Engineering and construction conglomerate Larsen & Toubro (L&T) is targeting to reach leadership position in at least two more verticals – “We are targeting to make L&T Realty the country’s top real estate developer in a few years and LTIM (LTIMindtree) one of the top five IT companies”, CEO and MD SN Subrahmanyam told CNBCTV18, in an exclusive chat.

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Subrahmanyam, soon to be Chairman of the group, said that among the conglomerate’s traditional businesses, construction of solar power projects is showing maximum promise, while building electrolysers and green hydrogen may soon become important verticals.

Realty

L&T Realty last year announced its plans to reach sales of Rs 10,000 crore by FY25. Subrahmanyam pointed out to the two major agreements the company signed last year. In November 2022, L&T Realty signed an agreement with Singapore-listed CapitaLand India Trust (CLINT) management, to develop close to 6 million square feet of prime office spaces across Bengaluru, Chennai and Mumbai in India, valued at $1 billion. “The arrangement is tailored to ensure a rotation of funds,” Subrahmanyam said. As part of the agreement, CLINT will acquire the ownership of these properties in a phased manner. over 2 years from completion so that L&T Realty can re-invest the funds in new projects.

Earlier in 2022, L&T Realty tied up with HDFC Capital Advisors, the private equity real estate arm of HDFC to create a Rs4,000 crore residential development and investment platform . Subrahmanyam said this JV will acquire the land and L&T Realty will be responsible for the execution of the projects in which the joint entity will make investments. L&T Realty is constructing a bunch of residential properties in the Mumbai metropolitan region and Bengaluru and is aiming to be present in Pune, Hyderabad and NCR.

But its biggest projects are in house, said Subrahmanyam. “We are building 30 million square feet for group companies to house LTIM , LTTS , and our construction and other units,” he said. The company is building offices in Bengaluru, Chennai, Hyderabad, Coimbatore, Kolkata and Noida. to house IT employees who are now working out of hired offices.

Infotech

LTIMindtree (LTIM) is seeing healthy growth in new orders, but older clients are spending a little less, given the global uncertainty, said Subrahmanyam. LTIM reported a revenue growth of 17.2 percent last year. “We are open to acquisitions in IT, now that we have successfully managed one”, Subrahmanyam said. “We expect to be among the top 5 IT companies, in a few years,” he added.

Solar, Hydrogen, Electrolysers

L&T has identified Green EPC and Electrolyzer & Battery manufacturing as focus areas in its 2026 strategy plan. Subrahmanyam said, one big step in this direction was the company bagging a large order from NEOM Green Hydrogen Company (NGHC) which is building the world’s largest green hydrogen plant in Saudi Arabia.

L&T will engineer, procure, and construct a 2.2 GW solar plant, 1.65 GW wind generation balance of plant and a 400 MWh battery energy storage system for this green hydrogen plan of Neom. It will also construct three 380 KV switching stations, 306 km of 380 kV overhead lines and underground cables. The value of the packages awarded to L&T aggregate to $2.8 billion, the company had said. (Separately L&T is also constructing a 388 MW solar plant in Jeddah and another 1500mw solar plant in the industrial city of Sudair.)

In India, on the green hydrogen front, Subrahmanyam pointed to the agreements signed with IOC and Renew Power to produce green hydrogen and another agreement with IOC to manufacture and sell electrolysers. "Green hydrogen technology is evolving and the cost of manufacture will eventually fall," he said.

ESG - A Mission

When asked whether MSCI upgrading L&T's ESG rating to BB from B will make it easier to raise funds, Subrahmanyam said, that "Environment is something we need to care about anyway." He explained the company has audited everyone of its plants as to their emissions and green cover and is working towards formulating a plan to make them environment friendly in terms of emissions and water usage. As one more step in this direction, the company plans to wind down its thermal power building unit and use the land for producing for the solar orders. "

Projects & Manufacturing, Infrastructure

Has private capex picked up? Yes, said Subrahmanyam pointing out that private orders within projects and manufacturing is 27 percent as of end FY23 versus 22 percent in FY22 . L&T's overall orderbook grew 12 percent in FY23 and stood at Rs3.99tn as of Mar’23. 72 percent of the order book (or Rs2.88 trln) is domestic of which 14 percent comes from the central govt and 30 percent from state governments. Yes margins were a miss in FY23, he admitted given the shocking rise in commodity prices, but FY24 is promising. He exuded confidence in infrastructure orders from central and state governments, what with tax collections remaining strong. “We have completed the trans-harbour link as also our part of the Mumbai coastal road, “ he said triumphantly.

The shares of L&T are trading 0.4 percent lower on exchanges at 10 am on July 3.

First Published:Jul 3, 2023 10:22 AM IST