L&T's ECC division to widen market base
By A Business Correspondent
The Chennai-based ECC division of engineering major Larsen & Toubro Ltd has chalked out a triplet of strategic initiatives to increase its market base. Owning strategically important plant and machinery, adding more specialist skills to the talent pool, diversifying into O&M in some businesses, and pre-tender value addition with clients and consultants to suit the method of construction are some strategies that are being contemplated.
In the roads sector, activities having direct relationship with time are to the tune of 25 per cent, i.e. a reduction in project time by 10 per cent will result in cost saving to the tune of 2.5 per cent. With improved site management thorough micro-planning and review, the company intends to shorten the construction time and achieve cost savings.
In the hydel sector, L&T hopes to increase the market share to 25 per cent by 2005-06 and become a leading player by 2011-12. In addition, it intends to pursue niche market segments such as LPG caverns, BOT/BOOT projects for medium-size hydel projects and defence projects, such as liquid propellant plants. Joint ventures with other large players would also be pursued based on the need.
In the electrical and transmission line sector, the company wants to concentrate on high value orders. Strategic tie-up with global manufacturers for 400 kV/800 kV substation equipment is being considered. Strategic understanding for EHV terminations and cable manufactures is expected to increase the chances of winning some large jobs in this sector.
L&T also proposes to enter long term agreements for procurement of cement and aggregates to neutralise future price hikes and other risks. In addition to 'L&T Concrete' the building products portfolio would also be expanded to pre-cast elements for mass consumption. The necessary facilities are being established near Chennai.
L&T intends to continuously scan the opportunities and proactively enter strategic pre-bid tie-ups with global players having the best mix of technology and competitiveness. Customer-centric marketing offering 'total solutions' in water business focusing on large projects backed by tie-up with major pipe/pump/equipment suppliers is expected to result in better competitiveness.
In the bulk material handling sector it intends to introduce some new product lines for mines and special conveyors with technology tie-ups with global majors.
The company's focus on providing EPC solutions for cross-country pipelines would get a further boost with technology upgradation and automation in pipeline operations.
Partnering with financial institutions for funding future PPP projects, sourcing long-term finances from IFC, ADB, infrastructure funds and developing domain expertise in ports, airports, hydel and water supply projects are some aspects that would be pursued actively.
Bidding through the tender route that follows a step-by-step transparent process may not always result in satisfactory award. For instance, in the case of NHAI, the construction major feels that over 30 per cent of 130 contracts recently concluded are performing far below expectations. Much of such poor performance can be due to extremely unrealistic pricing. It would, therefore, be in the interests of the project proponents, especially the government, to look at other alternative methods of awarding contracts without sacrificing the principle of least cost to the government, and at the same time ensuring successful completion of projects. The company's proposal to form a Consortium of Construction Companies who will seek to secure contracts through MoU route on the lines of MoU between NHAI and CIDB, Malaysia, is being discussed with the government.
Some major orders booked
* Civil and structural work for 2,000-mw (8x250 mw)
* Subansiri Lower HEP Project in Arunachal Pradesh (Rs 922 crore).
* Construction of 2nd Vivekanand bridge at Howrah (Rs 471 crore).
* Sinter Plant - 3, Blast Furnace 'G' upgradation and 132/33 kV substations at Jamshedpur (Rs 271
* Supply of hot rolled MS sheet coil for VIWSCO at Rajahmundry (Rs 152
* Construction of sports complex at Guwahati (Rs 136 crore).
* Construction of leaching plant at Hindustan Zinc, Chanderia (Rs 113
* Supply and erection of coal handling plant for NTPC Vindhyachal (Rs 112
* Construction of bridge over river Ganga at Allahabad (Rs 108 crore).
* 400 kV T/L at Gorakhpur (Rs 104 crore).
* E&C of soda ash plant in Kenya (Rs 256 crore).
* Expansion of 33 kV network in Al Ain area, UAE (Rs 126 crore).
* Construction of hotel/service apartments at Manama, Bahrain (Rs 71 crore).
* Design, supply, installation, testing and commissioning of double circuit of submarine and land power cable in UAE (Rs 57 crore).
(November 16-30, 2004)