Engineering conglomerate Larsen & Toubro Ltd. (L&T) recently completed divestment of its electrical and automation (E&A) business to Schneider Electric for ₹14,000 crore. The company is also planning to divest or dilute certain concession businesses as part of the strategic review of its business portfolio, said CEO and MDS.N. Subrahmanyan in an interview. Edited excerpts:
Recently, L&T divested its electrical and automation (E&A) division. What next?
We keep conducting a strategic review of our business portfolio from time to time and take a call on the basis of consistent, long-term planning process. As per this, we may divest or dilute certain concession businesses such as L&T Metro Rail (Hyderabad) and Nabha Power Ltd.
What will you do with the sale proceeds of the E&A deal?
We are in the middle of an unprecedented pandemic which has caused considerable uncertainty to business during the past five months.
In such times, it is necessary to strengthen the balance sheet and stay adequately liquid. Accordingly, the sale proceeds will be utilised partly for deleveraging the consolidated debt and also to strengthen the liquidity buffer warranted by the current economic environment.
As business conditions improve post-COVID-19, some of the equity unlocked by the divestment will also be invested for growing the business at the group level.
A certain part will also be used to reward our stakeholders.
Has normalcy returned to business?
As the country unlocks, means of transport open, supply chains resume and labour returns, operations at about 90% of our project sites and all manufacturing facilities have resumed and are gradually moving into normality. We remain positive.
How many guest workers have returned to work?
Pre-pandemic, we had around 2.7 lakh labourers on our rolls. This came down to 70,000 by end-May when the lockdown was lifted.
Most of the labourers and workers went back to their villages and towns. But, we have all the reasons to be positive now as about 2.2 lakh are back on our rolls and most of the sites are back to more or less normality. The amount of steel and cement we are purchasing is going up and that indicates better progress.
Have you started getting new business?
Infrastructure development is imperative to revive economic activity, create employment and infuse more liquidity into the system.
Additionally, funded projects by the World Bank, Japan International Cooperation Agency and Asian Development Bank, among others, should start moving faster.
We are, therefore, optimistic that sectors such as hospitals, power transmission and distribution, water, railways, roads, renewable energy and defence will start showing greater traction.
Digital is the buzzword these days. How is L&T readying for this fourth industrial revolution?
Over the last few years, L&T has deliberately and slowly enhanced its technology footprint and is charting a course in recent years that will see its technology portfolio increase its contribution vis-a-vis its traditional businesses.
In 2014-15, the world was seeing a tectonic shift with digital technologies. These emerging technologies were creating new processes, new business models and entirely new businesses.
Digitalisation and digital transformation were sweeping the business world.
L&T was seeing and experiencing this first-hand from the clients of IT services companies.
[We] saw the opportunity of digital as twofold. First, to digitally transform its own operations and use these new technologies to get better at what it was already doing well; and second, to look at digital as a new business opportunity that could shape its future portfolio.
L&T started doing both and it acted swiftly with determination.