Larsen and Toubro (L&T) is looking to diversify its global operations in politically stable countries to derisk its concentration in West Asia, from where it gets most of its revenues.
International orders constitute about 22%, or ₹66,709 crore of L&T’s order book, and during the second quarter alone, the company bagged international orders worth ₹16,675 crore, accounting for 35% of the total order inflow — most of them from West Asia. “We have benefitted internationally from the major expansion plan of Saudi Aramco, which is doing major developments of its fields. We have bagged major contracts to build oil and gas platforms. We are also benefiting from the refinery expansion plan of Aramco,” S.N. Subrahmanyan, MD & CEO, L&T, said.
The firm sees West Asia as a worry and has decided to diversify in the wake of the geopolitical tensions in the region due to broadening of tensions between Iran, Saudi Arabia and the U.S. R. Shankar Raman, Group CFO, L&T, told The Hindu , “Our international revenues from West Asia alone used to be 70-80% at one point and now it has fallen to below 50%. We have taken steps to expand in Africa, Bangladesh, Sri Lanka and East Asian countries. There is a conscious effort to derisk the dependence on West Asia and it is beginning to pay off.”
According to Mr. Subrahmanyan, West Asia is still a worry for the company. “Qatar is still not friendly with its neighbours or the other way around — the neighbours are still not friendly with Qatar. You have the war at Yemen. There is general broadening of tensions between Iran, Saudi Arabia and U.S. in between. There are sanctions Iran and Iraq are yet to settle down on. Turkey has invaded Syria.
“If major disruptions take place, it will impact the global economy because majority of world oil flows from there. One has to be conscious of this and take it forward,” he said.
