Renewing Focus, Revitalising Portfolio, Reaffirming Values
The best time to change is now
Forward looking organisations constantly evaluate how the
world is transforming and course-correct to stay ahead of
the curve. At L&T, our relentless endeavour has been to pivot
the organisation on its core strength of engineering and
technology to enhance shareholder value.
Resilience and Value Creation
FY 2021-22 saw L&T-ites yet again demonstrate their
resilience and spirit to first overcome the challenges posed by
the pandemic and thereafter reorganise themselves to push
forward. During the pandemic, the prime focus was to stand
by our employees, workmen, vendors, and the community at
large. Driving the need to stay safe, we ensured that most of
our employees were vaccinated through regular vaccination
drives. I sincerely thank all our employees, workmen, and
other stakeholders for standing by the organisation during
those tough times.
Despite severe headwinds, we ended FY 2021-22 on a strong
note on the back of several prestigious order wins. The Order
Book at around ₹3.6 lakh crore is not only the highest in the
history of the Company but is also diversified and growing.
Lakshya 2026
During the year, we formulated our Lakshya 2026 strategy
plan to sustain the present momentum and create value
over the Plan period up to FY 2025-26. In this exercise, the
Company seriously introspected and rededicated itself to its
core focus areas of EPC Projects, Hi-Tech Manufacturing and
Services.
The EPC Projects portfolio will focus on the Infrastructure
and Energy sectors, with the ‘Infrastructure’ segment
continuing to include all our construction businesses,
targeting Order Inflow and Revenue growth between 11 and
13%. The ‘Energy’ segment will comprise the Hydrocarbon,
Power, and Green Hydrogen EPC businesses. We will strive
for timely delivery and, wherever possible, early completion
in all the projects that we execute. Profitability will be driven
by a combination of productivity of resources, operational
excellence, as well as our on-going digitalisation drive.
Hi-Tech Manufacturing includes the Heavy Engineering
& Defence Engineering businesses. Additionally, the
manufacture of Electrolyzers and Battery Energy Storage
Systems will form part of this portfolio. We will target Order
Inflows and Revenue growth of 18%+ and improve and
sustain profitability thanks to our several initiatives revolving
around Design Excellence, Automation, Value Engineering,
Factory 4.0, and On-time Delivery.
Value creation in the EPC Projects and Hi-Tech Manufacturing
businesses will be a combination of margin improvement and
lower deployment of capital.
The Services portfolio is in a sweet spot with the potential for
accelerated growth. I am also happy to inform you that our
teams are performing creditably in an intensely competitive
scenario. Going forward, the Services portfolio will comprise
two segments: IT&TS Businesses and Financial Services.
IT&TS Business Portfolio
This portfolio includes LTI-Mindtree and LTTS. The IT&TS
businesses will continue to balance the risk and cyclicality
associated with the traditional projects and manufacturing
segment. The momentum from existing and emerging tech
trends such as Cloud, Digital, AI, Industry 4.0 is expected
to propel growth in the near term. This portfolio will aim at
Revenue growth in the high teens during the Plan period and
be vigilant to tap opportunities for inorganic growth as they
emerge. Making all these plans work will undoubtedly need
high calibre digital talent, and we intend to on-board the
finest minds in the industry.
The IT&TS portfolio will also have the in-house incubated
e-commerce and digital platforms that were launched in
FY 2021-22, SuFin and Edutech as well as the Data
Center Business.
Financial Services
This business, following the philosophy of ‘Shrink to Grow’,
will reorganise its existing lending portfolio and migrate
towards retail lending over time. We believe a growing
digitalised retail portfolio, with a focus on upselling and
cross-selling, will yield higher returns and lead to significant
improvement in valuation.
The Realty, Smart World & Communication and
Industrial Machinery & Products businesses will comprise
the ‘Others’ segment.
In the Realty business, we are looking for growth in
the residential and commercial spaces through multiple
formats under the larger objective of developing captive
landbanks to leverage existing investments. Smart World &
Communication will mature from the current EPC / O&M
format to that of a total Smart Solutions Provider model that
will enable us to provide complete end-to-end technology
solutions. We will also grow our Industrial Machinery
& Products portfolio, primarily comprising Construction
Equipment and Valves, as demand picks up.
Developmental Projects or the concessions portfolio will
now largely constitute the Hyderabad Metro while emerging opportunities
in the Green Hydrogen BOO projects space will
be housed in this portfolio too. We would like to complete
the divestment of L&T IDPL and Nabha Power during the
current Plan period and unlock their value. In Hyderabad
Metro, a combination of capital restructuring, improved
operations, and monetisation through Transit Oriented
Development should generate value over time.
Company-wide Perspective
Our thrust areas in the Plan period are clear: Ensure sustainable
growth in the current business portfolio through profitable
expansion and execution, scale up through business model
innovation and meet customer demands in an agile manner in
the newer businesses. This should help us clock Group Revenues
of ₹2.7 lakh crore and an ROE of 18%+ by FY 2025-26.
Cash flow is the lifeline of any business and we have
paid close attention to the cash flow profile at the Group
level. As we see it, cash generation during the Plan period
will be the outcome of improved profitability and lower
employment of capital. Further, as I mentioned earlier,
we are looking at unlocking capital through the sale of
some of our non-core assets to boost cash balances. The
Company will explore option to step up pay-out ratios over
time in addition to returning cash to shareholders which
will accelerate ROE improvement.
Future Ready Initiatives
We, at L&T, are committed to face the global climate
change crisis and shape the future around frontier
technologies to mitigate the ill effects of climate change.
We do believe that alternative fuels such as Green Hydrogen
will go a long way to create a cleaner environment and
contribute towards the nation’s energy security. We have a
unique opportunity to play a significant role to accelerate
the ecosystem around Green Hydrogen, with our thrust in
both the EPC and BOO spaces, coupled with the backward
integration of manufacturing electrolysers and grid battery
energy storage systems.
On the digital front, there is maturity in understanding
data security, data ownership and the Government is also
continuing its thrust for data localisation. Thus, the new Data
Center and Cloud Services businesses are distinctly positioned
to achieve scale in the future. Another dimension to the
digital world is e-commerce and the boom of services being
delivered through the internet. In these spaces, we intend to
capitalise on our engineering DNA to design superior services.
We have made moves in the e-commerce space through
SuFin, our B2B platform for the trade of industrial products
and services, where we put power in the hands of SMEs
and MSMEs and our EduTech platform, through which we
empower students seeking practical and application-oriented
engineering courses.
Greener and Brighter Tomorrow
With a vision of ‘Technology for Sustainable Growth’,
the Strategy Plan factors in Climate Change and what we
must do to push the agenda for a greener and sustainable
tomorrow within the organisation as well. While the
set specific targets may be new, proactive environment
conservation is not new to L&T. We have committed to
Water and Carbon Neutrality by 2035 and 2040 respectively.
We have also set for ourselves interim targets on various
parameters of ESG up to FY 2025-26.
We are taking steps to reduce waste production through
improved recycling initiatives that encourage our people
to develop and sustain environment friendly habits. Apart
from our operations and services, we are also working with
our partners, to reduce emissions and create a significant
impact. Some note-worthy achievements related to our
environmental performance include avoiding emission of
around 40,000 tonnes of CO2 during the year, which is
equivalent to planting 500,000 trees. Our cumulative energy
conservation is around 150 million units, which is equivalent
to powering 70,000 homes for a year.
We are keenly focused on Circular Economy using the 6R
(reduce, reuse, recycle, repair, refurbish and rethink) approach
to manage waste and improve material recycling and reuse.
Cumulatively, we have planted around 6 million multispecies
trees, and our focus on biodiversity and protection of
natural resources is sharper than ever. Our portfolio of green
businesses, which includes solar, water, green hydrogen, and
some others, is steadily growing and presently constitutes
>30% of the total revenue.
Digital and Technology Adoption
We cannot emphasise enough the importance of
digital technology adoption in both EPC Projects and
Manufacturing operations. In Manufacturing today, most
activities are automatically controlled. The amount of data
that is generated and monitored gives us a differentiated
advantage vis-à-vis competition in terms of visibility of
operations and remote control over various processes.
In various projects today, more than 13,000 equipment
are digitally connected providing real-time visibility into
operations. We also have quality and safety checks on
mobile apps, which also include a database with details of
our workers, their skill sets, and their home addresses. The
entire site topography is being mapped through drones and
light detection and ranging (LiDAR) sensors. Safety measures
for workers are being communicated through augmented
and virtual reality. Such level of digital adoption substantially
increases productivity, improves quality and safety. This is an
on-going journey, and all possibilities will be explored and
implemented in the future too.
Raising the Bar
Good governance has been integral to L&T’s DNA for
decades. We have always practised the highest level of
governance and intend to keep raising the bar. We actively
seek and adopt newer, better ways of doing things to keep
setting new industry benchmarks.
People
People are intrinsic to any business both in terms of being
one of the goals for which they are run as well as the means
to achieve this goal. I have often mentioned that L&T is
a great technology platform that nurtures and rewards
hardworking, sincere, honest, and dedicated individuals.
Every person we employ adds value to the organisation.
The value that some individuals add is apparent while for
some others it is embedded deep inside and takes the right
atmosphere for it to manifest.
It is our endeavour, as an organisation, to provide the
right atmosphere, an enabling environment, and the right
incentives to realise one’s potential and take the organisation
to the next level. Through the projects that we undertake,
which are some of the biggest, largest, tallest, and heaviest,
we are committed to creating opportunities at all levels
for people to give expression to their creative instincts and
unleash their potential.
We are also taking serious steps to increase the percentage
of women in the workforce to 10% from the current 6%.
Creating the ecosystem required for not letting biases,
stereotypes, and discrimination creep into decision making
and letting objectivity define the best person for any job
has been and will remain the endeavour for creating equal
opportunity for all genders.
Giving Back to the Society
We have always believed in sharing value with our various
stakeholders and our CSR initiatives, aligned with the
global and national development objectives, primarily
focus on healthcare and education & skilling to help more
Indians become capable to earn themselves a living. In
FY 2021-22, the Company spent ₹ 136 crore on
CSR activities. Apart from spending on CSR-oriented
projects covering water and sanitation, natural resource
conservation, climate change mitigation and adoption of
renewable forms of energy, L&T also responded to the
pandemic by assembling 38 PSA oxygen generation units
and transporting those across to different parts of the
country which were worst affected. Cumulatively, 1.1
million benefitted from our CSR initiatives in FY 2021-22.
L&T – A Technology Company
L&T is fully-geared for the next phase of growth to evolve,
accept, and adopt newer ideas as we revamp our portfolio
and equip our people with tomorrow’s skillsets. Adapting
and assimilating smart technology will play a significant role
going forward.
Challenges are part and parcel of our journey, and we
are ever prepared to face and overcome them through
continuous learning, unlearning, and relearning.
Finally, we will always remember that we are in the
business of nation building. For that, we must remain
passionate, optimistic, calm, patient and stay united in
our shared sense of purpose.