods
including e-procurement is being pursued.
c) Use of Information Technology
Operations of the Division are increasingly being
conducted using EIP - Enterprise Information Portal.
EIP i s a web-based end-to-end sol uti on that
encompasses both the Design and Construction
phases of a proj ect. Annual budgeti ng, j ob
performance moni tori ng, e-procurement, asset
management and financial accounting, etc. are under
integration into this single platform covering a large
number of sites.
d) International Operations
To overcome i nadequate oppor tuni ti es i n the
domestic market, strategic initiative has been taken
to expand our business in the neighbouring countries
where the Division has already established a fair
name. International operations have been organized
into four distinct areas viz. Middle East, South East
Asia, South Asia, Russia & Central Asia serviced by
four Area Offices. Business in Mauritius and Africa
will be developed on a selective basis. The Division
has earned a good reputation by constructing two
international class stadia in Qatar. ECC is currently
building four hospitals in Saudi Arabia and a major
training centre in Kuwait. Our traditional business like
transmission line towers and substations in the
Middle East continues to grow. During the year,
substantial work has been completed for large
irrigation projects in Bhutan and Nepal and for power
projects in Oman and Sri Lanka. The Division has
commenced work on a Coke Calcination Project on
EPC basis in Rotterdam, the Netherlands.
e) Collaborations & Joint Ventures
As a leader in construction business in India, it is
necessary to partner with international majors for
large and complicated jobs leading to enhancement
of ECC’s technical and project management skills in
addition to sharing of the project risks. A breakwater
construction project on the western coast of India, the
LNG terminal at Hazira and the Metro Rail project in
New Delhi are examples of such a strategy. ECC
plans to extend this strategy to Hydropower, Water
and effl uent treatment and other Heavy Ci vi l
Engineering projects. For executing some large road
projects in India, the Division has collaborated with
major Indian companies in order to synergize the
mutual strengths. Such collaborative approaches
could be extended to other sectors too on a selective
basis.
4. MAJOR ORDERS BOOKED / EXECUTED
Major orders booked by the Division during the year
2001-02 include: Rs. crore
Design, Engineering, Manufacturing
& Commissioning of Electrical facilities,
Service Water System & Supply Package
for Nuclear Power Corpn.of India Ltd. 577
Construction of Jharkhand Grand Trunk
road for National Highways Authority of India 260
Construction of access road and boundary
wall along with V & VI package at Hazira Jetty
for Hazira LNG Pvt. Ltd./ Hazira Port Pvt. Ltd. 252
Construction of bridges over Gowtami & Vasista
rivers for National Highways Authority of India 203
Effluent Disposal System for Gujarat
Industrial Development Corporation 175
RMC Supply and Electrical work for Delhi
Metro Rail Corridor project for International
Metro Civil Contractors 173
Widening of National Highway between
Tumkur & Sira for National Highways
Authority of India 153
Construction and electrification of fruit market
and civil work at Bhuj & Ahmedabad for
National Dairy Development Board 126
Widening of road between Kanchi-Walajapet
for National Highways Authority of India 122
Highway from Satara to Kolhapur (NH 4)
for Maharashtra State Road Development
Corporation Ltd. 118
NC–8 Water Supply Project for Gujarat
Water Infrastructure Ltd. 105
220 KV overhead line connection to Samha
Grid and 220/23 KV substation for Abu Dhabi
Water & Electricity Authority (UAE) 54
The Division completed the following major projects during
the year 2001-02:
Khandala-Lonavala Bypass – Elevated corridor – part
of Mumbai-Pune Expressway
Coal Handling Plant (4400 MTPA) for Paradip Port
Trust
Jack Welch R&D Center for GE-ITC, Bangalore
330 MW power project at Pillaiperumalnallur, Tamil
Nadu
Structures & Equipment erection for Chettinad
Cements & Dalmia Cements
21 MW power project at Mithapur for Tata Chemicals
Anode Baking furnace at Angul for Nalco
Wagon Tipplers for Bakreshwar Power plant and
Ambuja Cement
Reclaimer for Vizag Port Trust
Water supply schemes in Tamil Nadu
Offsite piping works and Hydrogen plant at IOCL,
Barauni
Vizag-Secunderabad Pipeline for HPCL
LARSEN & TOUBRO LIMITED
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OFC laying for Bharti Telesonic Ltd. at various places
Sports stadia in Qatar
In addition, Blast Furnace rebuild at TISCO, Jamshedpur
was completed subsequently in a world record time.
5. FUTURE OUTLOOK
In the near term, the Union Budget 2002 is likely to
encourage development of airports, special economic
zones, urban infrastructure projects and improvements to
the power distribution systems. Higher allocations for
various sectors have set in a favourable climate for new
investments. This is expected to provide opportunities for
ECC for securing large orders during the next financial
year, especially in the areas of urban infrastructure,
power distribution and rural roads. Further, dismantling
of APM in the petroleum sector could possibly open up
some opportunities in areas like cross-country product
pipelines and retail outlets.
Construction Industry is seeing a visible shift from “Owner
funded managed construction projects” to “Non-recourse
funded EPC projects”. In the longer term, privately funded
i nfrastructure proj ects under the Publ i c Pri vate
Participation (PPP) format are likely to increase. Enabling
legal framework and the concept of user charges gaining
acceptance could facilitate more projects in this format.
The Division has already made a beginning by promoting
roads, bridges, ports, IT parks and Exhibition Centres. In
addition, ECC is a partner in the consortium chosen to
promote the proposed Bangalore International Airport. The
experience of project promotion in PPP format and
operation of special purpose vehicles would give the
Division a lead over its competitors.
Focus on international operations would continue. ECC’s
leadership position in domestic markets, the past record
of successful project execution in overseas markets and
the global presence through international joint ventures
would be leveraged to exploit business opportunities
abroad, especially in the neighbouring countries.
Hitherto ECC is acknowledged as “Builders to the
Nation” and the Division would like to move on to
become “Builders of Nations” by its constructive
contribution to the development of infrastructure and
industrial growth.
6. AWARDS / RECOGNITION
ECC received the following awards during the year:
Overseas Construction Council of India (OCCI) award
for the outstanding performance during 2000-01 in
the following categories:
? ?? ?? Maximum value of contracts secured
? ?? ?? Second best in the category of maximum turnover
from Overseas Construction Contracts
? ?? ?? Maxi mum forei gn exchange earned and
repatriated from overseas construction contracts
? ?? ?? Maximum foreign business attempted
The Indian Institute of Bridge Engineers has conferred
five National Awards for Outstanding Bridges on ECC
Division and L&T’s JV L&T-Ramboll Consulting
Engineers Limited for excelling in bridge construction.
Constructi on Company of the Year Award by
Accommodation Times, a fortnightly magazine based
in Mumbai
Billimoria Award for Cyber Towers, Phase 1 of HITEC
City at Hyderabad received from the Association of
Consulting Civil Engineers, Bangalore.
ICI-McBauchemi e Award from Indi an Concrete
Institute for Most Outstanding Concrete Structures -
2001 to Chaitanya Jyoti at Puttaparthi in Andhra
Pradesh.
ACCE (Association of Consulting Civil Engineers,
Bangalore) Billimoria Award – 2002 for high-rise
building conferred on South City, Bangalore
Certificate of Recognition for highest safety standards
by American Society for Concrete Contractors in the
year 2001
L&C PROJLCTS
1. AN OVERVIEW
E&C Projects Division is the only Indian EPC Group pre-
qual i fi ed for executi ng l arge
process-intensive projects for oil
and gas, refinery, petrochemical
and fertilizer sectors. It is also a
player in Power Projects with two
large international projects under
execution. Our vision is to become
a world class, technology-driven
quality conscious Division with
emphasi s on val ue creati on
through turnkey proj ects and
proj ect management and
consultancy services.
2. BUSINESS ENVIRONMENT
The conti nuati on of the sl owdown i n the economy
deferred the i nvestment deci si ons resul ti ng i n
postponement of many projects. Private sector power
projects continue to be delayed till distribution reforms are
in place and payment security concerns are adequately
addressed. Slowdown in investments in the process sector
industries like fertilisers, refineries and petrochemicals
due to unfavourable demand and supply situation, has
affected the order prospects in this sector.
Intense competition from local and global players, all
competing for limited number of projects lead to very
aggressive pricing and pressure on the margins. Reduced
opportunities in the domestic sector encouraged us to
scout for opportunities abroad. Good track record of the
E&C Projects Division in the domestic sector helped in
getting pre-qualified for international projects in spite of
presence of global players in this area.
3. SIGNIFICANT INITIATIVES
The Di vi si on has l aunched several i ni ti ati ves for
enhancing the operational efficiency and the focus areas
of its business. Some of them are as under:
a) India-centric to a Regional Entity
We have a challenge ahead of us to transform
ourselves into a world class, operations oriented
organization.
We have defined the international boundary limits
within which E&C Projects Division will focus and
grow outwards from being a largely India-centric
organization.
Wi th thi s backdrop and al so to ensure cost
K. Venkataramanan
LARSEN & TOUBRO LIMITED
30
effectiveness and profitability, the following thrust
areas have been identified for implementation:
Staffing international organization with key
personnel and country managers.
Aligning individual SBUs with international thrust
through appropriate re-positioning of personnel
within SBUs.
Driving integration of IT into business and
measuri ng the cost effecti veness and
productivity improvements.
Ri sk Management, fi nanci al di sci pl i ne and
implementation of Value Drivers.
Initial efforts in this direction have been successful
with international business accounting for 27% of the
Division’s sales.
b) Risk management
A structured process has been evolved for risk
anal ysi s, eval uati on and mi ti gati on measures
encompassing all the project facets like engineering,
procurement, fabrication, construction, logistics,
contractual & commercial issues and country-specific
risks for enabling us to undertake complex projects
on diversified geographical basis.
c) Focus on Competitiveness
The year 2001-2002 also witnessed a significant
drive in the implementation of strategic initiatives to
improve our competitiveness against international
competitors with much wider experience.
These initiatives include:
cost reduction through global sourcing,
focus on new technol ogy areas to expand
business reach and
strengthening front-end engineering & design
capabilities.
We have been enhancing cost effectiveness and
building customer relationships through e-enabling
of our business operations.
d) Exploiting Information Technology
To compress cost, cycle time and distance, a number
of information technology oriented initiatives have
been implemented. These include:
Integrated project management system through
ERP,
Web-enabled speedy procurement through e-
commerce & reverse auction and
Knowledge management system specifically
developed to suit E&C requirements based on
IBM Lotus K station / Domino Doc Platform.
e) Human Resource Development
The well-established centers of excellence for front-
end engineering & design, detailed engineering,
technology innovation and research & development
are in a position to provide the required leadership
in technology engineering fields. Continuous efforts
are being made to upgrade the engineering and
project management skills through benchmarking
with worldwide major EPC players.
We have taken a major step towards capability and
competency building with a focus on leadership
devel opment through Capabi l i ty & Leadershi p
Development (CALD) programs and have trained
people in various functions like marketing, proposal
engineering, engineering, project management,
construction and quality. We are also enhancing
technical & engineering skills through E&C Project
Management Academy.
4. MAJOR ORDERS BOOKED/EXECUTED
In spi te of a sl uggi sh market wi th sl owdown i n
investments and predominance of cyclical projects, E&C
Projects Division has been successful in receiving some
prestigious large value orders like Hydrogen plant,
Sulphur recovery plant, Catalytic reforming unit, water
injection-cum-gas compression platforms and combined
cycle power plants.
The successful execution of complex & first of its kind
projects in the country and medium size projects in
Malaysia, Qatar, Dubai and Saudi Arabia, backed by a
strategic approach towards becoming a regional leader
has paved the way in securing prestigious large orders
such as 200 MW Gas Turbine Power Plant for Dhofar
Power in the Sultanate of Oman and 168 MW Combined
Cycle Power Project for AES Kelanitissa in Sri Lanka.
Some of the major orders booked during the year were:
Rs. crore
Bombay High North Water Compression
Platform (MNW) for Engineers India Ltd. &
ONGC Ltd. 606
EPC of Naphtha Hydrotreator, Catalytic
Reformer unit and Hydrogen Generation
Plant for Chennai Petroleum Corporation
Limited 445
Supply of piping, valves, equipment &
spares for Nuclear Power Corporation of
India Limited 266
Some of the major orders executed during the year were:
0.9 MTPA new cement plant for Chettinad Cement
Corporation Ltd., Karikalli, Tamil Nadu
Hydro-Treater Unit and Solvent De-waxing / De-Oiling
Unit Packages for IOCL-Digboi
Hydrogen Unit and Offsite & Utilities including
Electrical Substation for IOCL, Barauni
Additional Process Gas Compressor at HRC Platform
in Heera Field of ONGC Ltd.
Revamp of 3 nos. of Ammonia Reformers and supply
and erection of 2 nos. Fired Heaters (startup and
auxiliary) package for HFCL, Namrup
Design, Engineering, Procurement & Installation in
12 platforms - total 1963 MT for EIL-ONGC-Bombay
High North-Clamp On.
70 nos. Evaporator Exchangers for Desalination
Plant, total tonnage 505 MT for Sidem, France – Abu
Dhabi
5. FUTURE OUTLOOK
On the Indian scene, E&C Projects Division is geared up
to fully exploit emerging opportunities coming up in the
immediate future in upstream oil & gas projects, diesel &
motor spirit quality upgradation clean fuel projects, LNG/
LPG terminals, petrochemical projects like paraxylene &
PTA, revamp jobs in fertilizer and refinery sectors, deep
water exploration & offshore re-development, nuclear,
captive power & utility power projects.
LARSEN & TOUBRO LIMITED
31
On the international front the main focus is on the Middle
East countries and a few select opportunities in other
countries. Opportunities exist in Refinery revamp, Co-
generation, clean fuel and oil & gas sectors. Many gas-
based open cycle projects are coming up in the Middle
East due to better gas availability and lower complexities
in implementation and operation.
Initiatives like the setting up of the International Business
Development Group, finalization of agents and posting
of country representatives in target countries, would
enhance the abilities to capture international business
opportunities.
6. AWARDS/RECOGNITION
L&T’s design and development centers such as Front End
Engineering & Design, Research & Development and
Technology & Innovation Centre are certified to ISO 14001
and have won awards from ICMA and NACE during the
year 2001-02.
E&C Proj ects Di vi si on and Mi ni stry of Informati on
Technology, Government of India together launched the
Information Security Management System, which was a
project of national significance.
HLAVY LNGINLLRING DIVISION
1. AN OVERVIEW
Heavy Engineering Division with its strong engineering
capabilities and state-of-the-art manufacturing facilities
has established a leadership
position in manufacture and
supply of highly critical Process
Plant & Industrial Equipment to
the core sector industries as
wel l as Rubber Processi ng
machinery for the Tyre Industry.
The busi ness uni ts and the
associ ated manufacturi ng
facilities located at Powai in
Mumbai and Hazira & Baroda in
Gujarat together specialise in
suppl y of cri ti cal pressure
vessel s, heat exchangers,
reactors, etc. to industries such as Fertilizer, Refinery,
Petrochemical, Chemical, Oil & Gas, Nuclear Power,
Aerospace & Defence. A manufacturing centre is also
opened recently at Visakhapatnam in Andhra Pradesh.
The Kansbahal unit of the Division in Orissa supplies
Industrial Machinery for Mines & Ports, Steel and Paper
& Pul p sector. The Chennai uni t i s dedi cated to
manufacture & supply of Rubber Processing Machinery
for the Tyre Industry. The Division also markets in India,
Industrial Valves and Plastic Processing Machinery
manufactured by L&T’s Joint Venture companies located
at Chennai.
2. BUSINESS ENVIRONMENT
The business potential for Process Plant Equipment in
India has declined due to reduced investments during the
last few years and delayed project clearances.
The refinery sector was awaiting major Government
policy on dismantling of Administrative Pricing Mechanism
and this delayed the investment in this sector during the
year. In the case of Rubber Processing Machinery,
competition is faced from low-cost Chinese manufacturers.
Though the market for traditional products - Mechanical
Tyre Curing Presses - is stagnating, the Division has
developed Hydraulic Presses which are in the process
of being tested and evaluated by the customers.
With the current thrust on road building projects, the
business unit at Kansbahal, Orissa envisages increased
domestic demand for Aggregate Crushing Systems. Steps
have been initiated to meet the emerging demands of the
customers for compl ete systems i ncl udi ng feedi ng
devices, screens, conveyors, etc. Efforts are also on for
export of impactors in CKD/SKD form. The Division has
enlarged its product range by developing wind mill
components both in cast & fabricated form which have
good potential for exports.
3. SIGNIFICANT INITIATIVES
The Division had anticipated the shrinking business
potential in domestic process plant equipment market and
has developed a long term plan with the following
strategic directions to counter the situation :
Reduce dependence on domestic market for the
conventional product lines such as the process plant
equipment
Significantly enhance export of such equipment
Focus on the emerging businesses like hi-tech
equipment & systems for Defence, Aerospace &
Nuclear Power.
Several steps have already been initiated by the Division
towards implementation of the above strategies with fairly
good success.
a) Thrust on Exports
The Di vi si on has fi ne-tuned i ts manufacturi ng
operations to meet the stringent global standards of
short cycle times, on-time delivery, cost, quality and
aesthetics. This has resulted in steadily improving
order booking and sales from the international
markets.
During the year, the manufacturing centres of the
Division have successfully gone through several
stri ngent qual i ty audi ts conducted by vari ous
international customers / their Process Licensors who
have subsequently placed export orders for critical
equipment. Major global hydrocarbon players have
also given contracts for their requirements of critical
equipment.
The Division’s exports which have been mainly to
Middle-East & Far-East, are now reaching USA,
Canada, Norway, UK, South Afri ca, Brazi l and
Australia. Initiatives are under way for entering China
and Australia for various petrochemical projects.
The manufacturing Unit at Chennai has significantly
i ncreased the export of Rubber Processi ng
Machinery. This product is exported to many countries
including Europe, South America, Africa, Middle-East
and South-East Asia. Through continuous R&D the
Chennai Unit has added new products like Tyre
Bui l di ng Machi nes and Hydraul i c Presses for
manufacture of Radial Tyres to the product range.
Over the last few years, the Division’s domestic-export
mi x for al l products i ncl udi ng Process Pl ant
Equipment and Rubber Machinery has steadily tilted
in favour of export market. Export orders account for
nearly 35% of the total orders booked by the Division
during 2001-02.
P.M. Mehta
LARSEN & TOUBRO LIMITED
32
Products are exported to more than 45 countries
around the world. This is representative of the higher
acceptability in the global markets.
b) Hi-Tech Products
Concrete steps have been initiated in the new
liberalized environment to establish a dominant
position for the Division in the hi-tech sector.
The initiatives taken include setting up of a large
state-of-the-art Computer ai ded Desi gn &
Engi neeri ng Center as wel l as Product Li fe
management setup.
Steps have been initiated to partner with some of the
best technology leaders in the world. These include
initiatives with firms in South Africa, Russia, Germany,
Great Britain, Italy, Sweden and Israel.
A number of new products have been developed
during the year and discussions are on with the
authorities for finalisation of contracts for select hi-
tech equipment & systems of national importance.
Some prestigious orders which include revamping
part of Nuclear Power Plants have been received by
the Division.
c) Exploitation of Information Technology
The Division has stabilised its operations on ERP
backbone in its major locations and has further
enhanced the operational benefits through the
implementation of e-Procurement and Customer
Relationship Management functionality integrated
with the back-end ERP.
4. MAJOR ORDERS BOOKED / EXECUTED
Despite sluggish domestic markets, the Division bagged
major domestic orders from customers like RCF, RDEE,
ENERCON, CPCL, NPCIL, DRDL and others.
The Di vi si on recei ved export orders from l eadi ng
international companies such as Kellog JV, QAFCO,
Exxon Mobil, Danang - Vietnam, Krupp Uhde, Fluor
Daniel.
During the year, the Division exported for the first time
from India, Reaction Column and Switch Coolers for BASF
Petronas BPC-BDO project in Malaysia through Kvaerner
Petrominco Engineering Sdn Bhd. This is the first time
such equipment are manufactured outside Europe. The
Division also supplied 3 Separators for BP Nam Con son
Gas project in Vietnam. The Separators are exported for
the first time to the design of BS 5500.
The Di vi si on’s achi evements i ncl ude successful
completion of 2000 tons of equipment for Saudi Arabia’s
new petrochemical complex. The supply included the
largest tower, 250 feet long, 30 feet diameter, 800 tons
and 8 reactors.
Major domestic orders executed during the year include
orders for customers like IFFCO, Samsung, Hindalco,
HFCL, NPCIL & Ministry of Defence.
5. FUTURE OUTLOOK
The outlook for Process Plant Equipment business is
encouraging as the Division is focussing on exports where
significant business potential is envisaged. Keeping in
view the major business potential in USA, Brazil & Middle-
East and the raw material sourcing potential from Europe,
we are in the process of deputing personnel, appointing
agents and opening offices overseas.
Indian Defence Sector is being opened up for involvement
of Indian private enterprise as also in Joint Sector with
Foreign Partners with up to 26% FDI through licence
route. It is expected that the necessary licences will be
granted to facilitate indigenous sourcing of Defence
requirements as well as export of Defence Goods.
Liberalisation in the Defence Sector is expected to open
up major opportunities for the Division.
Although the liberalization would bring in competition from
overseas as well as within the country, the business
outlook in this sector looks optimistic in the medium and
long term due to the early investments made by the
Division and the leadership it has in this sector.
6. RECOGNITION / AWARDS
Hazira Works won the National Safety Award 2000
from the British Safety Council for demonstrating
commitment to best practices at the work place, health
and safety and the organization’s skill and efforts in
maintaining a good record, which is significantly
above average.
The Division's Chennai manufacturing unit has been
recertified under ISO 9001:2000 Quality Assurance
System in April 2001 by BVQI
It has al so been awarded the presti gi ous
Commendation Certificate - Rajiv Gandhi National
Quality Award 2000.
CLMLNT
1. AN OVERVIEW
The Company’s cement capacity stood at 16 million
tonnes including that of Narmada Cement Company
Limited. The Company’s Cement Division continued to
enjoy leadership position due to its large distribution
network, proactive response to the market requirements
and consistent high quality cement produced.
2. BUSINESS ENVIRONMENT
Cement industry grew by a healthy 10% in 2001-02
compared to a negative growth
of 2% i n the previ ous year,
despite low overall industrial
growth. Cement demand i n
Northern, Central & Eastern
regions went up by about 11%,
whereas i n the Southern &
Western regions it was around
8%. Increase i n cement
consumption was mainly driven
by the demand from housing
sector and reconstructi on
acti vi ti es i n Guj arat.
Government’s thrust on housing
with substantial fiscal incentives coupled with easy
financing options at low interest rates provided a fillip to
this sector.
Demand for cement has been growing at a compounded
growth rate of 8% during the last decade. However, the
growth in capacity outpaced the demand, leading to a
supply overhang in the market and low capacity utilization
levels. Even during the fiscal 2002, the capacity accretion
was around 16 million tonnes, of which almost 50% came
around through “Sweating of Assets” and increased thrust
towards blended cement. Having gained acceptability in
most of the markets which were hitherto alien, the
J.P. Nayak
LARSEN & TOUBRO LIMITED
33
production of blended categories increased from 37% to
43% of the total cement sold. India, thus, has a resultant
cement capaci ty of about 137 mi l l i on tonnes and
continues to be the second largest producer in the world.
Given the capacity build-up, the prices of cement have
been volatile in the last few years and were generally at
low levels. Inability to generate adequate returns rendered
many manufacturers financially sick. Driven by the
demand growth, the prices started indicating an upward
trend in the last quarter of Fiscal 2001, but continuously
dropped during fiscal 2002. The positive aspect is that
despite the drop, the average realization for Fiscal 2002
in most of the markets was still higher than that of the
previous year.
3. SIGNIFICANT INITIATIVES
The Cement Division undertook several initiatives to
improve the operating efficiency. These include:
a) Cost Leadership
The Di vi si on conti nued wi th i ts efforts on
improvement in operating efficiencies (see charts
below) and productivity levels, which resulted in
maintaining the variable costs at the previous fiscal’s
levels, despite the increase in costs of various inputs.
Further, substantial reduction was also achieved in
fixed costs. Change in product mix with thrust on
blended cement resulted in reduction in average
operating cost per tonne. The Company believes that
it is one of the lowest cost producers of cement in
the country.
Power Consumption
87
90
92
96
98
80
85
90
95
100
FY98 FY99 FY00 FY01 FY02
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701
708
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b) Supply Chain Management
Distribution cost is one of the major elements of cost
of cement. Considerable emphasis has been laid on
optimized distribution through direct despatches,
better mode of transportation and reduction in total
delivered cost of cement.
c) Information Technology
Significant improvement in business processes have
been achieved with Enterprise Resource Planning
(ERP) backbone in place. With full implementation
of ERP, the Division has established total connectivity
between all plants, dumps and marketing operations
leading to better serviceability of customers.
d) TPM with Six Sigma
“Total Producti ve Mai ntenance” practi sed for
“Comprehensive Asset Care Regime” launched in
certain plants of the Division will be implemented in
al l the pl ants, l eadi ng to i mproved empl oyee
ownership, process improvement and cost reduction.
e) Exports
The Company continued to be the largest exporter
of cement and clinker from India and exported 2.41
million tonnes of cement and clinker (previous year
2.36 million tonnes). The Company’s cement and
clinker have been well received and command a
good market in Western Europe, Middle East and
neighbouring countries.
L&T has become the first Indian cement company to
obtain accreditation from Bureau Veritas Quality
Internati onal Espana Sa, Spai n, whi ch i s a
prerequisite for supply of cement to Europe. L&T is
one of the few Asian cement companies to receive
this recognition.
4. FUTURE OUTLOOK
The outlook for the cement industry in 2002-03 continues
to be encouraging. The proactive steps announced by the
Government i n thei r recent budget woul d boost
investments in the housing and infrastructure sectors,
including focus on construction of roads, ports, airports
etc. With GDP growth of 6 – 7% and a reasonably good
monsoon, there would be good demand growth for
cement i n the near future. Pri ces, however, woul d
continue to be under pressure due to supply overhang
which is expected to continue and pose a major challenge
to the cement companies.
The Company has undertaken major initiatives in supply
chain management through optimization of distribution,
improving customer reach and reduction in total delivered
cost. Further thrust would be to increase sale of blended
cement, especially in Western India, and to continue
efforts to reduce operating costs. All these initiatives are
expected to improve the cost competitiveness and the
profitability of the Division. The behavioural pattern of the
prices of oil products with the dismantling of Administered
Pricing Mechanism and railway freight will influence the
profitability of the Division and efforts will be made
towards minimizing the adverse impact of such changes,
if any.
In rel ati on to the gl obal l evel s, Indi a’s per capi ta
consumpti on of cement i s l ow and i ndi cates good
prospects for long-term growth, given the objectives of the
country in terms of economic growth. The Company
believes that further accretion to the industry capacity will
be rational and driven by the demand growth alone. The
consolidation in the cement industry is also expected to
gai n momentum and resul t i n more stabl e market
conditions.
5. AWARDS/RECOGNITION
The Company was awarded the “Highest Export Award”
for 2000-01 by CAPEXIL for the 5th consecutive year for
export of cement & clinker. Further, some of the cement
plants of the Company have received various awards for
environment protection, social awareness, safety and
management of better industrial relations.
LLLCTRICAL &
LLLCTRONICS SLGMLNT
1. AN OVERVIEW
The Electrical Business comprises Strategic Business
Units (SBUs) of Electrical Standard Products, Electrical
Systems & Equipment and Petrol Dispensing Pumps &
Systems. The Electronics Business covers Metering &
Protection Systems, Control & Automation and Medical
Equipment & Systems. Embedded Software & Systems
and Telecom Projects are knowledge-based, asset-light
businesses, which are the new growth areas.
1998 1999 2000 2001 2002 1998 1999 2000 2001 2002
750
725
700
675
650
K
c
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l
/
T
100
95
90
85
80
K
w
h
/
T
734 726
714
708 701
98
96
92
90
87
LARSEN & TOUBRO LIMITED
34
2. BUSINESS ENVIRONMENT
While the GDP growth has been 5.7% and the industrial
growth was 2.7%, the electrical
industry has grown by 1.7% and
the l ow vol tage swi tchgear
sector of electrical industry has
shown a negative growth of 5%.
In such an envi ronment the
segment has ensured to
maintain the sales at the same
level as in the previous fiscal,
whi ch i s a si gni fi cant
achievement.
The margins in this business
segment have been impacted
due to predatory prices by the
competi ti on, hol di ng on to
market share, increased exports which were at lower
margins as an entry strategy for new markets and new
products, i ncreased i nvestments i n new product
development. Restructuring and seeding initiatives for the
potentially growth areas like Embedded Software &
Systems and Telecom Projects have also impacted
profitability.
Overcapacities being built up in the industry coupled with
MNCs’ attempt to increase their presence have not
affected leadership position and the segment maintained
the number one position in the country in Electrical
Standard Products and Electrical Systems & Equipment
Business.
On the export front, prospects in the Middle East, Sri Lanka
and Bangladesh were encouraging. China promises an
attractive market for selected products of this segment.
3. SIGNIFICANT INITIATIVES
The Electrical & Electronics segment has taken several
significant initiatives during the year. Some of these
include:
a) Development of New Products:
The Electrical & Electronics Segment has always
been tuning itself to the changes in technology
through introduction of new products & product
variants. High New Product Intensity (NPI) has
become an obsession.
b) Cost Leadership & Asset Productivity:
The cost competitiveness is continuously enhanced
through improvements in processes using tools like
Value Engineering, Six Sigma, JIT, e-Procurement,
Reverse Auctioning, and e-Enablement of sales
processes. Continuous efforts to enhance asset
productivity and optimize the financial resources
locked in the business have helped the Division to
enhance its free cash flow and improve internal
efficiencies.
c) Human Resources Development:
The segment has placed a lot of emphasis on
developing the skill sets of its people. On-the-job
training, specific need-based programmes and job
rotation have been continuing to nurture intellectual
capital. Computerization of performance planning and
appraisal process has been completed in order to
enabl e better moni tori ng of performance
management.
d) Exploiting Information Technology:
IT and e-initiatives continue to remain a focus area
in the segment, for improving business processes
and systems effectiveness. The segment was one of
the early implementers of ERP system which is being
constantly upgraded to latest versions. Collaboration
with customers and suppliers has been further
strengthened by value addition due to the Internet
based connectivity with them. A major initiative of
integrating product design & CAD (Pro-E) with ERP
has been l aunched; thi s wi l l enhance l evel of
concurrent engineering in product design resulting
in faster introduction of new products. The Segment
has started i mpl ementi ng Product Li fe Cycl e
Management (PLM) and Sales Force Automation as
a step towards putting in place solutions offered by
mySAP.com suite of products.
e) Thrust to Exports:
The segment has stepped up its focus on developing
international markets for its products. A select few
potential markets have been focussed and efforts to
penetrate these markets have been enhanced.
Suitable product variants have been designed and
certificates / approvals obtained as required. Pre-
tenderi ng acti vi ty has al so been stepped up.
Consequent to the several initiatives that have been
taken, the exports have increased five times in the
last two years. Exports during fiscal 2002 increased
by more than 70% as compared to the previous fiscal.
The Segment presently exports its electrical products
to Middle East, South East Asia and Africa. The
Medical Equipment are exported to Europe, China
and Iran.
4. FUTURE OUTLOOK
Improvement in overall economic scenario is expected
to provide stimulus to this business. Government policies
are generally favourable with particular emphasis on
Power Sector Reforms, Housing Sector, Infrastructure
Development, Health-care and Petroleum.
Pressure on margins would be arrested by introduction
of new variants, new products apart from continuous
efforts i n cost reducti on. Restructuri ng i s bei ng
implemented through de-layering and activity mapping to
improve response to customer. The lean and agile
organization structure would help to attract and retain
talent.
Convergence of El ectri ci ty, Communi cati on and
Automation would become a way of life. All businesses
of the Segment are synergized towards this.
It is expected that the year 2002 would be a transitional
year, during which business may show signs of revival in
the first half, with the prospect of a recovery at the end of
the year. The Segment has significantly improved the
competitive position and has learnt and aligned to
maximize utilization of the resources and enhance
productivity.
5. AWARDS/RECOGNITION
U-POWER Air Circuit Breaker won the Overall Best
Product award at ELECRAMA 2002, held in January
2002. Certificate of Appreciation was awarded to our
d-sine Moulded Case Circuit Breakers at the same
event.
R.N. Mukhija
LARSEN & TOUBRO LIMITED
35
Golden Peacock Award 2002
At 12th world congress on Total Quality 2002 held in
January 2002 for contribution to the health-care field
for medical equipment
Safety Awards (given in September 2001)
- Longest accident-free period, - for 1999 - given
by GOI, Ministry of Labour
- Longest Accident free period; and
- Lowest accident frequency rate - for 2000 - by
National Safety Council- Maharashtra Chapter
The Segment has received ISO 14000 certificate for
Electrical Business which expresses the concern for
Envi ronment. The Occupati onal Heal th and Safety
Assessment Series certificate (OHSAS-18001) granted to
Electrical Business places in perspective the care for
employees’ safety and health.
IINANCIAL RLVILW
The year 2001-02 witnessed an almost complete lack of
investment activity in capital
goods sector and sporadi c
investment in infrastructure -
pri mari l y roads and a few
refi ner y proj ects. Thi s was
exacerbated by the increasing
competi ti on both from
mul ti nati onal s and PSUs
putti ng i ntense pressure on
margi ns. The Company
intensified its efforts to increase
its international business during
fiscal 2002 and had to accept
l ower margi ns as an entry
strategy. The fi nanci al
performance of the Company for the year ended 31st March
2002 has to be viewed in the light of extremely challenging
business conditions.
REVENUES
Sales & Service income at Rs. 8,359 crore showed an
increase of 6.8% over Rs. 7,825 crore for the previous year.
The increase is largely attributable to growth in the E&C and
Cement segments. While Cement sales grew by 8.1%, E&C
sales increased by 5.4% during the year. Other income of
Rs.220 crore, which grew by 6%, comprises mainly dividends
from subsidiaries (Rs. 52 crore), gain on extinguishment of
debt (Rs. 40 crore), income from trade investments (Rs. 15
crore) and other business related income (Rs. 113 crore).
MANUFACTURING & OTHER COSTS
Manufacturing, Construction & Operating expenses incurred
during the year were Rs. 5126 crore, which are 7.7% higher
as compared to the previous year. While there was increase
in expenditure on raw materials and construction subcontracts,
expenditure on account of consumption of stores & spares and
packing & forwarding was lower as compared to the previous
year. A l arge par t of the Company’s busi ness bei ng
Engineering & Construction, the expenditure on account of
raw materials, sub-contracts, construction materials, etc. would
depend on the nature of contracts under execution. It is
therefore necessary to compare these expenses in totality.
Despite increases in power tariff and higher activity, the power
& fuel costs were contai ned by the Company through
appropriate energy management initiatives. Expenditure on
royalty and technical knowhow fees were also lower during
the year as compared to the previous year.
Staff expenses at Rs. 619 crore reflected a moderate increase
of 5.1 % over the earlier year. The increase was mainly due
to annual salary & wage increments, higher contribution to
Gratuity and Pension Funds triggered by reducing interest rate
scenario and the impact of payouts on account of the voluntary
retirement schemes. The Company reduced its manpower by
over 1000 employees during the year. The positive fallout of
the reduction in workforce is expected to accrue in the coming
years.
Sales, Administration and Other Expenses increased by 7.1%
from Rs. 1262 crore in 2000-01 to Rs. 1351 crore in 2001-02.
Major items contributing to the increase were packing &
forwarding, discount on sales, professional fees, travel &
communication. The impact of these increases was moderated
by the savings achieved in expenses such as rent, publicity
& sales promotion, repairs & maintenance, etc. Efforts are
being made to optimize logistics and distribution cost in the
Company’s cement business which are expected to result in
savings in overall selling and distribution cost. Thrust on
exports has resulted in the Company incurring developmental
costs particularly towards international sales promotion and
marketing. The Indian Rupee depreciation of 4.6% vis-à-vis
the USD resulted in a higher exchange loss in respect of the
company’s foreign exchange exposures. The prolonged delay
in revival of the core sector industries, to which the Company
has exposure in the form of receivables, has necessitated
increase in precautionary provisions towards non-recovery of
dues with respect to some of these receivables. Although all
requisite efforts have been initiated for recovery of these dues,
delays are foreseen in collection of dues from certain
customers.
The gross interest expense for the year was Rs. 376 crore, a
decrease of Rs. 88 crore as compared to the previous year.
The savings were achieved through better working capital
management, strict control over capital expenditure and
prepayment of loans. The overall softer interest rate scenario
in the market also helped in managing the interest cost. During
the year, the Company reduced significant interest costs by
re-financing high cost borrowings with lower cost options and
managing liquidity through a mix of currency and interest rate
structures. The interest income for the year was lower at Rs.60
crore as compared to Rs.103 crore for the year 2000-01 largely
due to reduced interest income from the customers, lower
interest earnings on treasury activities, etc. The average cost
of borrowing for the year was 9.5% for long-term loans and
8.8% for short-term borrowings.
Depreciation and obsolescence charge increased by Rs. 23
crore mainly on account of capitalization of the grinding unit
at Durgapur, West Bengal during the year. Higher charge was
also due to the impact of full year depreciation for the grinding
unit at Arakkonam, Tamil Nadu and higher charge on assets
bought for specific, long tenor customer related jobs.
PROFITABILITY
The operating profit for 2001-02 was higher at Rs.1053 crore,
an increase of Rs.40 crore, over the previous year. With
busi ness condi ti ons remai ni ng hi ghl y competi ti ve, the
increase in operating profit was largely due to the various cost
reduction measures undertaken by the Company.
Profit before Tax at Rs. 401 crore for 2001-02 was higher by
Rs. 62 crore as compared to the previous year largely due to
savings in interest cost. After considering the tax credits
available under section 115 JAA of Income Tax Act, 1961, the
Y.M. Deosthalee
LARSEN & TOUBRO LIMITED
36
Company was liable for Minimum Alternate Tax. In line with
the newly introduced Accounting Standard 22, ‘Accounting for
Taxes on Income’, provision has been made for deferred tax
for the year 2001-02. Despite higher tax provisions, the
Company’s Profit after Tax for 2001-02 was 10% higher at
Rs.347 crore as compared to Rs.315 crore for the previous
year.
As stipulated by the above referred Accounting Standard on
Deferred Tax, the Company has adjusted Rs. 823 crore from
General Reserves on account of the opening balance for net
deferred tax liability as of April 1, 2001.
SEGMENT-WISE PERFORMANCE
Engineering and Construction (E&C)
This segment was adversely affected by the general slowdown
i n i nvestment acti vi ti es; however, i t was successful i n
registering its presence in the international markets. The export
revenues of the segment clocked a handsome 75% growth
during the year. Also, the segment had contained costs
through a series of measures such as improved asset
utilization, cross project comparisons, effective integration of
information technology with traditional engineering strengths
and superior project management capabilities.
The brief financials for this segment are:
Figures in Rs. crore 2001-2002 2000-2001
Order Booking 7227 7093
Order Backlog 11621 9222
Gross Revenue * 4907 4656
EBITDA / Revenue (%) * 9.8 11.2
Export Earnings 848 484
* Including inter-segment revenue
Cement
Total sales of cement and clinker increased by 6% to touch
11.9 mi l l i on tonnes. Average sal es real i zati on duri ng
2001-02 improved by 4% to Rs. 1303 per tonne. In spite of
increasing input costs (fuel and power), the continuous cost
reduction initiatives enabled the Division to improve its
operating margin.
The segment was the single largest exporter of bulk cement
and clinker from India with shipments touching 2.41 million
tonnes, valued around USD 49 million.
The brief financials for this segment are:
Figures in Rs. crore 2001-2002 2000-2001
Gross Revenue * 2611 2415
EBITDA / Revenue (%) * 18.1 15.9
Exports 236 212
* Including inter-segment revenue
Electrical and Electronics
Notwi thstandi ng i ntense competi ti on, the Company
maintained its market leadership in its switchgear business.
The other product groups had more or less flat top-line growth
with low margins. The segment has identified exports as a
major growth initiative in the years to come. Export sales
nearly doubled during 2001-02 and are expected to show a
steady growth in the future.
The brief financials for this segment are:
Figures in Rs. Crore 2001-2002 2000-2001
Order Booking 711 693
Gross Revenue * 736 740
EBITDA / Revenue (%) * 12.3 15.5
Exports 37 21
* Including inter-segment revenue
Diversified Businesses
Competi ti on from wel l entrenched domesti c pl ayers,
inequitable local tax structure vis-a-vis imports in certain
product groups and a slump in the overall domestic demand
have all contributed to low sales growth and under-recovery
on capital employed. Sales of construction equipment declined
during the year, mainly on account of low industrial activity.
Whereas certain product segments like welding systems do
indicate reasonably good growth potential, value creation is
dependent on cost reduction measures, launch of new
products and specific focus on sectors like defence, oil & gas,
railways and the automobile sector.
The brief financials for this segment are:
Figures in Rs. Crore 2001-2002 2000-2001
Gross Revenue * 425 358
EBITDA / Revenue (%) * 2.8 7.3
Exports 3 12
* Including inter-segment revenue
FIXED ASSETS
The gross fixed assets as at March 31, 2002 were at Rs. 6294
crore as compared to Rs 6441 crore in the previous year. The
reduction was mainly due to transfer of certain construction
equipment and technology-based assets of the Company
under a structured operating lease-back scheme. Also, the
capital expenditure incurred by the Company during 2001-02
was lower than the previous year by Rs. 118 crore. Asset
capi tal i zati on duri ng 2001-02 was l argel y due to the
commissioning of the cement grinding unit at Durgapur, West
Bengal.
WORKING CAPITAL
The net working capital at Rs. 2485 crore as of March 31,
2002, registered a reduction of Rs.250 crore as compared to
the previous year. Considerable emphasis was placed on
i mprovi ng the worki ng capi tal management wi thi n the
Company. Stringent monitoring of resources deployment,
focus on cash flow optimization, timely collection of customer
outstandings and monitoring of the procurement and stocking
policies have contributed to the reduction in the working
capital. The Company plans to pursue further optimization of
working capital requirements to unlock value.
FINANCIAL CONDITION & LIQUIDITY
The Fixed Deposit Schemes and the Commercial Papers
issued by the Company are rated ‘AAA’ and ‘P1+’ respectively,
the highest credit rating in that category. In November 2001,
the Company’s long term debt rating was revised to ‘AA+’ by
CRISIL. The rating revision was mainly on account of the
adverse impact of the unfavourable business conditions on
the Company’s financial risk profile.
In its efforts to regain the ‘AAA’ rating for long term debt, the
Company has placed considerable emphasis on increased
value addition from the operations, reduction in the overall
funds employed through better working capital management,
lower capital expenditure and sale/disposal of unproductive
assets/businesses.
As in the past, the Company retained the confidence of its
bankers and other financial sector participants and was able
to access funds at the most competitive rates. The Company
concluded many transactions at benchmark rates from time
to time when it accessed the market.
The Company’s principal sources of liquidity were:
a) Existing cash and cash equivalents
LARSEN & TOUBRO LIMITED
37
b) Cash generated from operations
c) Unutilized funded limits with banks
d) Fresh borrowings
During the year under review, the Company reduced its debt
by a significant amount of Rs.719 crore through various
measures. These included reduction of working capital and
capital expenditure, release of funds locked in fixed assets,
and securitisation of receivables.
The cash flow summary for the year was as follows:
Figures in Rs. crore
Liquidity & Capital Resources 2001-2002 2000-2001
Cash and Cash equivalents
- Beginning of the period 138.90 220.83
- End of the period 237.14 138.90
Net Cash provided /(used) by
- Operating Activities 1311.19 561.57
- Investing Activities 92.03 (299.38)
- Financing Activities (1304.98) (344.12)
The liquidity of the Company improved during the year as can
be seen from the increase in cash generated by the operating
activity. Strict monitoring of segment-wise working capital
ensured adequate liquidity. Also, lower level of capital
expenditure together with release of funds locked in the
assets of the Company further augmented the liquidity which
was utilized to reduce debt, apart from servicing interest and
dividend commitments. Funds were managed through an
optimum blend of borrowings and short term investments with
an appropriate mix of tenor, currency and interest rates. The
Company’s working capital limits were Rs. 1400 crore raised
from its consortium of banks.
The Company has an integrated financial risk management
policy to monitor and manage liquidity, interest rate and foreign
currency exposures. The procedures, practices and limits with
respect to this function were subject to periodic review by
senior management during the year under review.
INTERNAL CONTROL SYSTEM
The Company has an internal control system commensurate
with its size and nature of business and meeting with the
following objectives:
Efficient use and safeguarding of resources
Compliance with statutes, policies and procedures
Transactions being accurately recorded and promptly
reported
The internal control system provides for well-documented
policies, guidelines, authorizations and approval procedures.
The Corporate Audit Services Department conducts periodic
audits across all locations and of all functions throughout the
year. The observations arising out of the audit are subject to
periodic review and compliance monitoring. The internal audit
reports along with the report of the status of implementation of
recommendations contained there in are reviewed by the Audit
Committee of the Board on a regular basis. The Company’s
authorization procedures for revenue and capital expenditure
was reviewed and redefined during the year 2001-02.
PEOPLE INITIATIVES
The Company believes that the quality of its employees is the
key to its success in the long run. Accordingly, several new HR
processes have been launched by the Company with the
objective of supporting its business plans. The Management
Leadership Program and Technology Leadership Program
endeavour to identify management and technical leadership
talent by taking targeted employees through assessment centers
and tests. Training programs also emphasize the need for a
general management perspective to business. The Company
continues to empower its people and provide a stimulating
professional environment to its staff to excel in their respective
functional disciplines. Campus Ambassadors have been
nominated from internal resources, to promote the brand image
of the Company at leading campuses.
Process initiatives such as Enterprise Resource Planning
(implementation of SAP-HR module) and rationalization of
manpower are aimed to make the businesses more efficient and
agile.
It is expected that the above initiatives together with business
objectives will steer the Company towards its vision of becoming
a leading Indian multinational.
PLRIORMANCL OI SUBSIDIARY
AND ASSOCIATL COMPANILS
SUBSIDIARY COMPANIES
Larsen & Toubro Infotech Limited
(Formerly L&T Information Technology Limited)
The Company, a wholly-owned subsidiary, is in the business
of providing software solutions tailored for varied applications
and industries. During the year, the name of the Company
was changed to reflect and leverage the brand equity of L&T.
The Company focuses on four broad verti cal s, vi z.
Manufacturing, Utilities, Financial Services and Telecom
Services. As a de-risking strategy, efforts are being made to
increase the domestic business, particularly in defence,
banking and government sectors.
The Company operates in a highly competitive environment
and expects to benefit from the shift in the customer preference
for fewer and more reliable vendors who can provide a more
comprehensive range of IT services.
The total income of the Company, including its wholly-owned
subsidiary, Larsen &Toubro Infotech GmbH, for 2001-2002 at
Rs. 281 crore has registered a 11% growth over the previous
year. Nearly 93% of the Company’s revenue is from overseas
markets. The Company has earned a profit after tax of Rs. 36
crore for 2001-2002.
The US market continues to be the leading destination
contributing 57% to the total software exports while Europe
and Japan contributed 23% and 8% respectively.
The Company presently has more than 121 active clients, with
56 new clients added during the year. Repeat business from
existing customers remained strong at 88%.
The Company continued to successfully nurture long-term
relationships with several of its large customers. The Company’s
focus on its verticals and the thrust on quality with SEI CMM Level
5 certification of its European operations are expected to position
the Company as a premier IT solutions provider.
LARSEN & TOUBRO LIMITED
38
L&T Finance Limited
The Company, a wholly-owned subsidiary of L&T, is engaged
in the business of providing lease, hire purchase and other
financing facilities. The Company focuses on financing of
construction equipment and aids the sale of L&T’s construction
equipment in a significant way. Apart from L&T, the client profile
of the Company’s lease portfolio includes many reputed
multinational companies. During the year, the Company
commenced financing of dealers of tractors manufactured by
L&T-John Deere Private Limited.
The total income of the company for 2001-2002 was Rs. 75
crore (Rs. 97 crore for the 15 months period ending March
31,2001). The Company’s post tax profit at Rs. 11 crore for the
year is higher by about 25% than the post tax profit reported
for the previous 15 month period.
HPL Cogeneration Limited
The Company, which is a subsidiary of L&T, runs a 116 MW
cogeneration power plant on BOO basis to supply power and
steam to Haldia Petrochemicals Limited, the other stakeholder
in the Company.
The total income of the Company for the year 2001-2002 at
Rs. 152 crore is at the same level as in the previous year. The
Company has earned a lower profit of Rs. 37 crore for the
year as compared to Rs. 58 crore in the previous year, due to
provisioning of Rs. 25 crore for deferred tax liability.
L&T Infocity Limited
The Company is a joint venture between L&T and Andhra
Pradesh Industrial Infrastructure Corporation Limited (APIIC).
The Company is engaged in the business of development
and maintenance of information technology parks in Andhra
Pradesh. The Company is developing the HITEC City
(Hyderabad Information Technology Engineering Consultancy
City) in Hyderabad, over 151 acres of land in phases with an
overall outlay of Rs.1500 crore.
The first phase of development at Hitec City is the Cyber Towers
building with 5.25 lakh square feet of office space, constructed
and marketed successfully to various IT companies. The
second phase is the Cyber Gateway, which will offer 7.8 lakh
square feet of office space.
The Company has also promoted a subsidiary, Hyderabad
International Trade Expositions Ltd. (HITEX), for development
of an exhibition center of international standards, in Hyderabad.
The total income of the Company for 2001-2002 at Rs. 71
crore has more than doubled over that of the previous year.
The company has earned a post tax profit of Rs. 13 crore for
the year.
The Company’s plans include development of a residential
complex on 87 acres of land, adjacent to HITEC City. The
Company also proposes to undertake consulting services for
setting up IT Parks by other developers in other States.
L&T Equipment Leasing Company Limited
The Company, a wholly-owned subsidiary of L&T, has been
formed to provide construction equipment on operating lease
to L&T and other established entities in India. Currently, the
Company is predominantly catering to the equipment
requirements of L&T.
The total income of the Company for 2001-2002 was Rs. 3.9
crore (Rs. 1.0 crore in the previous year). The Company earned
a post tax profit of Rs. 0.5 crore during the year.
The National Highways Authority of India (NHAI)’s initiative to
accelerate the integrated national road network provides
opportuni ti es i n constructi on equi pment l easi ng. The
Company’s plans include leasing out sophisticated road
building equipment like hot mix plants, sensor pavers etc. to
leading construction contractors. Through the Company’s
operations, L&T proposes to improve the utilization and
maintenance of its construction equipment.
India Infrastructure Developers Limited
The Company, a wholly owned subsidiary of L&T, was formed
as a special purpose vehicle to provide a 2x45 MW captive
cogeneration plant on lease to Indian Petrochemicals
Corporation Limited (“IPCL”) at their Gandhar petrochemical
facility (Gujarat). The Company is receiving the lease rentals
from IPCL as per agreed schedule.
The Company earned a total income of Rs. 74 crore during
2001-2002 as compared to Rs.77 crore in the previous year.
The Company incurred a total loss of Rs.30 crore including
deferred tax provision of Rs.25 crore.
Tractor Engineers Limited
The Company manufactures and sells
a) undercarriage systems for excavators, crawler tractors, and
bulldozers
b) material handling equipment like apron conveyors
c) spares for oil field equipment, etc.
Pursuant to the sale of 50% stake by Caterpillar Overseas
S.A. to L&T in January 2002, the Company is now a wholly-
owned subsidiary of L&T.
The total income of the Company for 2001-2002 was lower at
Rs. 32 crore (Rs. 39 crore in the previous year). The Company
incurred a loss of Rs. 1.5 crore during the year.
Competition from imported undercarriage systems at lower
prices have eroded the Company’s market share and margins
over the years. The decline in sales during 2001-2002 is also
attributable to a lower off-take by L&T-Komatsu – an associate
company whose operations were affected by labour unrest.
Loss for the year 2001-2002 includes a provision of Rs. 2.96
crore on account of impairment of assets located at the Navi
Mumbai plant. The Company is exploring possibilities of
expanding the product range to improve profitability.
Narmada Cement Company Limited
The Company, a subsidiary of L&T, manufactures and sells
grey portland cement. The Company’s plants, having a
combined capacity of 1.50 million tonnes, are located at
Jafrabad & Magdalla in Gujarat and Ratnagiri in Maharashtra.
During the year 2001-2002, the clinker despatches increased
by 4% to 12.43 lakh mt. The Company achieved a turnover of
Rs. 258 crore as against Rs. 247 crore in the previous year.
The improvement in prices witnessed in the first quarter of the
year could not be sustained and the prices remained weak
during the balance period of the year. The loss during the
year was lower at Rs. 17 crore (excluding deferred tax assets
of Rs. 1.3 crore) as against Rs. 20 crore in the previous year,
mainly due to improvements in operational efficiencies and
cost reduction initiatives.
The Company continues to be a potentially sick company within
the meaning of the Sick Industrial Companies (Special
Provisions) Act, 1985. However, continuous efforts are being
made to improve the performance of the Company.
Larsen and Toubro Ceylinco (Private) Limited
The Company is a joint venture between L&T and the Ceylinco
Group, Sri Lanka. The Company is a major player in the Sri
LARSEN & TOUBRO LIMITED
39
Lankan cement market, importing bulk cement from L&T and
marketing the same locally, in bags and in bulk. The Company
achieved a 13% market share in its second year of operations.
The total income of the Company for the financial year January
– December 2001 was Rs. 93 crore (Rs. 54 crore in the
previous year). The Company incurred a loss of Rs. 3 crore
(loss of Rs.13 crore in the previous year). The Company plans
to re-capitalize its balance sheet to strengthen the networth .
The supply overhang and competition from global majors has
reduced the realization, thus affecting profitability. Recent
reduction in Sri Lankan customs duty for bulk cement imports
from India should augur well for the Company as landed costs
reduce. The introduction of Value Added Tax should stabilize
cement prices across the country.
Narmada Infrastructure Construction Enterprise Limited
The Company is a special purpose vehicle with a 15-year
ownership/tolling rights in respect of 2 bridges at Zadeshwar
across the river Narmada in Gujarat on National Highway 8.
Traffic during the first full year of operations of the Company
has been lower than expected. The total income of the
Company for 2001-2002 is higher at Rs. 20 crore as compared
to the previous year (Rs. 8 crore). The company has incurred
a loss of Rs. 7 crore for the year.
A proposal for tariff rationalization has been submitted to the
appropriate authorities, which, if approved, should increase
revenues and improve the profitability of the Company.
L&T Western India Tollbridge Limited
The Company enjoys a 10 year ownership and tolling rights in
respect of the bridge across the river Watrak and its approach
roads on National Highway 8. The bridge was opened to
commercial traffic in March 2001.
The Company has earned a total income of Rs.12 crore during
2001-2002 (Rs.1 crore during the previous year) and has
posted profits of Rs.1.2 crore in its first full year of commercial
operations.
L&T Transportation Infrastructure Limited
The Company is a special purpose entity owning the property
and tolling rights of the 28 kilometer Coimbatore Bypass Road
and a 2 lane Bridge across river Noyyal (Athupalam) on
National Highway 47. The tolling rights cover the concession
period (including construction period) of 31 years for the bypass
and 21 years for the Bridge. The performance of the Company
is dependent on the volume of road traffic.
The Company earned a total income of Rs. 9 crore during
2001-2002 (Rs. 8 crore in the previous year) and incurred a
loss of Rs. 6 crore mainly due to the loss of toll revenue,
caused by toll collection problem for the Bridge at Athupalam.
The Company has taken up the issue with the Central/State
Governments and is hopeful of a solution during the next year.
L&T Capital Company Limited
The Company, a wholly-owned subsidiary of L&T Finance
Limited, is a SEBI-registered merchant banker and is engaged
in fee-based intermediation in project advisory, money market
and capital market segments. The Company earned a higher
income of Rs.1.9 crore for the year 2001-2002 and a profit of
Rs.0.23 crore.
L&T Netcom Limited
L&T Netcom Limited, a fully owned subsidiary of L&T, is
engaged in the business of providing internet services. The
Company has an ‘A’ Category (all India level) ISP licence and
presently exclusively caters to the in-house connectivity
requirements of the L&T Group. Mission critical applications
such as SAP, instant messaging, e-business are deployed
using the infrastructure provided by the company.
The year 2001-02 has been the first year of commercial
operations for the Company. The Company earned a total
income of Rs. 3 crore and incurred a loss of Rs. 1 crore during
the year.
L&T Trade.com Limited
The Company, a wholly-owned subsidiary of L&T Finance
Limited, was engaged in providing software solutions in
internet-based trading platforms for financial products such as
securities, mutual funds etc. Following a change in the business
profile, the Company’s domain expertise has been relocated
to Larsen &Toubro Infotech Ltd. for its Financial Services
Practice and the operations of L&T Trade.com have been fully
integrated with Larsen & Toubro Infotech Limited. The Company
has incurred a loss of Rs. 3 crore for the year 2001-2002.
ASSOCIATE COMPANIES
Audco India Limited
The Company, a joint venture between L&T and the Flowserve
Group (US), is engaged in the manufacture and sale of
industrial valves, safety relief valves and pneumatic actuators.
The quality of the Company’s products have been certified by
internationally accredited agencies. Currently, around 50% of
the Company’s revenues accrue out of exports. Technical
skills, leading to product innovations, a strong distribution set-
up and an optimal cost structure are key strengths of the
Company. Aided by a 56% increase in export turnover, the
Company achieved sales of Rs.214 crore (Rs.176 crore in the
previous year) and a profit after tax of Rs. 21.6 crore (Rs. 17.1
crore in the previous year) during 2001-2002.
The scenario for the year 2002-2003 appears promising, with
healthy order backlog of Rs.93 crore. While domestic business
growth may continue to be sluggish, export opportunities in
the refinery sector and increased offtake by Flowserve will
provide growth impetus.
Ewac Alloys Limited
The Company, a j oi nt venture between L&T and
Eutectic+Castolin Group, Switzerland, is a market leader in
the business of maintenance & repair welding and welding
solutions for conservation of global metal resources. The
principal products and services comprise maintenance & repair
electrode consumables, specification grade electrodes,
flux-cored welding wires, wear plates/parts, welding equipment
etc., The marketing of the Company’s products in India is done
by L&T.
The industrial downturn in the economy has had a negative
impact on the demand for welding consumables. Sluggish
market conditions coupled with cheap imports and low priced
products from small scale industries have affected the
Company’s performance in the year under review.
The total income of the Company during 2001-2002 was Rs.55
crore (Rs. 63 crore in the previous year) and the profit after tax
Rs.9.3 crore (Rs.10.4 crore in the previous year).
The Company is considering production of continuous wire
electrodes, with necessary investments. An improved business
environment in 2002-2003 along with introduction of newer
products and positive impact of various cost control initiatives
is expected to contribute to a better performance of the
Company.
LARSEN & TOUBRO LIMITED
40
L&T-Sargent & Lundy Limited
The Company is a joint venture between L&T and Sargent &
Lundy LLC, USA, established for providing the entire spectrum
of engineering services and solutions to projects in the power
sector.
The Company caters to the captive requirements of its parent
entities and a few niche clients in India and abroad. The
Company recently completed the engineering services related
to a 500 MW combined cycle power plant of General Electric,
USA. Work on three more plants of similar size and
configuration is in progress.
The total income of the Company for 2001-2002 at Rs. 26
crore has registered a 78% growth over the previous year.
Profit after tax more than trebled during 2001-2002 to touch
Rs.9.3 crore.
The Company has good potential of enhancing its business
from the US and other countries.
L&T-Chiyoda Limited
The Company, a joint venture between L&T and Chiyoda
Corporation, Japan, is an engineering consulting firm that offers
complete range of design and engineering services to the
hydrocarbon sector.
The services offered include technology/licensor selection,
preparation of techno-economic feasibility reports, development
of process design package, front-end engineering and design,
project management consulting, etc.
There were no major fresh investments in 2001-2002 in the
Indian hydrocarbon industry other than the revamping of the
existing production facilities in the refinery sector to produce
cleaner fuel. The Company is continuously working on
application of information technology to simplify and automate
the process engineering discipline.
The total income of the Company for 2001-2002 at Rs.14.3
crore was higher by 16% over the previous year. The company
earned a profit after tax of Rs.1.2 crore (Rs.1.0 crore in the
previous year).
In line with L&T’s strategy of tapping business opportunities in
Middle East and South-East Asia, the Company looks forward
to growth prospects in these markets in the coming years.
L&T-Ramboll Consulting Engineers Limited
The Company, a joint venture between L&T, Ramboll A/S,
Denmark and IFU (the Danish Industrialization Fund for
Developing Countries), offers international quality engineering
and project consulting services in the transportation sector,
especially for projects relating to ports and harbours, roads
and bridges, railways, tunnels and airports.
The total income of the Company at Rs. 7.8 Crore for
2001-2002 has registered an increase of over 16% over the
previous year. Notwithstanding the thrust on infrastructure
projects, financial closure has been a challenge for many BOT
projects in the roads and ports sector. Delays in project
implementation have restricted the growth opportunities for
the Company. Measures announced to promote foreign direct
investments in the infrastructure sector are expected to favour
the industry in the years to come.
L&T-Demag Plastics Machinery Private Limited
The Company, a joint venture between LTM Limited and
Demag Ergotech GmbH, Germany, manufactures and sells
Injection Moulding Machines for the plastics industry. The
Company commenced operations in January, 2001.
The Company enjoys a leadership position in the organized
sector. However, the Company faces strong competition from
imports.
The Company secured good orders from major players in
various segments of the Indian plastics industry like packaging,
writing instruments and automobiles. The exports of the
Company’s products is channelled through Ergotech’s global
marketing network. In 2001-2002, the Company’s products
were exported to Israel, Australia and Sudan.
The Company’s total income for 2001-2002 was Rs.37 crore
(Rs.9.4 crore for 3 months during the previous year) and the
profit after tax was Rs.0.8 crore (Rs.0.4 crore in the previous
year). The Company expects the order booking to increase by
20% during 2002-2003.
L&T-Niro Limited
The Company is a joint venture between L&T and Niro A/S,
Denmark, and is engaged in EPC business specific to dairy,
chemical and pharmaceutical sectors.
The slowdown in the domestic economy had its impact on the
Company’s performance, as order booking during 2001-2002
at Rs.14.42 crore was lower by 20%. However, the Company
managed to bag a few contracts in polyester chips, a relatively
new line of business, with Barr-Rosin technology from UK.
The total income of the Company for 2001-2002 was lower at
Rs.24 crore (Rs. 31.9 crore in the previous year) and the net
loss for the year was Rs.3.1 crore (Rs.3.4 crore profit after tax
in the previous year).
The Company expects growth from automated powder plants
in the dairy industry and polymer chip production units.
L&T-John Deere Private Limited
The Company is a joint venture between L&T and Deere &
Company, USA, and is engaged in the manufacture and sale
of agricultural tractors. The manufacturing facilities located at
Sanaswadi, Pune are capable of producing 30,000 tractors
per annum.
The Company has achieved the highest market share in the
55 HP segment within a short span of 18 months, although
volumes in this segment are low. The company aims to
increase capacity utilization and sales by introducing models
in other segments. The 40 HP model was launched in October
2001 while a 47 HP model, with a new heavy duty drive train
was launched in May 2002.
The Company continued to expand its distribution network
and has appointed 110 dealers covering 16 States and Nepal.
The total income of the Company was Rs.91.25 crore for the
year 2001-02, as against Rs.29.77 crore in the previous period
(5 months). Cost reduction efforts like indigenisation by local
purchase of key component parts continue and the favourable
impact is likely to be felt in the coming years. The Company
expects to break even in the next couple of years on reaching
sales of around 16,000 tractors per annum.
L&T-Komatsu Limited
The Company, a joint venture between L&T and Komatsu
Limited, Japan is a leading manufacturer of hydraulic
excavators and high pressure hydraulic components in the
country.
The market for earthmoving/construction equipment declined
during the year, primarily due to the recession in industrial
and construction activities in the country. However, substantial
investments in the road sector compensated the demand
shortfall from other sectors. The Company’s products face stiff
competition from other local manufacturers and imports.
New products launched by the Company included a 7 Ton
LARSEN & TOUBRO LIMITED
41
class excavator model PC 71 along with an upgraded version
of 35T 180CK excavator. The initial response for these new
models has been encouraging.
The performance of the Company during the year under review
was affected by a strike at its plant. The strike was called off
and normalcy restored in January 2002. The Company’s sales
were lower at Rs. 172 crore (Rs. 227 crore in the previous
year) and so was the net loss at Rs.1.5 crore (Rs.1.7 crore in
the previous year). The Company expects to post an improved
performance during the year 2002-2003 and beyond, due to
the anticipated recovery in the domestic economy.
L&T-Case Equipment Private Limited
The Company is a 50:50 joint venture of L&T and Case
Corporation, USA engaged in the manufacture and sale of
earthmoving machinery. The marketing of the Company’s
products is done by L&T. The main product lines comprise
Loader Backhoes (with market share of around 15%) and
Vibratory Compactors (with market share of around 30%).
The government’s recent initiative to encourage investment in
the infrastructure sector, particularly in roads, is expected to
spur demand for the Company’s products. The Company has
launched initiatives for improving the product design through
technology upgradation and for enhancing productivity.
The total income of the Company grew by 14% to reach
Rs.105 crore (Rs.92 crore in the previous year) and the profit
after tax at Rs.4.1 crore (Rs.3.4 crore in the previous year)
increased by over 21% during 2001-2002.
With the introduction of a new model of Loader Backhoe using
CNH technology and improved in-house models of Vibratory
Compactors, the Company aims to improve domestic market
share and consequently, the financial performance during the
year 2002-2003.
Larsen & Toubro (Oman) LLC
The Company is a joint venture between L&T and Zubair
Enterprises LLC, a leading business group in Oman. It offers
comprehensive services in the construction field, with
specialization in turnkey projects. Major orders currently under
execution include the onshore component of the Salalah Power
Project. The Company has earned a total income of Omani
Riyal 4.95 million during the calendar year 2001. The
Company plays a significant role in furthering the L&T Group’s
business interests in Oman and the neighbouring regions.
Larsen & Toubro (Saudi Arabia) LLC
The Company, a joint venture between L&T and a local partner
in Saudi Arabia, was formed to take advantage of the
construction project opportunities in Saudi Arabia. The
Company offers turnkey solutions in specialized fields of oil &
gas, petrochemicals, fertilizers & chemicals, infrastructure,
buildings, factories, power transmission & distribution and
telecommunication projects. The Company earned a total
income of Saudi Riyal 34.07 million and a profit of Saudi Riyal
1.73 million during the calendar year 2001.
International Seaports Pte. Limited
The Company, a joint venture between L&T, Precious Shipping
Public Company Limited, Bangkok and SSA Inc., USA, was
formed to provide integrated services with respect to design,
development, building and operating seaport terminals in
South and South East Asia.
The company, through its project management subsidiary in
India, International Seaports (India) Pvt. Ltd., has successfully
bid for port projects in Orissa, Andhra Pradesh and West
Bengal. The projects which are being developed through
separate project companies, are not yet financially closed.
L&T as a Corporate Citizen
Good corporate ci ti zenshi p has been the phi l osophy
underpinning the operations of the Company since its
inception in 1938. Over the last six decades and more, the
Company has endeavoured to di scharge i ts soci al
responsibilities through various initiatives.
Community Welfare
Rural and Tribal Welfare
The Company has undertaken rural and tri bal wel fare
schemes in the villages surrounding many of its factories.
L&T’s community initiative VIKAS (Village Improvement Know-
how and Skills) is a multi-pronged development scheme
which begins with improving health and increasing awareness
about health issues. The services include family planning
operations, immunization, post and ante natal care and
tuberculosis eradication.
Support to Health Delivery systems
The Company runs a full-fledged Health Centre at Andheri, a
Western suburb of Mumbai . Thi s centre provi des free
di agnosti c and medi cal faci l i ti es to the nei ghbouri ng
community and has done award-winning work in the areas of
family planning, leprosy and T.B. Widespread health facilities
to the community are provided at L&T’s various cement plants.
Environment Conservation
The Company is committed to environment conservation and
deploys state-of-the-art pollution control equipment at all its
cement manufacturing facilities. Afforestation programmes to
develop greenery are undertaken in the surroundings of all
L&T units.
Encouraging Education
In the area of strengtheni ng educati on, the Company
encourages the children of its employees to seek educational
excellence by recognising their academic achievements
through award of cash i ncenti ves. The Company has
established its own L&T Institute of Technology, Mumbai
providing engineering diploma courses to the children of its
employees.
The Company has set up ‘Balwadis’, schools for village
children in the vicinity of its manufacturing facilities. The
children’s progress is constantly monitored to spur them
towards better performance.
L&T has i nsti tuted chai rs and l ectures i n professi onal
institutions to promote advancement of knowledge in premier
institutions like IIM-Ahmedabad, XLRI-Jamshedpur, IIT-
Mumbai etc.
Disaster Relief
The Company has been prompt in responding to the needs
of the nation in disaster situations, the latest being the Gujarat
earthquake. It adopted two villages in Kutch - Kirai and Nilpar
in the Rapar taluka, for rehabilitation. The Company deployed
its earth moving equipment and medical equipment in rescue
and relief operations in the earthquake affected parts of
Gujarat. In addition, it offered support for the maintenance and
upkeep of the equipment used by other relief agencies.
Beyond growth and profitability, the Company’s mission
involves pursuit of business ethics and social responsibility.
The Company will continue in its initiatives to reinforce its
credentials as a good corporate citizen.
doc_959631996.pdf
L&T undertakes engineering, design and construction of
infrastructure and industrial projects covering civil,
mechanical, electrical and instrumentation engineeringsectors through its ECC
(Engineering, Construction and
Contracts) Division. ECC is
India’s largest construction
organization, having many of
the country’s prized landmark
constructions to its credit.
Construction, which was
recognized as “industry”
recently, serves projects worth
Rs.240,000 crore and employs
over 35 million people.
However, construction industry
still remains very fragmented
with traditional methods and
manual skills dominating, with very little mechanization.
The strengths of ECC Division are in contrast to this
scenario. ECC Division offers complete turnkey solutions
including engineering and use of mechanized methods
of construction and modern management principles on
the lines of construction majors of the developed world.
This has helped the Division to establish itself as an
undisputed leader in the construction industry. In-house
engineering skills available at the Engineering Design
and Research Centre enable the Division to undertake
complete turnkey projects across sectors. L&T’s customers
have the advantage of getting the project completed on
time – many a time setting world records - to high quality
and at competitive prices.
LARSEN & TOUBRO LIMITED
27
CONSTRUCTION
1. AN OVERVIEW
L&T undertakes engineering, design and construction of
infrastructure and industrial projects covering civil,
mechanical, electrical and instrumentation engineering
sectors through its ECC
(Engineering, Construction and
Contracts) Di vi si on. ECC i s
Indi a’s l argest constructi on
organization, having many of
the country’s prized landmark
constructions to its credit.
Construction, which was
recogni zed as “i ndustry”
recently, serves projects worth
Rs.240,000 crore and employs
over 35 mi l l i on peopl e.
However, construction industry
still remains very fragmented
with traditional methods and
manual skills dominating, with very little mechanization.
The strengths of ECC Division are in contrast to this
scenario. ECC Division offers complete turnkey solutions
including engineering and use of mechanized methods
of construction and modern management principles on
the lines of construction majors of the developed world.
This has helped the Division to establish itself as an
undisputed leader in the construction industry. In-house
engineering skills available at the Engineering Design
and Research Centre enable the Division to undertake
complete turnkey projects across sectors. L&T’s customers
have the advantage of getting the project completed on
time – many a time setting world records - to high quality
and at competitive prices.
2. BUSINESS ENVIRONMENT
Inadequate investment in industrial and infrastructure
projects has resulted in lower business available for
construction companies in the large project segment.
Increased opportunities in individual house constructions
and road projects have helped some smaller contractors
to join hands with international companies, especially
from Malaysia, for the road sector. Contracts awarded
under the National Highway Development Programme
showed a decline in prices by nearly 4% over the last
year’s prices. The inputs from the international companies
for road projects, however, being minimal, this could
probably affect the quality of the projects.
Consequent to the slowdown in the investment climate
with no major industrial projects, the business mix of the
Division has tilted more towards social and physical
infrastructure projects such as housing, hospitals, IT
parks, expressways, bridges, ports, water and effluent
treatment projects. In the changed business environment,
the Division has positioned itself in the area of application
of technologically innovative solutions to deliver quality
and in shortest time. For instance, in the Housing sector
the Division chose to concentrate only on system housing
where application of mechanized forms of construction
leads to speedy completion and economy. Similarly, in
road & bridge construction the Division is credited with
i ntroduci ng many technol ogi cal i nnovati ons – l i ke
segmental construction for the first time in India.
3. SIGNIFICANT INITIATIVES
Gi ven the present busi ness scenari o i nvol vi ng
international competition and consequent pressure on
operating margins, the Division has evolved strategies to
exploit its strengths and enhance business prospects and
profitability. In addition to the large domestic market,
opportunities abroad, especially in the neighbouring
countries, are also considered while formulating the
strategies. Some of the strategies are detailed below:
a) Operational Improvements
The Division has streamlined many of its operations
to become more efficient, productive and profitable.
munug.n.n:'o 11o.uoo1on & AnuI,o1o
The management of Larsen & Toubro Limited presents below its
analysis covering the segment-wise performance of the Company
for the year 2001-2002 and an outlook for the future. The report
conveys expectations on future performance based on an
assessment of the current business environment. These could
vary based on future developments.
The Company has performed well during 2001-02 to maintain its
leadership position in the various businesses. The business
conditions during the year under review were quite challenging,
with domestic industrial sector registering a marginal growth of
2.7%. The industrial downturn has been most visible in the capital
goods sector which witnessed a negative growth of 4.0%. A
higher agriculture sector growth supported by a good performance
by the services sector moderated the impact of low industrial
growth.
To overcome the challenging environment, the Company has
launched several focussed initiatives such as cost reduction,
value chain migration, resource optimization, extensive use of
information technology and new HR processes. All these initiatives
have contributed to sharpening the competitive strengths of the
Company. Well-defined value drivers and benchmarking against
the best practices have percolated to all the business segments
of the Company. The positive outlook derived from such internal
process developments can only be sustained and enhanced in
an improved external environment. The Government’s thrust on
further reforms articulated through the recent Union Budget and
the Exim policy reflects an effort to create a more vibrant industrial
climate in the country.
The Company’s major focus is to strengthen the competitive
positioning of its businesses and with the renewed thrust on
international business, transform the organization into a successful
Indian multinational corporation.
The Company’s business is organized around the following
major segments :
Name of Segment % of Segment Revenue
G Engineering & Construction (E&C) 57
Construction E & C Projects Heavy Engineering
G Cement 30
G Electrical & Electronics 8
G Others 5
In the backdrop of a demanding business environment, given
below are the highlights of the performance of the Company
during the financial year 2001-2002 along with the near term
business perspective. A brief summary of the activities of major
subsidiary and associate companies is also included.
A. Ramakrishna
LARSEN & TOUBRO LIMITED
28
The Division strives for maintaining a high level of
equipment reliability and availability. A subsidiary
company, L&T Equipment Leasing Company Ltd., has
been formed to lease out surplus equipment to
improve Plant & Machinery utilization. Competency
Cells are created in specialist areas such as use of
system formwork and blended cement. Achieving
global standards in safety has given the Division an
edge over competi ti on and hence the safety
standards are continuously being monitored and
maintained. People-centered HR systems is another
focus area for the Division.
b) Cost Reduction
The Di vi si on i s focussed on achi evi ng cost
leadership. Prudent benchmarking with international
leaders operating under similar circumstances, cross
project comparisons, target productivity for resources
and close monitoring have been the key aspects of
cost reduction exercise. Development of specialist
sub-contractors, allocation of project risks and long-
term rate contracts for material procurement is
expected to aid in achieving cost reduction. As
materials constitute a major portion of operating cost,
adopting efficient materials procurement methods
including e-procurement is being pursued.
c) Use of Information Technology
Operations of the Division are increasingly being
conducted using EIP - Enterprise Information Portal.
EIP i s a web-based end-to-end sol uti on that
encompasses both the Design and Construction
phases of a proj ect. Annual budgeti ng, j ob
performance moni tori ng, e-procurement, asset
management and financial accounting, etc. are under
integration into this single platform covering a large
number of sites.
d) International Operations
To overcome i nadequate oppor tuni ti es i n the
domestic market, strategic initiative has been taken
to expand our business in the neighbouring countries
where the Division has already established a fair
name. International operations have been organized
into four distinct areas viz. Middle East, South East
Asia, South Asia, Russia & Central Asia serviced by
four Area Offices. Business in Mauritius and Africa
will be developed on a selective basis. The Division
has earned a good reputation by constructing two
international class stadia in Qatar. ECC is currently
building four hospitals in Saudi Arabia and a major
training centre in Kuwait. Our traditional business like
transmission line towers and substations in the
Middle East continues to grow. During the year,
substantial work has been completed for large
irrigation projects in Bhutan and Nepal and for power
projects in Oman and Sri Lanka. The Division has
commenced work on a Coke Calcination Project on
EPC basis in Rotterdam, the Netherlands.
e) Collaborations & Joint Ventures
As a leader in construction business in India, it is
necessary to partner with international majors for
large and complicated jobs leading to enhancement
of ECC’s technical and project management skills in
addition to sharing of the project risks. A breakwater
construction project on the western coast of India, the
LNG terminal at Hazira and the Metro Rail project in
New Delhi are examples of such a strategy. ECC
plans to extend this strategy to Hydropower, Water
and effl uent treatment and other Heavy Ci vi l
Engineering projects. For executing some large road
projects in India, the Division has collaborated with
major Indian companies in order to synergize the
mutual strengths. Such collaborative approaches
could be extended to other sectors too on a selective
basis.
4. MAJOR ORDERS BOOKED / EXECUTED
Major orders booked by the Division during the year
2001-02 include: Rs. crore
Design, Engineering, Manufacturing
& Commissioning of Electrical facilities,
Service Water System & Supply Package
for Nuclear Power Corpn.of India Ltd. 577
Construction of Jharkhand Grand Trunk
road for National Highways Authority of India 260
Construction of access road and boundary
wall along with V & VI package at Hazira Jetty
for Hazira LNG Pvt. Ltd./ Hazira Port Pvt. Ltd. 252
Construction of bridges over Gowtami & Vasista
rivers for National Highways Authority of India 203
Effluent Disposal System for Gujarat
Industrial Development Corporation 175
RMC Supply and Electrical work for Delhi
Metro Rail Corridor project for International
Metro Civil Contractors 173
Widening of National Highway between
Tumkur & Sira for National Highways
Authority of India 153
Construction and electrification of fruit market
and civil work at Bhuj & Ahmedabad for
National Dairy Development Board 126
Widening of road between Kanchi-Walajapet
for National Highways Authority of India 122
Highway from Satara to Kolhapur (NH 4)
for Maharashtra State Road Development
Corporation Ltd. 118
NC–8 Water Supply Project for Gujarat
Water Infrastructure Ltd. 105
220 KV overhead line connection to Samha
Grid and 220/23 KV substation for Abu Dhabi
Water & Electricity Authority (UAE) 54
The Division completed the following major projects during
the year 2001-02:
Khandala-Lonavala Bypass – Elevated corridor – part
of Mumbai-Pune Expressway
Coal Handling Plant (4400 MTPA) for Paradip Port
Trust
Jack Welch R&D Center for GE-ITC, Bangalore
330 MW power project at Pillaiperumalnallur, Tamil
Nadu
Structures & Equipment erection for Chettinad
Cements & Dalmia Cements
21 MW power project at Mithapur for Tata Chemicals
Anode Baking furnace at Angul for Nalco
Wagon Tipplers for Bakreshwar Power plant and
Ambuja Cement
Reclaimer for Vizag Port Trust
Water supply schemes in Tamil Nadu
Offsite piping works and Hydrogen plant at IOCL,
Barauni
Vizag-Secunderabad Pipeline for HPCL
LARSEN & TOUBRO LIMITED
29
OFC laying for Bharti Telesonic Ltd. at various places
Sports stadia in Qatar
In addition, Blast Furnace rebuild at TISCO, Jamshedpur
was completed subsequently in a world record time.
5. FUTURE OUTLOOK
In the near term, the Union Budget 2002 is likely to
encourage development of airports, special economic
zones, urban infrastructure projects and improvements to
the power distribution systems. Higher allocations for
various sectors have set in a favourable climate for new
investments. This is expected to provide opportunities for
ECC for securing large orders during the next financial
year, especially in the areas of urban infrastructure,
power distribution and rural roads. Further, dismantling
of APM in the petroleum sector could possibly open up
some opportunities in areas like cross-country product
pipelines and retail outlets.
Construction Industry is seeing a visible shift from “Owner
funded managed construction projects” to “Non-recourse
funded EPC projects”. In the longer term, privately funded
i nfrastructure proj ects under the Publ i c Pri vate
Participation (PPP) format are likely to increase. Enabling
legal framework and the concept of user charges gaining
acceptance could facilitate more projects in this format.
The Division has already made a beginning by promoting
roads, bridges, ports, IT parks and Exhibition Centres. In
addition, ECC is a partner in the consortium chosen to
promote the proposed Bangalore International Airport. The
experience of project promotion in PPP format and
operation of special purpose vehicles would give the
Division a lead over its competitors.
Focus on international operations would continue. ECC’s
leadership position in domestic markets, the past record
of successful project execution in overseas markets and
the global presence through international joint ventures
would be leveraged to exploit business opportunities
abroad, especially in the neighbouring countries.
Hitherto ECC is acknowledged as “Builders to the
Nation” and the Division would like to move on to
become “Builders of Nations” by its constructive
contribution to the development of infrastructure and
industrial growth.
6. AWARDS / RECOGNITION
ECC received the following awards during the year:
Overseas Construction Council of India (OCCI) award
for the outstanding performance during 2000-01 in
the following categories:
? ?? ?? Maximum value of contracts secured
? ?? ?? Second best in the category of maximum turnover
from Overseas Construction Contracts
? ?? ?? Maxi mum forei gn exchange earned and
repatriated from overseas construction contracts
? ?? ?? Maximum foreign business attempted
The Indian Institute of Bridge Engineers has conferred
five National Awards for Outstanding Bridges on ECC
Division and L&T’s JV L&T-Ramboll Consulting
Engineers Limited for excelling in bridge construction.
Constructi on Company of the Year Award by
Accommodation Times, a fortnightly magazine based
in Mumbai
Billimoria Award for Cyber Towers, Phase 1 of HITEC
City at Hyderabad received from the Association of
Consulting Civil Engineers, Bangalore.
ICI-McBauchemi e Award from Indi an Concrete
Institute for Most Outstanding Concrete Structures -
2001 to Chaitanya Jyoti at Puttaparthi in Andhra
Pradesh.
ACCE (Association of Consulting Civil Engineers,
Bangalore) Billimoria Award – 2002 for high-rise
building conferred on South City, Bangalore
Certificate of Recognition for highest safety standards
by American Society for Concrete Contractors in the
year 2001
L&C PROJLCTS
1. AN OVERVIEW
E&C Projects Division is the only Indian EPC Group pre-
qual i fi ed for executi ng l arge
process-intensive projects for oil
and gas, refinery, petrochemical
and fertilizer sectors. It is also a
player in Power Projects with two
large international projects under
execution. Our vision is to become
a world class, technology-driven
quality conscious Division with
emphasi s on val ue creati on
through turnkey proj ects and
proj ect management and
consultancy services.
2. BUSINESS ENVIRONMENT
The conti nuati on of the sl owdown i n the economy
deferred the i nvestment deci si ons resul ti ng i n
postponement of many projects. Private sector power
projects continue to be delayed till distribution reforms are
in place and payment security concerns are adequately
addressed. Slowdown in investments in the process sector
industries like fertilisers, refineries and petrochemicals
due to unfavourable demand and supply situation, has
affected the order prospects in this sector.
Intense competition from local and global players, all
competing for limited number of projects lead to very
aggressive pricing and pressure on the margins. Reduced
opportunities in the domestic sector encouraged us to
scout for opportunities abroad. Good track record of the
E&C Projects Division in the domestic sector helped in
getting pre-qualified for international projects in spite of
presence of global players in this area.
3. SIGNIFICANT INITIATIVES
The Di vi si on has l aunched several i ni ti ati ves for
enhancing the operational efficiency and the focus areas
of its business. Some of them are as under:
a) India-centric to a Regional Entity
We have a challenge ahead of us to transform
ourselves into a world class, operations oriented
organization.
We have defined the international boundary limits
within which E&C Projects Division will focus and
grow outwards from being a largely India-centric
organization.
Wi th thi s backdrop and al so to ensure cost
K. Venkataramanan
LARSEN & TOUBRO LIMITED
30
effectiveness and profitability, the following thrust
areas have been identified for implementation:
Staffing international organization with key
personnel and country managers.
Aligning individual SBUs with international thrust
through appropriate re-positioning of personnel
within SBUs.
Driving integration of IT into business and
measuri ng the cost effecti veness and
productivity improvements.
Ri sk Management, fi nanci al di sci pl i ne and
implementation of Value Drivers.
Initial efforts in this direction have been successful
with international business accounting for 27% of the
Division’s sales.
b) Risk management
A structured process has been evolved for risk
anal ysi s, eval uati on and mi ti gati on measures
encompassing all the project facets like engineering,
procurement, fabrication, construction, logistics,
contractual & commercial issues and country-specific
risks for enabling us to undertake complex projects
on diversified geographical basis.
c) Focus on Competitiveness
The year 2001-2002 also witnessed a significant
drive in the implementation of strategic initiatives to
improve our competitiveness against international
competitors with much wider experience.
These initiatives include:
cost reduction through global sourcing,
focus on new technol ogy areas to expand
business reach and
strengthening front-end engineering & design
capabilities.
We have been enhancing cost effectiveness and
building customer relationships through e-enabling
of our business operations.
d) Exploiting Information Technology
To compress cost, cycle time and distance, a number
of information technology oriented initiatives have
been implemented. These include:
Integrated project management system through
ERP,
Web-enabled speedy procurement through e-
commerce & reverse auction and
Knowledge management system specifically
developed to suit E&C requirements based on
IBM Lotus K station / Domino Doc Platform.
e) Human Resource Development
The well-established centers of excellence for front-
end engineering & design, detailed engineering,
technology innovation and research & development
are in a position to provide the required leadership
in technology engineering fields. Continuous efforts
are being made to upgrade the engineering and
project management skills through benchmarking
with worldwide major EPC players.
We have taken a major step towards capability and
competency building with a focus on leadership
devel opment through Capabi l i ty & Leadershi p
Development (CALD) programs and have trained
people in various functions like marketing, proposal
engineering, engineering, project management,
construction and quality. We are also enhancing
technical & engineering skills through E&C Project
Management Academy.
4. MAJOR ORDERS BOOKED/EXECUTED
In spi te of a sl uggi sh market wi th sl owdown i n
investments and predominance of cyclical projects, E&C
Projects Division has been successful in receiving some
prestigious large value orders like Hydrogen plant,
Sulphur recovery plant, Catalytic reforming unit, water
injection-cum-gas compression platforms and combined
cycle power plants.
The successful execution of complex & first of its kind
projects in the country and medium size projects in
Malaysia, Qatar, Dubai and Saudi Arabia, backed by a
strategic approach towards becoming a regional leader
has paved the way in securing prestigious large orders
such as 200 MW Gas Turbine Power Plant for Dhofar
Power in the Sultanate of Oman and 168 MW Combined
Cycle Power Project for AES Kelanitissa in Sri Lanka.
Some of the major orders booked during the year were:
Rs. crore
Bombay High North Water Compression
Platform (MNW) for Engineers India Ltd. &
ONGC Ltd. 606
EPC of Naphtha Hydrotreator, Catalytic
Reformer unit and Hydrogen Generation
Plant for Chennai Petroleum Corporation
Limited 445
Supply of piping, valves, equipment &
spares for Nuclear Power Corporation of
India Limited 266
Some of the major orders executed during the year were:
0.9 MTPA new cement plant for Chettinad Cement
Corporation Ltd., Karikalli, Tamil Nadu
Hydro-Treater Unit and Solvent De-waxing / De-Oiling
Unit Packages for IOCL-Digboi
Hydrogen Unit and Offsite & Utilities including
Electrical Substation for IOCL, Barauni
Additional Process Gas Compressor at HRC Platform
in Heera Field of ONGC Ltd.
Revamp of 3 nos. of Ammonia Reformers and supply
and erection of 2 nos. Fired Heaters (startup and
auxiliary) package for HFCL, Namrup
Design, Engineering, Procurement & Installation in
12 platforms - total 1963 MT for EIL-ONGC-Bombay
High North-Clamp On.
70 nos. Evaporator Exchangers for Desalination
Plant, total tonnage 505 MT for Sidem, France – Abu
Dhabi
5. FUTURE OUTLOOK
On the Indian scene, E&C Projects Division is geared up
to fully exploit emerging opportunities coming up in the
immediate future in upstream oil & gas projects, diesel &
motor spirit quality upgradation clean fuel projects, LNG/
LPG terminals, petrochemical projects like paraxylene &
PTA, revamp jobs in fertilizer and refinery sectors, deep
water exploration & offshore re-development, nuclear,
captive power & utility power projects.
LARSEN & TOUBRO LIMITED
31
On the international front the main focus is on the Middle
East countries and a few select opportunities in other
countries. Opportunities exist in Refinery revamp, Co-
generation, clean fuel and oil & gas sectors. Many gas-
based open cycle projects are coming up in the Middle
East due to better gas availability and lower complexities
in implementation and operation.
Initiatives like the setting up of the International Business
Development Group, finalization of agents and posting
of country representatives in target countries, would
enhance the abilities to capture international business
opportunities.
6. AWARDS/RECOGNITION
L&T’s design and development centers such as Front End
Engineering & Design, Research & Development and
Technology & Innovation Centre are certified to ISO 14001
and have won awards from ICMA and NACE during the
year 2001-02.
E&C Proj ects Di vi si on and Mi ni stry of Informati on
Technology, Government of India together launched the
Information Security Management System, which was a
project of national significance.
HLAVY LNGINLLRING DIVISION
1. AN OVERVIEW
Heavy Engineering Division with its strong engineering
capabilities and state-of-the-art manufacturing facilities
has established a leadership
position in manufacture and
supply of highly critical Process
Plant & Industrial Equipment to
the core sector industries as
wel l as Rubber Processi ng
machinery for the Tyre Industry.
The busi ness uni ts and the
associ ated manufacturi ng
facilities located at Powai in
Mumbai and Hazira & Baroda in
Gujarat together specialise in
suppl y of cri ti cal pressure
vessel s, heat exchangers,
reactors, etc. to industries such as Fertilizer, Refinery,
Petrochemical, Chemical, Oil & Gas, Nuclear Power,
Aerospace & Defence. A manufacturing centre is also
opened recently at Visakhapatnam in Andhra Pradesh.
The Kansbahal unit of the Division in Orissa supplies
Industrial Machinery for Mines & Ports, Steel and Paper
& Pul p sector. The Chennai uni t i s dedi cated to
manufacture & supply of Rubber Processing Machinery
for the Tyre Industry. The Division also markets in India,
Industrial Valves and Plastic Processing Machinery
manufactured by L&T’s Joint Venture companies located
at Chennai.
2. BUSINESS ENVIRONMENT
The business potential for Process Plant Equipment in
India has declined due to reduced investments during the
last few years and delayed project clearances.
The refinery sector was awaiting major Government
policy on dismantling of Administrative Pricing Mechanism
and this delayed the investment in this sector during the
year. In the case of Rubber Processing Machinery,
competition is faced from low-cost Chinese manufacturers.
Though the market for traditional products - Mechanical
Tyre Curing Presses - is stagnating, the Division has
developed Hydraulic Presses which are in the process
of being tested and evaluated by the customers.
With the current thrust on road building projects, the
business unit at Kansbahal, Orissa envisages increased
domestic demand for Aggregate Crushing Systems. Steps
have been initiated to meet the emerging demands of the
customers for compl ete systems i ncl udi ng feedi ng
devices, screens, conveyors, etc. Efforts are also on for
export of impactors in CKD/SKD form. The Division has
enlarged its product range by developing wind mill
components both in cast & fabricated form which have
good potential for exports.
3. SIGNIFICANT INITIATIVES
The Division had anticipated the shrinking business
potential in domestic process plant equipment market and
has developed a long term plan with the following
strategic directions to counter the situation :
Reduce dependence on domestic market for the
conventional product lines such as the process plant
equipment
Significantly enhance export of such equipment
Focus on the emerging businesses like hi-tech
equipment & systems for Defence, Aerospace &
Nuclear Power.
Several steps have already been initiated by the Division
towards implementation of the above strategies with fairly
good success.
a) Thrust on Exports
The Di vi si on has fi ne-tuned i ts manufacturi ng
operations to meet the stringent global standards of
short cycle times, on-time delivery, cost, quality and
aesthetics. This has resulted in steadily improving
order booking and sales from the international
markets.
During the year, the manufacturing centres of the
Division have successfully gone through several
stri ngent qual i ty audi ts conducted by vari ous
international customers / their Process Licensors who
have subsequently placed export orders for critical
equipment. Major global hydrocarbon players have
also given contracts for their requirements of critical
equipment.
The Division’s exports which have been mainly to
Middle-East & Far-East, are now reaching USA,
Canada, Norway, UK, South Afri ca, Brazi l and
Australia. Initiatives are under way for entering China
and Australia for various petrochemical projects.
The manufacturing Unit at Chennai has significantly
i ncreased the export of Rubber Processi ng
Machinery. This product is exported to many countries
including Europe, South America, Africa, Middle-East
and South-East Asia. Through continuous R&D the
Chennai Unit has added new products like Tyre
Bui l di ng Machi nes and Hydraul i c Presses for
manufacture of Radial Tyres to the product range.
Over the last few years, the Division’s domestic-export
mi x for al l products i ncl udi ng Process Pl ant
Equipment and Rubber Machinery has steadily tilted
in favour of export market. Export orders account for
nearly 35% of the total orders booked by the Division
during 2001-02.
P.M. Mehta
LARSEN & TOUBRO LIMITED
32
Products are exported to more than 45 countries
around the world. This is representative of the higher
acceptability in the global markets.
b) Hi-Tech Products
Concrete steps have been initiated in the new
liberalized environment to establish a dominant
position for the Division in the hi-tech sector.
The initiatives taken include setting up of a large
state-of-the-art Computer ai ded Desi gn &
Engi neeri ng Center as wel l as Product Li fe
management setup.
Steps have been initiated to partner with some of the
best technology leaders in the world. These include
initiatives with firms in South Africa, Russia, Germany,
Great Britain, Italy, Sweden and Israel.
A number of new products have been developed
during the year and discussions are on with the
authorities for finalisation of contracts for select hi-
tech equipment & systems of national importance.
Some prestigious orders which include revamping
part of Nuclear Power Plants have been received by
the Division.
c) Exploitation of Information Technology
The Division has stabilised its operations on ERP
backbone in its major locations and has further
enhanced the operational benefits through the
implementation of e-Procurement and Customer
Relationship Management functionality integrated
with the back-end ERP.
4. MAJOR ORDERS BOOKED / EXECUTED
Despite sluggish domestic markets, the Division bagged
major domestic orders from customers like RCF, RDEE,
ENERCON, CPCL, NPCIL, DRDL and others.
The Di vi si on recei ved export orders from l eadi ng
international companies such as Kellog JV, QAFCO,
Exxon Mobil, Danang - Vietnam, Krupp Uhde, Fluor
Daniel.
During the year, the Division exported for the first time
from India, Reaction Column and Switch Coolers for BASF
Petronas BPC-BDO project in Malaysia through Kvaerner
Petrominco Engineering Sdn Bhd. This is the first time
such equipment are manufactured outside Europe. The
Division also supplied 3 Separators for BP Nam Con son
Gas project in Vietnam. The Separators are exported for
the first time to the design of BS 5500.
The Di vi si on’s achi evements i ncl ude successful
completion of 2000 tons of equipment for Saudi Arabia’s
new petrochemical complex. The supply included the
largest tower, 250 feet long, 30 feet diameter, 800 tons
and 8 reactors.
Major domestic orders executed during the year include
orders for customers like IFFCO, Samsung, Hindalco,
HFCL, NPCIL & Ministry of Defence.
5. FUTURE OUTLOOK
The outlook for Process Plant Equipment business is
encouraging as the Division is focussing on exports where
significant business potential is envisaged. Keeping in
view the major business potential in USA, Brazil & Middle-
East and the raw material sourcing potential from Europe,
we are in the process of deputing personnel, appointing
agents and opening offices overseas.
Indian Defence Sector is being opened up for involvement
of Indian private enterprise as also in Joint Sector with
Foreign Partners with up to 26% FDI through licence
route. It is expected that the necessary licences will be
granted to facilitate indigenous sourcing of Defence
requirements as well as export of Defence Goods.
Liberalisation in the Defence Sector is expected to open
up major opportunities for the Division.
Although the liberalization would bring in competition from
overseas as well as within the country, the business
outlook in this sector looks optimistic in the medium and
long term due to the early investments made by the
Division and the leadership it has in this sector.
6. RECOGNITION / AWARDS
Hazira Works won the National Safety Award 2000
from the British Safety Council for demonstrating
commitment to best practices at the work place, health
and safety and the organization’s skill and efforts in
maintaining a good record, which is significantly
above average.
The Division's Chennai manufacturing unit has been
recertified under ISO 9001:2000 Quality Assurance
System in April 2001 by BVQI
It has al so been awarded the presti gi ous
Commendation Certificate - Rajiv Gandhi National
Quality Award 2000.
CLMLNT
1. AN OVERVIEW
The Company’s cement capacity stood at 16 million
tonnes including that of Narmada Cement Company
Limited. The Company’s Cement Division continued to
enjoy leadership position due to its large distribution
network, proactive response to the market requirements
and consistent high quality cement produced.
2. BUSINESS ENVIRONMENT
Cement industry grew by a healthy 10% in 2001-02
compared to a negative growth
of 2% i n the previ ous year,
despite low overall industrial
growth. Cement demand i n
Northern, Central & Eastern
regions went up by about 11%,
whereas i n the Southern &
Western regions it was around
8%. Increase i n cement
consumption was mainly driven
by the demand from housing
sector and reconstructi on
acti vi ti es i n Guj arat.
Government’s thrust on housing
with substantial fiscal incentives coupled with easy
financing options at low interest rates provided a fillip to
this sector.
Demand for cement has been growing at a compounded
growth rate of 8% during the last decade. However, the
growth in capacity outpaced the demand, leading to a
supply overhang in the market and low capacity utilization
levels. Even during the fiscal 2002, the capacity accretion
was around 16 million tonnes, of which almost 50% came
around through “Sweating of Assets” and increased thrust
towards blended cement. Having gained acceptability in
most of the markets which were hitherto alien, the
J.P. Nayak
LARSEN & TOUBRO LIMITED
33
production of blended categories increased from 37% to
43% of the total cement sold. India, thus, has a resultant
cement capaci ty of about 137 mi l l i on tonnes and
continues to be the second largest producer in the world.
Given the capacity build-up, the prices of cement have
been volatile in the last few years and were generally at
low levels. Inability to generate adequate returns rendered
many manufacturers financially sick. Driven by the
demand growth, the prices started indicating an upward
trend in the last quarter of Fiscal 2001, but continuously
dropped during fiscal 2002. The positive aspect is that
despite the drop, the average realization for Fiscal 2002
in most of the markets was still higher than that of the
previous year.
3. SIGNIFICANT INITIATIVES
The Cement Division undertook several initiatives to
improve the operating efficiency. These include:
a) Cost Leadership
The Di vi si on conti nued wi th i ts efforts on
improvement in operating efficiencies (see charts
below) and productivity levels, which resulted in
maintaining the variable costs at the previous fiscal’s
levels, despite the increase in costs of various inputs.
Further, substantial reduction was also achieved in
fixed costs. Change in product mix with thrust on
blended cement resulted in reduction in average
operating cost per tonne. The Company believes that
it is one of the lowest cost producers of cement in
the country.
Power Consumption
87
90
92
96
98
80
85
90
95
100
FY98 FY99 FY00 FY01 FY02
K
w
h
/
T
Heat Consumption
701
708
714
726
734
$#
$%#
%
%#
%#
.;'& .;'' .; .; .;
K
c
a
l/T
b) Supply Chain Management
Distribution cost is one of the major elements of cost
of cement. Considerable emphasis has been laid on
optimized distribution through direct despatches,
better mode of transportation and reduction in total
delivered cost of cement.
c) Information Technology
Significant improvement in business processes have
been achieved with Enterprise Resource Planning
(ERP) backbone in place. With full implementation
of ERP, the Division has established total connectivity
between all plants, dumps and marketing operations
leading to better serviceability of customers.
d) TPM with Six Sigma
“Total Producti ve Mai ntenance” practi sed for
“Comprehensive Asset Care Regime” launched in
certain plants of the Division will be implemented in
al l the pl ants, l eadi ng to i mproved empl oyee
ownership, process improvement and cost reduction.
e) Exports
The Company continued to be the largest exporter
of cement and clinker from India and exported 2.41
million tonnes of cement and clinker (previous year
2.36 million tonnes). The Company’s cement and
clinker have been well received and command a
good market in Western Europe, Middle East and
neighbouring countries.
L&T has become the first Indian cement company to
obtain accreditation from Bureau Veritas Quality
Internati onal Espana Sa, Spai n, whi ch i s a
prerequisite for supply of cement to Europe. L&T is
one of the few Asian cement companies to receive
this recognition.
4. FUTURE OUTLOOK
The outlook for the cement industry in 2002-03 continues
to be encouraging. The proactive steps announced by the
Government i n thei r recent budget woul d boost
investments in the housing and infrastructure sectors,
including focus on construction of roads, ports, airports
etc. With GDP growth of 6 – 7% and a reasonably good
monsoon, there would be good demand growth for
cement i n the near future. Pri ces, however, woul d
continue to be under pressure due to supply overhang
which is expected to continue and pose a major challenge
to the cement companies.
The Company has undertaken major initiatives in supply
chain management through optimization of distribution,
improving customer reach and reduction in total delivered
cost. Further thrust would be to increase sale of blended
cement, especially in Western India, and to continue
efforts to reduce operating costs. All these initiatives are
expected to improve the cost competitiveness and the
profitability of the Division. The behavioural pattern of the
prices of oil products with the dismantling of Administered
Pricing Mechanism and railway freight will influence the
profitability of the Division and efforts will be made
towards minimizing the adverse impact of such changes,
if any.
In rel ati on to the gl obal l evel s, Indi a’s per capi ta
consumpti on of cement i s l ow and i ndi cates good
prospects for long-term growth, given the objectives of the
country in terms of economic growth. The Company
believes that further accretion to the industry capacity will
be rational and driven by the demand growth alone. The
consolidation in the cement industry is also expected to
gai n momentum and resul t i n more stabl e market
conditions.
5. AWARDS/RECOGNITION
The Company was awarded the “Highest Export Award”
for 2000-01 by CAPEXIL for the 5th consecutive year for
export of cement & clinker. Further, some of the cement
plants of the Company have received various awards for
environment protection, social awareness, safety and
management of better industrial relations.
LLLCTRICAL &
LLLCTRONICS SLGMLNT
1. AN OVERVIEW
The Electrical Business comprises Strategic Business
Units (SBUs) of Electrical Standard Products, Electrical
Systems & Equipment and Petrol Dispensing Pumps &
Systems. The Electronics Business covers Metering &
Protection Systems, Control & Automation and Medical
Equipment & Systems. Embedded Software & Systems
and Telecom Projects are knowledge-based, asset-light
businesses, which are the new growth areas.
1998 1999 2000 2001 2002 1998 1999 2000 2001 2002
750
725
700
675
650
K
c
a
l
/
T
100
95
90
85
80
K
w
h
/
T
734 726
714
708 701
98
96
92
90
87
LARSEN & TOUBRO LIMITED
34
2. BUSINESS ENVIRONMENT
While the GDP growth has been 5.7% and the industrial
growth was 2.7%, the electrical
industry has grown by 1.7% and
the l ow vol tage swi tchgear
sector of electrical industry has
shown a negative growth of 5%.
In such an envi ronment the
segment has ensured to
maintain the sales at the same
level as in the previous fiscal,
whi ch i s a si gni fi cant
achievement.
The margins in this business
segment have been impacted
due to predatory prices by the
competi ti on, hol di ng on to
market share, increased exports which were at lower
margins as an entry strategy for new markets and new
products, i ncreased i nvestments i n new product
development. Restructuring and seeding initiatives for the
potentially growth areas like Embedded Software &
Systems and Telecom Projects have also impacted
profitability.
Overcapacities being built up in the industry coupled with
MNCs’ attempt to increase their presence have not
affected leadership position and the segment maintained
the number one position in the country in Electrical
Standard Products and Electrical Systems & Equipment
Business.
On the export front, prospects in the Middle East, Sri Lanka
and Bangladesh were encouraging. China promises an
attractive market for selected products of this segment.
3. SIGNIFICANT INITIATIVES
The Electrical & Electronics segment has taken several
significant initiatives during the year. Some of these
include:
a) Development of New Products:
The Electrical & Electronics Segment has always
been tuning itself to the changes in technology
through introduction of new products & product
variants. High New Product Intensity (NPI) has
become an obsession.
b) Cost Leadership & Asset Productivity:
The cost competitiveness is continuously enhanced
through improvements in processes using tools like
Value Engineering, Six Sigma, JIT, e-Procurement,
Reverse Auctioning, and e-Enablement of sales
processes. Continuous efforts to enhance asset
productivity and optimize the financial resources
locked in the business have helped the Division to
enhance its free cash flow and improve internal
efficiencies.
c) Human Resources Development:
The segment has placed a lot of emphasis on
developing the skill sets of its people. On-the-job
training, specific need-based programmes and job
rotation have been continuing to nurture intellectual
capital. Computerization of performance planning and
appraisal process has been completed in order to
enabl e better moni tori ng of performance
management.
d) Exploiting Information Technology:
IT and e-initiatives continue to remain a focus area
in the segment, for improving business processes
and systems effectiveness. The segment was one of
the early implementers of ERP system which is being
constantly upgraded to latest versions. Collaboration
with customers and suppliers has been further
strengthened by value addition due to the Internet
based connectivity with them. A major initiative of
integrating product design & CAD (Pro-E) with ERP
has been l aunched; thi s wi l l enhance l evel of
concurrent engineering in product design resulting
in faster introduction of new products. The Segment
has started i mpl ementi ng Product Li fe Cycl e
Management (PLM) and Sales Force Automation as
a step towards putting in place solutions offered by
mySAP.com suite of products.
e) Thrust to Exports:
The segment has stepped up its focus on developing
international markets for its products. A select few
potential markets have been focussed and efforts to
penetrate these markets have been enhanced.
Suitable product variants have been designed and
certificates / approvals obtained as required. Pre-
tenderi ng acti vi ty has al so been stepped up.
Consequent to the several initiatives that have been
taken, the exports have increased five times in the
last two years. Exports during fiscal 2002 increased
by more than 70% as compared to the previous fiscal.
The Segment presently exports its electrical products
to Middle East, South East Asia and Africa. The
Medical Equipment are exported to Europe, China
and Iran.
4. FUTURE OUTLOOK
Improvement in overall economic scenario is expected
to provide stimulus to this business. Government policies
are generally favourable with particular emphasis on
Power Sector Reforms, Housing Sector, Infrastructure
Development, Health-care and Petroleum.
Pressure on margins would be arrested by introduction
of new variants, new products apart from continuous
efforts i n cost reducti on. Restructuri ng i s bei ng
implemented through de-layering and activity mapping to
improve response to customer. The lean and agile
organization structure would help to attract and retain
talent.
Convergence of El ectri ci ty, Communi cati on and
Automation would become a way of life. All businesses
of the Segment are synergized towards this.
It is expected that the year 2002 would be a transitional
year, during which business may show signs of revival in
the first half, with the prospect of a recovery at the end of
the year. The Segment has significantly improved the
competitive position and has learnt and aligned to
maximize utilization of the resources and enhance
productivity.
5. AWARDS/RECOGNITION
U-POWER Air Circuit Breaker won the Overall Best
Product award at ELECRAMA 2002, held in January
2002. Certificate of Appreciation was awarded to our
d-sine Moulded Case Circuit Breakers at the same
event.
R.N. Mukhija
LARSEN & TOUBRO LIMITED
35
Golden Peacock Award 2002
At 12th world congress on Total Quality 2002 held in
January 2002 for contribution to the health-care field
for medical equipment
Safety Awards (given in September 2001)
- Longest accident-free period, - for 1999 - given
by GOI, Ministry of Labour
- Longest Accident free period; and
- Lowest accident frequency rate - for 2000 - by
National Safety Council- Maharashtra Chapter
The Segment has received ISO 14000 certificate for
Electrical Business which expresses the concern for
Envi ronment. The Occupati onal Heal th and Safety
Assessment Series certificate (OHSAS-18001) granted to
Electrical Business places in perspective the care for
employees’ safety and health.
IINANCIAL RLVILW
The year 2001-02 witnessed an almost complete lack of
investment activity in capital
goods sector and sporadi c
investment in infrastructure -
pri mari l y roads and a few
refi ner y proj ects. Thi s was
exacerbated by the increasing
competi ti on both from
mul ti nati onal s and PSUs
putti ng i ntense pressure on
margi ns. The Company
intensified its efforts to increase
its international business during
fiscal 2002 and had to accept
l ower margi ns as an entry
strategy. The fi nanci al
performance of the Company for the year ended 31st March
2002 has to be viewed in the light of extremely challenging
business conditions.
REVENUES
Sales & Service income at Rs. 8,359 crore showed an
increase of 6.8% over Rs. 7,825 crore for the previous year.
The increase is largely attributable to growth in the E&C and
Cement segments. While Cement sales grew by 8.1%, E&C
sales increased by 5.4% during the year. Other income of
Rs.220 crore, which grew by 6%, comprises mainly dividends
from subsidiaries (Rs. 52 crore), gain on extinguishment of
debt (Rs. 40 crore), income from trade investments (Rs. 15
crore) and other business related income (Rs. 113 crore).
MANUFACTURING & OTHER COSTS
Manufacturing, Construction & Operating expenses incurred
during the year were Rs. 5126 crore, which are 7.7% higher
as compared to the previous year. While there was increase
in expenditure on raw materials and construction subcontracts,
expenditure on account of consumption of stores & spares and
packing & forwarding was lower as compared to the previous
year. A l arge par t of the Company’s busi ness bei ng
Engineering & Construction, the expenditure on account of
raw materials, sub-contracts, construction materials, etc. would
depend on the nature of contracts under execution. It is
therefore necessary to compare these expenses in totality.
Despite increases in power tariff and higher activity, the power
& fuel costs were contai ned by the Company through
appropriate energy management initiatives. Expenditure on
royalty and technical knowhow fees were also lower during
the year as compared to the previous year.
Staff expenses at Rs. 619 crore reflected a moderate increase
of 5.1 % over the earlier year. The increase was mainly due
to annual salary & wage increments, higher contribution to
Gratuity and Pension Funds triggered by reducing interest rate
scenario and the impact of payouts on account of the voluntary
retirement schemes. The Company reduced its manpower by
over 1000 employees during the year. The positive fallout of
the reduction in workforce is expected to accrue in the coming
years.
Sales, Administration and Other Expenses increased by 7.1%
from Rs. 1262 crore in 2000-01 to Rs. 1351 crore in 2001-02.
Major items contributing to the increase were packing &
forwarding, discount on sales, professional fees, travel &
communication. The impact of these increases was moderated
by the savings achieved in expenses such as rent, publicity
& sales promotion, repairs & maintenance, etc. Efforts are
being made to optimize logistics and distribution cost in the
Company’s cement business which are expected to result in
savings in overall selling and distribution cost. Thrust on
exports has resulted in the Company incurring developmental
costs particularly towards international sales promotion and
marketing. The Indian Rupee depreciation of 4.6% vis-à-vis
the USD resulted in a higher exchange loss in respect of the
company’s foreign exchange exposures. The prolonged delay
in revival of the core sector industries, to which the Company
has exposure in the form of receivables, has necessitated
increase in precautionary provisions towards non-recovery of
dues with respect to some of these receivables. Although all
requisite efforts have been initiated for recovery of these dues,
delays are foreseen in collection of dues from certain
customers.
The gross interest expense for the year was Rs. 376 crore, a
decrease of Rs. 88 crore as compared to the previous year.
The savings were achieved through better working capital
management, strict control over capital expenditure and
prepayment of loans. The overall softer interest rate scenario
in the market also helped in managing the interest cost. During
the year, the Company reduced significant interest costs by
re-financing high cost borrowings with lower cost options and
managing liquidity through a mix of currency and interest rate
structures. The interest income for the year was lower at Rs.60
crore as compared to Rs.103 crore for the year 2000-01 largely
due to reduced interest income from the customers, lower
interest earnings on treasury activities, etc. The average cost
of borrowing for the year was 9.5% for long-term loans and
8.8% for short-term borrowings.
Depreciation and obsolescence charge increased by Rs. 23
crore mainly on account of capitalization of the grinding unit
at Durgapur, West Bengal during the year. Higher charge was
also due to the impact of full year depreciation for the grinding
unit at Arakkonam, Tamil Nadu and higher charge on assets
bought for specific, long tenor customer related jobs.
PROFITABILITY
The operating profit for 2001-02 was higher at Rs.1053 crore,
an increase of Rs.40 crore, over the previous year. With
busi ness condi ti ons remai ni ng hi ghl y competi ti ve, the
increase in operating profit was largely due to the various cost
reduction measures undertaken by the Company.
Profit before Tax at Rs. 401 crore for 2001-02 was higher by
Rs. 62 crore as compared to the previous year largely due to
savings in interest cost. After considering the tax credits
available under section 115 JAA of Income Tax Act, 1961, the
Y.M. Deosthalee
LARSEN & TOUBRO LIMITED
36
Company was liable for Minimum Alternate Tax. In line with
the newly introduced Accounting Standard 22, ‘Accounting for
Taxes on Income’, provision has been made for deferred tax
for the year 2001-02. Despite higher tax provisions, the
Company’s Profit after Tax for 2001-02 was 10% higher at
Rs.347 crore as compared to Rs.315 crore for the previous
year.
As stipulated by the above referred Accounting Standard on
Deferred Tax, the Company has adjusted Rs. 823 crore from
General Reserves on account of the opening balance for net
deferred tax liability as of April 1, 2001.
SEGMENT-WISE PERFORMANCE
Engineering and Construction (E&C)
This segment was adversely affected by the general slowdown
i n i nvestment acti vi ti es; however, i t was successful i n
registering its presence in the international markets. The export
revenues of the segment clocked a handsome 75% growth
during the year. Also, the segment had contained costs
through a series of measures such as improved asset
utilization, cross project comparisons, effective integration of
information technology with traditional engineering strengths
and superior project management capabilities.
The brief financials for this segment are:
Figures in Rs. crore 2001-2002 2000-2001
Order Booking 7227 7093
Order Backlog 11621 9222
Gross Revenue * 4907 4656
EBITDA / Revenue (%) * 9.8 11.2
Export Earnings 848 484
* Including inter-segment revenue
Cement
Total sales of cement and clinker increased by 6% to touch
11.9 mi l l i on tonnes. Average sal es real i zati on duri ng
2001-02 improved by 4% to Rs. 1303 per tonne. In spite of
increasing input costs (fuel and power), the continuous cost
reduction initiatives enabled the Division to improve its
operating margin.
The segment was the single largest exporter of bulk cement
and clinker from India with shipments touching 2.41 million
tonnes, valued around USD 49 million.
The brief financials for this segment are:
Figures in Rs. crore 2001-2002 2000-2001
Gross Revenue * 2611 2415
EBITDA / Revenue (%) * 18.1 15.9
Exports 236 212
* Including inter-segment revenue
Electrical and Electronics
Notwi thstandi ng i ntense competi ti on, the Company
maintained its market leadership in its switchgear business.
The other product groups had more or less flat top-line growth
with low margins. The segment has identified exports as a
major growth initiative in the years to come. Export sales
nearly doubled during 2001-02 and are expected to show a
steady growth in the future.
The brief financials for this segment are:
Figures in Rs. Crore 2001-2002 2000-2001
Order Booking 711 693
Gross Revenue * 736 740
EBITDA / Revenue (%) * 12.3 15.5
Exports 37 21
* Including inter-segment revenue
Diversified Businesses
Competi ti on from wel l entrenched domesti c pl ayers,
inequitable local tax structure vis-a-vis imports in certain
product groups and a slump in the overall domestic demand
have all contributed to low sales growth and under-recovery
on capital employed. Sales of construction equipment declined
during the year, mainly on account of low industrial activity.
Whereas certain product segments like welding systems do
indicate reasonably good growth potential, value creation is
dependent on cost reduction measures, launch of new
products and specific focus on sectors like defence, oil & gas,
railways and the automobile sector.
The brief financials for this segment are:
Figures in Rs. Crore 2001-2002 2000-2001
Gross Revenue * 425 358
EBITDA / Revenue (%) * 2.8 7.3
Exports 3 12
* Including inter-segment revenue
FIXED ASSETS
The gross fixed assets as at March 31, 2002 were at Rs. 6294
crore as compared to Rs 6441 crore in the previous year. The
reduction was mainly due to transfer of certain construction
equipment and technology-based assets of the Company
under a structured operating lease-back scheme. Also, the
capital expenditure incurred by the Company during 2001-02
was lower than the previous year by Rs. 118 crore. Asset
capi tal i zati on duri ng 2001-02 was l argel y due to the
commissioning of the cement grinding unit at Durgapur, West
Bengal.
WORKING CAPITAL
The net working capital at Rs. 2485 crore as of March 31,
2002, registered a reduction of Rs.250 crore as compared to
the previous year. Considerable emphasis was placed on
i mprovi ng the worki ng capi tal management wi thi n the
Company. Stringent monitoring of resources deployment,
focus on cash flow optimization, timely collection of customer
outstandings and monitoring of the procurement and stocking
policies have contributed to the reduction in the working
capital. The Company plans to pursue further optimization of
working capital requirements to unlock value.
FINANCIAL CONDITION & LIQUIDITY
The Fixed Deposit Schemes and the Commercial Papers
issued by the Company are rated ‘AAA’ and ‘P1+’ respectively,
the highest credit rating in that category. In November 2001,
the Company’s long term debt rating was revised to ‘AA+’ by
CRISIL. The rating revision was mainly on account of the
adverse impact of the unfavourable business conditions on
the Company’s financial risk profile.
In its efforts to regain the ‘AAA’ rating for long term debt, the
Company has placed considerable emphasis on increased
value addition from the operations, reduction in the overall
funds employed through better working capital management,
lower capital expenditure and sale/disposal of unproductive
assets/businesses.
As in the past, the Company retained the confidence of its
bankers and other financial sector participants and was able
to access funds at the most competitive rates. The Company
concluded many transactions at benchmark rates from time
to time when it accessed the market.
The Company’s principal sources of liquidity were:
a) Existing cash and cash equivalents
LARSEN & TOUBRO LIMITED
37
b) Cash generated from operations
c) Unutilized funded limits with banks
d) Fresh borrowings
During the year under review, the Company reduced its debt
by a significant amount of Rs.719 crore through various
measures. These included reduction of working capital and
capital expenditure, release of funds locked in fixed assets,
and securitisation of receivables.
The cash flow summary for the year was as follows:
Figures in Rs. crore
Liquidity & Capital Resources 2001-2002 2000-2001
Cash and Cash equivalents
- Beginning of the period 138.90 220.83
- End of the period 237.14 138.90
Net Cash provided /(used) by
- Operating Activities 1311.19 561.57
- Investing Activities 92.03 (299.38)
- Financing Activities (1304.98) (344.12)
The liquidity of the Company improved during the year as can
be seen from the increase in cash generated by the operating
activity. Strict monitoring of segment-wise working capital
ensured adequate liquidity. Also, lower level of capital
expenditure together with release of funds locked in the
assets of the Company further augmented the liquidity which
was utilized to reduce debt, apart from servicing interest and
dividend commitments. Funds were managed through an
optimum blend of borrowings and short term investments with
an appropriate mix of tenor, currency and interest rates. The
Company’s working capital limits were Rs. 1400 crore raised
from its consortium of banks.
The Company has an integrated financial risk management
policy to monitor and manage liquidity, interest rate and foreign
currency exposures. The procedures, practices and limits with
respect to this function were subject to periodic review by
senior management during the year under review.
INTERNAL CONTROL SYSTEM
The Company has an internal control system commensurate
with its size and nature of business and meeting with the
following objectives:
Efficient use and safeguarding of resources
Compliance with statutes, policies and procedures
Transactions being accurately recorded and promptly
reported
The internal control system provides for well-documented
policies, guidelines, authorizations and approval procedures.
The Corporate Audit Services Department conducts periodic
audits across all locations and of all functions throughout the
year. The observations arising out of the audit are subject to
periodic review and compliance monitoring. The internal audit
reports along with the report of the status of implementation of
recommendations contained there in are reviewed by the Audit
Committee of the Board on a regular basis. The Company’s
authorization procedures for revenue and capital expenditure
was reviewed and redefined during the year 2001-02.
PEOPLE INITIATIVES
The Company believes that the quality of its employees is the
key to its success in the long run. Accordingly, several new HR
processes have been launched by the Company with the
objective of supporting its business plans. The Management
Leadership Program and Technology Leadership Program
endeavour to identify management and technical leadership
talent by taking targeted employees through assessment centers
and tests. Training programs also emphasize the need for a
general management perspective to business. The Company
continues to empower its people and provide a stimulating
professional environment to its staff to excel in their respective
functional disciplines. Campus Ambassadors have been
nominated from internal resources, to promote the brand image
of the Company at leading campuses.
Process initiatives such as Enterprise Resource Planning
(implementation of SAP-HR module) and rationalization of
manpower are aimed to make the businesses more efficient and
agile.
It is expected that the above initiatives together with business
objectives will steer the Company towards its vision of becoming
a leading Indian multinational.
PLRIORMANCL OI SUBSIDIARY
AND ASSOCIATL COMPANILS
SUBSIDIARY COMPANIES
Larsen & Toubro Infotech Limited
(Formerly L&T Information Technology Limited)
The Company, a wholly-owned subsidiary, is in the business
of providing software solutions tailored for varied applications
and industries. During the year, the name of the Company
was changed to reflect and leverage the brand equity of L&T.
The Company focuses on four broad verti cal s, vi z.
Manufacturing, Utilities, Financial Services and Telecom
Services. As a de-risking strategy, efforts are being made to
increase the domestic business, particularly in defence,
banking and government sectors.
The Company operates in a highly competitive environment
and expects to benefit from the shift in the customer preference
for fewer and more reliable vendors who can provide a more
comprehensive range of IT services.
The total income of the Company, including its wholly-owned
subsidiary, Larsen &Toubro Infotech GmbH, for 2001-2002 at
Rs. 281 crore has registered a 11% growth over the previous
year. Nearly 93% of the Company’s revenue is from overseas
markets. The Company has earned a profit after tax of Rs. 36
crore for 2001-2002.
The US market continues to be the leading destination
contributing 57% to the total software exports while Europe
and Japan contributed 23% and 8% respectively.
The Company presently has more than 121 active clients, with
56 new clients added during the year. Repeat business from
existing customers remained strong at 88%.
The Company continued to successfully nurture long-term
relationships with several of its large customers. The Company’s
focus on its verticals and the thrust on quality with SEI CMM Level
5 certification of its European operations are expected to position
the Company as a premier IT solutions provider.
LARSEN & TOUBRO LIMITED
38
L&T Finance Limited
The Company, a wholly-owned subsidiary of L&T, is engaged
in the business of providing lease, hire purchase and other
financing facilities. The Company focuses on financing of
construction equipment and aids the sale of L&T’s construction
equipment in a significant way. Apart from L&T, the client profile
of the Company’s lease portfolio includes many reputed
multinational companies. During the year, the Company
commenced financing of dealers of tractors manufactured by
L&T-John Deere Private Limited.
The total income of the company for 2001-2002 was Rs. 75
crore (Rs. 97 crore for the 15 months period ending March
31,2001). The Company’s post tax profit at Rs. 11 crore for the
year is higher by about 25% than the post tax profit reported
for the previous 15 month period.
HPL Cogeneration Limited
The Company, which is a subsidiary of L&T, runs a 116 MW
cogeneration power plant on BOO basis to supply power and
steam to Haldia Petrochemicals Limited, the other stakeholder
in the Company.
The total income of the Company for the year 2001-2002 at
Rs. 152 crore is at the same level as in the previous year. The
Company has earned a lower profit of Rs. 37 crore for the
year as compared to Rs. 58 crore in the previous year, due to
provisioning of Rs. 25 crore for deferred tax liability.
L&T Infocity Limited
The Company is a joint venture between L&T and Andhra
Pradesh Industrial Infrastructure Corporation Limited (APIIC).
The Company is engaged in the business of development
and maintenance of information technology parks in Andhra
Pradesh. The Company is developing the HITEC City
(Hyderabad Information Technology Engineering Consultancy
City) in Hyderabad, over 151 acres of land in phases with an
overall outlay of Rs.1500 crore.
The first phase of development at Hitec City is the Cyber Towers
building with 5.25 lakh square feet of office space, constructed
and marketed successfully to various IT companies. The
second phase is the Cyber Gateway, which will offer 7.8 lakh
square feet of office space.
The Company has also promoted a subsidiary, Hyderabad
International Trade Expositions Ltd. (HITEX), for development
of an exhibition center of international standards, in Hyderabad.
The total income of the Company for 2001-2002 at Rs. 71
crore has more than doubled over that of the previous year.
The company has earned a post tax profit of Rs. 13 crore for
the year.
The Company’s plans include development of a residential
complex on 87 acres of land, adjacent to HITEC City. The
Company also proposes to undertake consulting services for
setting up IT Parks by other developers in other States.
L&T Equipment Leasing Company Limited
The Company, a wholly-owned subsidiary of L&T, has been
formed to provide construction equipment on operating lease
to L&T and other established entities in India. Currently, the
Company is predominantly catering to the equipment
requirements of L&T.
The total income of the Company for 2001-2002 was Rs. 3.9
crore (Rs. 1.0 crore in the previous year). The Company earned
a post tax profit of Rs. 0.5 crore during the year.
The National Highways Authority of India (NHAI)’s initiative to
accelerate the integrated national road network provides
opportuni ti es i n constructi on equi pment l easi ng. The
Company’s plans include leasing out sophisticated road
building equipment like hot mix plants, sensor pavers etc. to
leading construction contractors. Through the Company’s
operations, L&T proposes to improve the utilization and
maintenance of its construction equipment.
India Infrastructure Developers Limited
The Company, a wholly owned subsidiary of L&T, was formed
as a special purpose vehicle to provide a 2x45 MW captive
cogeneration plant on lease to Indian Petrochemicals
Corporation Limited (“IPCL”) at their Gandhar petrochemical
facility (Gujarat). The Company is receiving the lease rentals
from IPCL as per agreed schedule.
The Company earned a total income of Rs. 74 crore during
2001-2002 as compared to Rs.77 crore in the previous year.
The Company incurred a total loss of Rs.30 crore including
deferred tax provision of Rs.25 crore.
Tractor Engineers Limited
The Company manufactures and sells
a) undercarriage systems for excavators, crawler tractors, and
bulldozers
b) material handling equipment like apron conveyors
c) spares for oil field equipment, etc.
Pursuant to the sale of 50% stake by Caterpillar Overseas
S.A. to L&T in January 2002, the Company is now a wholly-
owned subsidiary of L&T.
The total income of the Company for 2001-2002 was lower at
Rs. 32 crore (Rs. 39 crore in the previous year). The Company
incurred a loss of Rs. 1.5 crore during the year.
Competition from imported undercarriage systems at lower
prices have eroded the Company’s market share and margins
over the years. The decline in sales during 2001-2002 is also
attributable to a lower off-take by L&T-Komatsu – an associate
company whose operations were affected by labour unrest.
Loss for the year 2001-2002 includes a provision of Rs. 2.96
crore on account of impairment of assets located at the Navi
Mumbai plant. The Company is exploring possibilities of
expanding the product range to improve profitability.
Narmada Cement Company Limited
The Company, a subsidiary of L&T, manufactures and sells
grey portland cement. The Company’s plants, having a
combined capacity of 1.50 million tonnes, are located at
Jafrabad & Magdalla in Gujarat and Ratnagiri in Maharashtra.
During the year 2001-2002, the clinker despatches increased
by 4% to 12.43 lakh mt. The Company achieved a turnover of
Rs. 258 crore as against Rs. 247 crore in the previous year.
The improvement in prices witnessed in the first quarter of the
year could not be sustained and the prices remained weak
during the balance period of the year. The loss during the
year was lower at Rs. 17 crore (excluding deferred tax assets
of Rs. 1.3 crore) as against Rs. 20 crore in the previous year,
mainly due to improvements in operational efficiencies and
cost reduction initiatives.
The Company continues to be a potentially sick company within
the meaning of the Sick Industrial Companies (Special
Provisions) Act, 1985. However, continuous efforts are being
made to improve the performance of the Company.
Larsen and Toubro Ceylinco (Private) Limited
The Company is a joint venture between L&T and the Ceylinco
Group, Sri Lanka. The Company is a major player in the Sri
LARSEN & TOUBRO LIMITED
39
Lankan cement market, importing bulk cement from L&T and
marketing the same locally, in bags and in bulk. The Company
achieved a 13% market share in its second year of operations.
The total income of the Company for the financial year January
– December 2001 was Rs. 93 crore (Rs. 54 crore in the
previous year). The Company incurred a loss of Rs. 3 crore
(loss of Rs.13 crore in the previous year). The Company plans
to re-capitalize its balance sheet to strengthen the networth .
The supply overhang and competition from global majors has
reduced the realization, thus affecting profitability. Recent
reduction in Sri Lankan customs duty for bulk cement imports
from India should augur well for the Company as landed costs
reduce. The introduction of Value Added Tax should stabilize
cement prices across the country.
Narmada Infrastructure Construction Enterprise Limited
The Company is a special purpose vehicle with a 15-year
ownership/tolling rights in respect of 2 bridges at Zadeshwar
across the river Narmada in Gujarat on National Highway 8.
Traffic during the first full year of operations of the Company
has been lower than expected. The total income of the
Company for 2001-2002 is higher at Rs. 20 crore as compared
to the previous year (Rs. 8 crore). The company has incurred
a loss of Rs. 7 crore for the year.
A proposal for tariff rationalization has been submitted to the
appropriate authorities, which, if approved, should increase
revenues and improve the profitability of the Company.
L&T Western India Tollbridge Limited
The Company enjoys a 10 year ownership and tolling rights in
respect of the bridge across the river Watrak and its approach
roads on National Highway 8. The bridge was opened to
commercial traffic in March 2001.
The Company has earned a total income of Rs.12 crore during
2001-2002 (Rs.1 crore during the previous year) and has
posted profits of Rs.1.2 crore in its first full year of commercial
operations.
L&T Transportation Infrastructure Limited
The Company is a special purpose entity owning the property
and tolling rights of the 28 kilometer Coimbatore Bypass Road
and a 2 lane Bridge across river Noyyal (Athupalam) on
National Highway 47. The tolling rights cover the concession
period (including construction period) of 31 years for the bypass
and 21 years for the Bridge. The performance of the Company
is dependent on the volume of road traffic.
The Company earned a total income of Rs. 9 crore during
2001-2002 (Rs. 8 crore in the previous year) and incurred a
loss of Rs. 6 crore mainly due to the loss of toll revenue,
caused by toll collection problem for the Bridge at Athupalam.
The Company has taken up the issue with the Central/State
Governments and is hopeful of a solution during the next year.
L&T Capital Company Limited
The Company, a wholly-owned subsidiary of L&T Finance
Limited, is a SEBI-registered merchant banker and is engaged
in fee-based intermediation in project advisory, money market
and capital market segments. The Company earned a higher
income of Rs.1.9 crore for the year 2001-2002 and a profit of
Rs.0.23 crore.
L&T Netcom Limited
L&T Netcom Limited, a fully owned subsidiary of L&T, is
engaged in the business of providing internet services. The
Company has an ‘A’ Category (all India level) ISP licence and
presently exclusively caters to the in-house connectivity
requirements of the L&T Group. Mission critical applications
such as SAP, instant messaging, e-business are deployed
using the infrastructure provided by the company.
The year 2001-02 has been the first year of commercial
operations for the Company. The Company earned a total
income of Rs. 3 crore and incurred a loss of Rs. 1 crore during
the year.
L&T Trade.com Limited
The Company, a wholly-owned subsidiary of L&T Finance
Limited, was engaged in providing software solutions in
internet-based trading platforms for financial products such as
securities, mutual funds etc. Following a change in the business
profile, the Company’s domain expertise has been relocated
to Larsen &Toubro Infotech Ltd. for its Financial Services
Practice and the operations of L&T Trade.com have been fully
integrated with Larsen & Toubro Infotech Limited. The Company
has incurred a loss of Rs. 3 crore for the year 2001-2002.
ASSOCIATE COMPANIES
Audco India Limited
The Company, a joint venture between L&T and the Flowserve
Group (US), is engaged in the manufacture and sale of
industrial valves, safety relief valves and pneumatic actuators.
The quality of the Company’s products have been certified by
internationally accredited agencies. Currently, around 50% of
the Company’s revenues accrue out of exports. Technical
skills, leading to product innovations, a strong distribution set-
up and an optimal cost structure are key strengths of the
Company. Aided by a 56% increase in export turnover, the
Company achieved sales of Rs.214 crore (Rs.176 crore in the
previous year) and a profit after tax of Rs. 21.6 crore (Rs. 17.1
crore in the previous year) during 2001-2002.
The scenario for the year 2002-2003 appears promising, with
healthy order backlog of Rs.93 crore. While domestic business
growth may continue to be sluggish, export opportunities in
the refinery sector and increased offtake by Flowserve will
provide growth impetus.
Ewac Alloys Limited
The Company, a j oi nt venture between L&T and
Eutectic+Castolin Group, Switzerland, is a market leader in
the business of maintenance & repair welding and welding
solutions for conservation of global metal resources. The
principal products and services comprise maintenance & repair
electrode consumables, specification grade electrodes,
flux-cored welding wires, wear plates/parts, welding equipment
etc., The marketing of the Company’s products in India is done
by L&T.
The industrial downturn in the economy has had a negative
impact on the demand for welding consumables. Sluggish
market conditions coupled with cheap imports and low priced
products from small scale industries have affected the
Company’s performance in the year under review.
The total income of the Company during 2001-2002 was Rs.55
crore (Rs. 63 crore in the previous year) and the profit after tax
Rs.9.3 crore (Rs.10.4 crore in the previous year).
The Company is considering production of continuous wire
electrodes, with necessary investments. An improved business
environment in 2002-2003 along with introduction of newer
products and positive impact of various cost control initiatives
is expected to contribute to a better performance of the
Company.
LARSEN & TOUBRO LIMITED
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L&T-Sargent & Lundy Limited
The Company is a joint venture between L&T and Sargent &
Lundy LLC, USA, established for providing the entire spectrum
of engineering services and solutions to projects in the power
sector.
The Company caters to the captive requirements of its parent
entities and a few niche clients in India and abroad. The
Company recently completed the engineering services related
to a 500 MW combined cycle power plant of General Electric,
USA. Work on three more plants of similar size and
configuration is in progress.
The total income of the Company for 2001-2002 at Rs. 26
crore has registered a 78% growth over the previous year.
Profit after tax more than trebled during 2001-2002 to touch
Rs.9.3 crore.
The Company has good potential of enhancing its business
from the US and other countries.
L&T-Chiyoda Limited
The Company, a joint venture between L&T and Chiyoda
Corporation, Japan, is an engineering consulting firm that offers
complete range of design and engineering services to the
hydrocarbon sector.
The services offered include technology/licensor selection,
preparation of techno-economic feasibility reports, development
of process design package, front-end engineering and design,
project management consulting, etc.
There were no major fresh investments in 2001-2002 in the
Indian hydrocarbon industry other than the revamping of the
existing production facilities in the refinery sector to produce
cleaner fuel. The Company is continuously working on
application of information technology to simplify and automate
the process engineering discipline.
The total income of the Company for 2001-2002 at Rs.14.3
crore was higher by 16% over the previous year. The company
earned a profit after tax of Rs.1.2 crore (Rs.1.0 crore in the
previous year).
In line with L&T’s strategy of tapping business opportunities in
Middle East and South-East Asia, the Company looks forward
to growth prospects in these markets in the coming years.
L&T-Ramboll Consulting Engineers Limited
The Company, a joint venture between L&T, Ramboll A/S,
Denmark and IFU (the Danish Industrialization Fund for
Developing Countries), offers international quality engineering
and project consulting services in the transportation sector,
especially for projects relating to ports and harbours, roads
and bridges, railways, tunnels and airports.
The total income of the Company at Rs. 7.8 Crore for
2001-2002 has registered an increase of over 16% over the
previous year. Notwithstanding the thrust on infrastructure
projects, financial closure has been a challenge for many BOT
projects in the roads and ports sector. Delays in project
implementation have restricted the growth opportunities for
the Company. Measures announced to promote foreign direct
investments in the infrastructure sector are expected to favour
the industry in the years to come.
L&T-Demag Plastics Machinery Private Limited
The Company, a joint venture between LTM Limited and
Demag Ergotech GmbH, Germany, manufactures and sells
Injection Moulding Machines for the plastics industry. The
Company commenced operations in January, 2001.
The Company enjoys a leadership position in the organized
sector. However, the Company faces strong competition from
imports.
The Company secured good orders from major players in
various segments of the Indian plastics industry like packaging,
writing instruments and automobiles. The exports of the
Company’s products is channelled through Ergotech’s global
marketing network. In 2001-2002, the Company’s products
were exported to Israel, Australia and Sudan.
The Company’s total income for 2001-2002 was Rs.37 crore
(Rs.9.4 crore for 3 months during the previous year) and the
profit after tax was Rs.0.8 crore (Rs.0.4 crore in the previous
year). The Company expects the order booking to increase by
20% during 2002-2003.
L&T-Niro Limited
The Company is a joint venture between L&T and Niro A/S,
Denmark, and is engaged in EPC business specific to dairy,
chemical and pharmaceutical sectors.
The slowdown in the domestic economy had its impact on the
Company’s performance, as order booking during 2001-2002
at Rs.14.42 crore was lower by 20%. However, the Company
managed to bag a few contracts in polyester chips, a relatively
new line of business, with Barr-Rosin technology from UK.
The total income of the Company for 2001-2002 was lower at
Rs.24 crore (Rs. 31.9 crore in the previous year) and the net
loss for the year was Rs.3.1 crore (Rs.3.4 crore profit after tax
in the previous year).
The Company expects growth from automated powder plants
in the dairy industry and polymer chip production units.
L&T-John Deere Private Limited
The Company is a joint venture between L&T and Deere &
Company, USA, and is engaged in the manufacture and sale
of agricultural tractors. The manufacturing facilities located at
Sanaswadi, Pune are capable of producing 30,000 tractors
per annum.
The Company has achieved the highest market share in the
55 HP segment within a short span of 18 months, although
volumes in this segment are low. The company aims to
increase capacity utilization and sales by introducing models
in other segments. The 40 HP model was launched in October
2001 while a 47 HP model, with a new heavy duty drive train
was launched in May 2002.
The Company continued to expand its distribution network
and has appointed 110 dealers covering 16 States and Nepal.
The total income of the Company was Rs.91.25 crore for the
year 2001-02, as against Rs.29.77 crore in the previous period
(5 months). Cost reduction efforts like indigenisation by local
purchase of key component parts continue and the favourable
impact is likely to be felt in the coming years. The Company
expects to break even in the next couple of years on reaching
sales of around 16,000 tractors per annum.
L&T-Komatsu Limited
The Company, a joint venture between L&T and Komatsu
Limited, Japan is a leading manufacturer of hydraulic
excavators and high pressure hydraulic components in the
country.
The market for earthmoving/construction equipment declined
during the year, primarily due to the recession in industrial
and construction activities in the country. However, substantial
investments in the road sector compensated the demand
shortfall from other sectors. The Company’s products face stiff
competition from other local manufacturers and imports.
New products launched by the Company included a 7 Ton
LARSEN & TOUBRO LIMITED
41
class excavator model PC 71 along with an upgraded version
of 35T 180CK excavator. The initial response for these new
models has been encouraging.
The performance of the Company during the year under review
was affected by a strike at its plant. The strike was called off
and normalcy restored in January 2002. The Company’s sales
were lower at Rs. 172 crore (Rs. 227 crore in the previous
year) and so was the net loss at Rs.1.5 crore (Rs.1.7 crore in
the previous year). The Company expects to post an improved
performance during the year 2002-2003 and beyond, due to
the anticipated recovery in the domestic economy.
L&T-Case Equipment Private Limited
The Company is a 50:50 joint venture of L&T and Case
Corporation, USA engaged in the manufacture and sale of
earthmoving machinery. The marketing of the Company’s
products is done by L&T. The main product lines comprise
Loader Backhoes (with market share of around 15%) and
Vibratory Compactors (with market share of around 30%).
The government’s recent initiative to encourage investment in
the infrastructure sector, particularly in roads, is expected to
spur demand for the Company’s products. The Company has
launched initiatives for improving the product design through
technology upgradation and for enhancing productivity.
The total income of the Company grew by 14% to reach
Rs.105 crore (Rs.92 crore in the previous year) and the profit
after tax at Rs.4.1 crore (Rs.3.4 crore in the previous year)
increased by over 21% during 2001-2002.
With the introduction of a new model of Loader Backhoe using
CNH technology and improved in-house models of Vibratory
Compactors, the Company aims to improve domestic market
share and consequently, the financial performance during the
year 2002-2003.
Larsen & Toubro (Oman) LLC
The Company is a joint venture between L&T and Zubair
Enterprises LLC, a leading business group in Oman. It offers
comprehensive services in the construction field, with
specialization in turnkey projects. Major orders currently under
execution include the onshore component of the Salalah Power
Project. The Company has earned a total income of Omani
Riyal 4.95 million during the calendar year 2001. The
Company plays a significant role in furthering the L&T Group’s
business interests in Oman and the neighbouring regions.
Larsen & Toubro (Saudi Arabia) LLC
The Company, a joint venture between L&T and a local partner
in Saudi Arabia, was formed to take advantage of the
construction project opportunities in Saudi Arabia. The
Company offers turnkey solutions in specialized fields of oil &
gas, petrochemicals, fertilizers & chemicals, infrastructure,
buildings, factories, power transmission & distribution and
telecommunication projects. The Company earned a total
income of Saudi Riyal 34.07 million and a profit of Saudi Riyal
1.73 million during the calendar year 2001.
International Seaports Pte. Limited
The Company, a joint venture between L&T, Precious Shipping
Public Company Limited, Bangkok and SSA Inc., USA, was
formed to provide integrated services with respect to design,
development, building and operating seaport terminals in
South and South East Asia.
The company, through its project management subsidiary in
India, International Seaports (India) Pvt. Ltd., has successfully
bid for port projects in Orissa, Andhra Pradesh and West
Bengal. The projects which are being developed through
separate project companies, are not yet financially closed.
L&T as a Corporate Citizen
Good corporate ci ti zenshi p has been the phi l osophy
underpinning the operations of the Company since its
inception in 1938. Over the last six decades and more, the
Company has endeavoured to di scharge i ts soci al
responsibilities through various initiatives.
Community Welfare
Rural and Tribal Welfare
The Company has undertaken rural and tri bal wel fare
schemes in the villages surrounding many of its factories.
L&T’s community initiative VIKAS (Village Improvement Know-
how and Skills) is a multi-pronged development scheme
which begins with improving health and increasing awareness
about health issues. The services include family planning
operations, immunization, post and ante natal care and
tuberculosis eradication.
Support to Health Delivery systems
The Company runs a full-fledged Health Centre at Andheri, a
Western suburb of Mumbai . Thi s centre provi des free
di agnosti c and medi cal faci l i ti es to the nei ghbouri ng
community and has done award-winning work in the areas of
family planning, leprosy and T.B. Widespread health facilities
to the community are provided at L&T’s various cement plants.
Environment Conservation
The Company is committed to environment conservation and
deploys state-of-the-art pollution control equipment at all its
cement manufacturing facilities. Afforestation programmes to
develop greenery are undertaken in the surroundings of all
L&T units.
Encouraging Education
In the area of strengtheni ng educati on, the Company
encourages the children of its employees to seek educational
excellence by recognising their academic achievements
through award of cash i ncenti ves. The Company has
established its own L&T Institute of Technology, Mumbai
providing engineering diploma courses to the children of its
employees.
The Company has set up ‘Balwadis’, schools for village
children in the vicinity of its manufacturing facilities. The
children’s progress is constantly monitored to spur them
towards better performance.
L&T has i nsti tuted chai rs and l ectures i n professi onal
institutions to promote advancement of knowledge in premier
institutions like IIM-Ahmedabad, XLRI-Jamshedpur, IIT-
Mumbai etc.
Disaster Relief
The Company has been prompt in responding to the needs
of the nation in disaster situations, the latest being the Gujarat
earthquake. It adopted two villages in Kutch - Kirai and Nilpar
in the Rapar taluka, for rehabilitation. The Company deployed
its earth moving equipment and medical equipment in rescue
and relief operations in the earthquake affected parts of
Gujarat. In addition, it offered support for the maintenance and
upkeep of the equipment used by other relief agencies.
Beyond growth and profitability, the Company’s mission
involves pursuit of business ethics and social responsibility.
The Company will continue in its initiatives to reinforce its
credentials as a good corporate citizen.
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