Larsen & Toubro has decided to lower its involvement in planned diversification into steel and alumina. It has decided to increase its commitment to power and cement sectors by investing in fresh capacity.
For the first time, the company will enter power generation as a major equity partner. The Rs 5304.74 crore engineering giant has formed a consortium with British Gas and Marubeni Corporation of Japan to bid for the 615-mw Pipavav power project in Gujarat. It will hold 35 per cent in the new company, which will be formed if the consortium wins the contract. British Gas and Marubeni will hold 32.5 per cent each.
In a change of strategy, L&T chief executive officer S D Kulkarni said the company was not interested in developing the proposed alumina and steel projects on its own. We are examining the issue. We have never said we will develop the projects on our own. We are only interested in the EPC work for these projects, said Kulkarni.
Officials said L&T would carry out the basic development work for the project and invite a foreign partner to take it up and implement. L&T will hold a minority stake, which in the case of alumina is 26 per cent, and do the EPC work for the projects.
The alumina EPC work is worth Rs 2,000 crore, the steel EPC is worth Rs 4,000 crore. We cant ignore these contracts. Our interest is only in EPC, said A M Naik, one of the directors.
The engineering giant, which announced its results yesterday, is also in the market to raise Rs 100 crore through private placement of bonds. The coupon rate will be 14.5 per cent and the bonds will have a tenure of five years.
The company is also expanding capacity at the upcoming cement plant at Tadpatri in Andhra Pradesh. From 2 million tonnes, the capacity will rise to 4 million tonnes. L&T officials said at a press conference held yesterday to announce the results that an additional 2 million tonnes would form part of the second phase of the project.
The first phase, with a capacity of 2 million tonnes, will be completed by 1998. Work on raising funds for the next phase will begin only in late 1998, said senior L&T executives. After completion of the second phase, L&Ts total cement capacity will reach the targeted capacity of 12 million tonnes.
L&T net rises 5.8%
Our Corporate Bureau mumbai
Sluggish cement sales in the second half of 1996-97 and a higher tax outgo saw engineering giant Larsen & Toubros net profit rise by only 5.8 per cent, despite a 25 per cent rise in sales.
Income from sales and service stood at Rs 5,304.74 crore while net profit amounted to Rs 411.35 crore. Announcing the results in Mumbai yesterday, L&T CEO S D Kulkarni said: 25 per cent sales growth and 11 per cent growth in profit before tax shows that the companys performance was quite good considering the adverse business conditions.
L&Ts interest cost rose 47 per cent to about Rs 115 crore from Rs 78.26 crore in 1995-96. The company maintained a dividend of Rs 6 per share, while its earning per share rose marginally from Rs 15.46 to Rs 16.5.
The L&T scrip yesterday rose marginally above the previous closing level. On the Bombay Stock Exchange (BSE), the stock gained Rs 2.50 to close at Rs 206.25. 4.16 lakh shares were traded, for a total turnover of Rs 8.48 crore.
The stock closed at Rs 205.65 on the National Stock Exchange (NSE), gaining Rs 2.35 with 11.56 lakh shares traded.
The companys GDR ruled at $12.62, with the offer price touching $13 by 20:00 IST. The stock had closed at $13.50 on Wednes-day at the GDR markets.
