Larsen & Toubro (L&T) is reorganising its businesses into nine empowered verticals or operating units in addition to its five existing subsidiaries. The nine companies will act like ‘independent companies' (ICs) going forward.
Addressing the media here on Monday, L&T Whole-time Director and Advisor to Chairman and Managing Director J. P. Nayak said, “We are trying to bring about a transformation.
A change in mindset is required in the competitive environment, where decision-making is closer to our clients. Each IC will develop robust internal board governance and will become more competitive in its markets. The boards and business heads have already been put in place for the nine ICs while the induction of external directors on the IC boards is in process and should be completed in about two months. Several of them have already had their first board meetings.'' A corporate centre is to be established to nurture the L&T brand, value and to optimise synergies through key account management and share services and various processes are being put in place to institutionalise the new structure.
Typically, the IC board will have a Chairman (from the board of L&T), three representatives of the business from within, three non-executive directors and one representative (as non-executive director) from the L&T board. The nine verticals include power, hydrocarbons, mechanical and products, switchgear, heavy engineering, infrastructure, building, minerals and metals and electrical. L&T's subsidiaries include L&T Infotech, L&T Financial Services, L&T IDPL, L&T Power Development and and subsidiary for L&T's Hyderabad Metro project.
All the 9 ICs will look after their business and L&T, having made the investment into the business, will take on the role of an investor and will be the hybrid holding company.
Speaking on the impact of the reorganisation, Mr. Nayak said, “The performance of the company will improve due to focus, empowerment, transparency, stronger leadership and improved competitiveness of each business. It will also create a stronger leadership pipeline and enhance stakeholder value.'' While none of the nine ICs is yet legal entity, financial reporting will be based on the existing Indian GAAP and IFRS. “It will henceforth be in much greater detail as in the past, there were only three segments.''
Mr. Nayak also said the time was not yet ripe to unlock value of anyone of the verticals. “None of the nine is ready for listing. In fact, none of them is yet registered entity. We have to first corporatise them. Our plan is to first list our subsidiaries. But again, that would depend on market conditions, maturity of the business, need for funds and the value accretion that can take place,'' he said.
Keywords: L&T transformation