Winds of change
If one were to play a word association game using economic indicator as the words, then a lot of people would probably associate Larsen & Toubro with ‘bellwether’. As a beacon of accomplishment and integrity, the conglomerate operates in businesses such as engineering, construction, finance, manufacturing for defence and critical process industries, real estate, ship-building, and power — all heavyweight industries that call for complex projects and require extremely skilled manpower and technical knowhow.
Leading at the helm of this conglomerate is AM Naik, group executive chairman, who has been running the firm for more than a decade. But this story is not about Naik. It is about the protégé who Naik has carefully cultured and is set to succeed him in October 2017. SN Subrahmanyan (known as SNS), deputy MD & president, Larsen & Toubro (L&T), has some notable achievements to his name. As a civil engineer who joined the company three decades ago, he has driven many of the company’s infrastructure and construction projects that are now landmarks in their own right. But Subrahmanyan rightly knows where to heap the praises. He says, “Naik has been a visionary, founder and initiator of many businesses in the company and has an uncanny knack for seeking out opportunities and forecasting trends. This has helped us exit certain businesses, move into newer geographies and thereby to a large extent, be what we are. Some of us have had the privilege of sharing time with him to gather insights into our businesses including honing our strategies as we look forward into the next five years. The bulk of investments and other layouts that need to be done for future prospects have been done by him and therefore I do not see any major change of strategies going forward.”
Large and complex behemoths like L&T need to be run like a tight ship so that they produce tremendous results. In this sense, L&T has gained the respect of its customers and shareholders alike and has constantly strived to ensure returns for customers through breakthrough technology and building intricate projects with ease.
Corporate wisdom has it that successful companies last an average of 5-6 decades. However, organisations that know what it takes and have the perception to execute on a company vision are destined to carry on for generations to come.
In this respect, a conglomerate like L&T has fulfilled all the criteria to build a company that can endure for ages. The criteria here range from investment in employees, building rock solid relationships with partners and customers, remain financially stable, and maintain clear and focused value propositions. In fact, it is one of the few companies to look at newer ventures that were hitherto untapped in the country. Over the last few years, the firm has entered into manufacturing for the defence sector and nuclear power equipment, besides exploring newer markets such as Africa. At the previous AGM, L&T set an ambitious target of achieving Rs 2 lakh crore revenues and order inflows of more than Rs 2.5 lakh crore annually by 2021. “As part of our five-year strategic plan, Lakshya 2021, we are cautiously optimistic of achieving them. Once the prevailing macro-economic scene improves, opportunities will arise in the infrastructure space. This will boost the economy and thereby give us more projects making Lakshya 2021 goals achievable,” says Subrahmanyan. However, it intends to stay focussed on its core business, which is construction and engineering, besides the specialised high-tech manufacturing. The last goal is in keeping with the government’s ambition and conviction that indigenous arms production can create jobs and self-reliability and has put defence manufacturing at the heart of its drive to boost domestic manufacturing.
Similarly, seeing an opportunity in Smart Cities, the firm has recently entered into Smart World & Communication. Its trump card here is its capability to build on smart technologies. According to Subrahmanyan, this business has the potential to be one of the fastest growing businesses within the L&T fold both from the view point of the opportunities arising as well as the capabilities that it is developing. “Primarily, we offer end-to-end solutions in the areas of Security Solutions, Communication Network and Telecom Infrastructure and Smart Infrastructure as a Master Systems Integrator. Security solutions will involve city surveillance systems, intelligent traffic management systems (ITMS), border security systems, security & management systems for critical infrastructure like ports, airports, metros, etc. Communication Network and Telecom Infrastructure will involve wired & wireless networks including OFC, IP-based DWDM Communication Network, Wi-Fi, fixed broad band, satellite and microwave RF links, and ICT/data centre infrastructure; while Smart Infrastructure will cover smart cities, smart buildings, water and energy; smart transportation & logistics, emergency response systems, and real-time information systems,” adds Subrahmanyan.
The track record of the company’s Smart World business has been growing. Starting with the development of surveillance and intelligent traffic management systems for the government of Gujarat in Ahmedabad, Gandhinagar and Vadodara and a surveillance and management system of critical infrastructure at the Sabarmati Jail, the business has since executed the smart city project in Jaipur, and is executing India’s largest city surveillance project comprising 5,000-plus cameras across 1,500 locations in Mumbai. It is also in the process of converting Nagpur into India’s first large-scale integrated smart city and is executing several projects in Pune, Lucknow and Hyderabad.
Geeks for good
The scale, ambition and complexity of today’s engineering and construction projects are nothing short of breathtaking. Technology plays an integral part in helping the industry realise goals by enabling enhanced design, planning and construction. When applied effectively, technology can significantly boost a sector that for many years failed to improve productivity. Subrahmanyan says that his firm has adopted or developed several new technologies to face specific site-based challenges. Modern geo-spatial technology such as LiDAR is used for faster and accurate survey of terrains. “We are implementing Building Information Model (BIM) in many of our complex infrastructure projects coupled with technologies like 3D visualisation, mixed reality and virtual reality. Our design and construction teams are working seamlessly to improve the productivity, minimise rework and deliver projects with superior quality,” he adds.
Similarly, the firm has deployed tunnel boring machines for the underground sections in the Metro Rail projects, while it uses mechanised method for track linking (New Track construction machine) for the railway freight corridor projects for high quality and speedy execution. “We have also deployed specialised auger boring machines for cylindrical foundations of masts to be erected along the railway tracks,” says Subrahmanyan.
Across all areas of work, the company has largely been a firm believer of implementing solutions using digital technologies for quantum improvements. It has set up a digital group to ideate, initiate and implement solutions and deliver results to the business. “We develop and implement solutions to track and monitor performance of all equipment deployed at construction sites by installing sensors and gateways, improve productivity and safety of workmen through tagging and tracking, optimise logistics and material consumption by tracking using GPS and RFIDs and project monitoring & control through data and visuals captured in real-time from sites using mobile devices,” he adds. The data from these initiatives will be pulled into an analytics engine to deliver trends, actionable insights and forecast scenarios for proactive and corrective action. As technologies and business processes evolve, the group continues to develop breakthrough solutions and evangelise the digital transformation.
But Subrahmanyan is concerned. Although L&T Construction continues to remain the largest contributor to the company’s top line, the economic environment has been challenging for a while. He does not deny that infrastructure development is vital to sustain India’s growth. “The central government’s development-focused agenda has gone a long way to create a climate that is conducive for growth. But the pace is irritatingly slow. But we are in a space where opportunities continue to remain in the various verticals in which we are present,” he says.
So considering that L&T has bagged several projects in the Middle East and other countries, how is that working out for them? “The Middle East once showed huge promise but with the dropping of crude oil prices, things have slowed down considerably. This has resulted in deferment and deceleration of several projects. The market poses unique challenges like non-availability of skilled labour, limited availability of visas for employees and workmen, and relatively higher working capital requirement for projects. We also face stiff competition from some of the renowned global infrastructure players present in the region,” says Subrahmanyan.
However, it is not the beginning of the end. With things slowing down in the Middle East, L&T Construction is exploring other markets of potential like Africa and the ASEAN region. “Our Power Transmission & Distribution business has made significant inroads into Africa where we have established our presence in Kenya, Malawi, Algeria and Ethiopia. We have also bagged projects in Thailand and Malaysia and are looking forward to gradually increase the quantum of business in these new and other promising geographies,” he adds.