L&T down 6.5%, loses 70.5% in a month

Engineering and construction behemoth, Larsen and Toubro continues to reel under selling pressure. On Monday, the stock was down by 6.5 per cent, touching a 52-week low of Rs 721.65. It has lost a whopping 70 per cent in the last month alone.

At Rs 729, the stock trades at a price to estimated earnings of 17 times and 14 times for FY09 and FY10 respectively.

CLSA has an 'underperformer' rating on the stock with a target price of Rs 1,000, stating that the company is facing challenging times of credit crunch and likely slowdown in growth of order inflows.

L&T proposes to raise Rs 2,400 cr thru securities

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Future plans

The company may opt for issue of securities through qualified institutions placement

It has embarked on a project to look beyond 2010 and formulate a perspective plan till 2015

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Chennai, Aug. 9 Larsen & Toubro Ltd plans to raise about Rs 2,400 crore through a placement with qualified institutional buyers, for which it is seeking its shareholders’ approval.

In its notice to shareholders for the annual general meeting scheduled for August 29, L&T has said that the company requires adequate capital to meet the needs of the growing business. To leverage available business opportunities, the company may opt for issue of securities through qualified institutions placement (QIP). A QIP of the company’s shares would be less time-consuming and more economical, the notice said.

At the meeting, L&T will also seek its shareholders’ nod to re-appoint six directors, including Mr A.M. Naik, the Chairman and Managing Director. The others are: Mr J.P. Nayak, President (Machinery and Industry Products); Mr Y.M. Deosthalee, Chief Financial Officer; Mr K. Venkataramanan, President (Engineering and Construction Projects); Mr K.V. Rangaswami, President (Construction); and Mr V.K. Magapu, Senior Executive Vice-President (IT and Technology Services).

The company last year increased the retirement age of its senior management from 65 to 70 years. Mr Naik is 66 years old and Mr Nayak 65 years.

Reorganisation

L&T’s 2007-08 annual report talks about the company’s plans to re-organise its businesses to industry or customer segments. As part of this, it plans to create 12 operating companies within the existing L&T corporate structure. Each operating company will be responsible for its strategic and operational decisions and performance.

Each operating company will have independent support functions, such as finance and accounts, HR, supply chain management, and corporate centre.

The annual report says that due to encouraging changes in the opportunity landscape, the company has embarked on a project to look beyond 2010 and formulate a perspective plan till 2015. This exercise is meant to align the company’s investments (both capital and manpower) to the long-term trends, while addressing emerging opportunities and unseen challenges.

Leadership development

L&T has also initiated a structured leadership development programme to identify leaders and develop them. “This exercise is expected not only to meet short-term operational challenges but also create a band of leaders to take on larger responsibilities in future,” says the annual report.

L&T expects defence biz to grow with change in procurement norms

Chennai, Aug 11 Larsen & Toubro Ltd expects to benefit from the changes to the defence procurement procedure that will come into effect shortly, with more manufacturing opportunities being thrown up for the private sector.

L&T’s defence business comes under its heavy engineering division, which manufactures and supplies custom engineered equipment and systems to a range of industries such as fertilisers, refinery, petrochemicals, oil and gas, thermal and nuclear power, aerospace and equipment and systems for defence applications.

The Defence Procurement Procedure 2006 made it essential for overseas suppliers to have value addition from within India – or called offsets – for major defence contracts.

The offset stipulation would drive business opportunities in the defence sector in the medium term. DPP-2008 has been announced and will come into effect from September 1.

L&T’s annual report for 2007-08 says DPP-2008 is expected to pave the way towards allowing banking of offsets. This would benefit existing players such as L&T who are licensed to produce defence goods.

The armed forces are considering inducting a variety of weapon systems and engineering systems developed by DRDO.

“This opens up opportunities for the division (Heavy Engineering Division) as it has been a development partner of DRDO,” the annual report says.

The Government’s decision on granting “Raksha Udyog Ratna” status to select technology players is awaited.

The division has registered itself as the preferred player in the private sector for conferring this status.