L&T SPLITS INTO FOUR ENTITIES

• Larsen &Toubro - Engineering Construction and Contract (ECC) division - is going to be split into Four Separate Companies within two years

• The separate entities would be functioning in different areas i.e. Buildings & Factories, Infrastructure, Power Transmission & Distribution and Mineral Metal & Water.

• These entities have already started operating as independent divisions with effect from July 1, 2008

• Each division is contributing Rs.3000-4000 Crore this year and they grow to at least Rs 5,000 crore each after their registration.

Infrastructure major Larsen & Toubro has decided to split its Engineering Construction and Contracts Division since L&T has been increased in many folds in their business in recent years.

Mr J Ganguly, L&T Executive Vice-President, said “We have decided to split the ECC division functional areas into four companies. ECC will be the holding company for it,"

The functional restructuring has been effected since 1st July and the four divisions have began work independently, though some manpower allocation for the departments were yet to be completed.

Mr Ganguly said the rationale behind the move that the business becoming too big we need to take steps to reduce the management response time to act quickly to the market. This is possible when a company is small.

Further he added, "We may take these four companies of the ECC division to the public in the next two to three years after attaining a critical mass (read revenue) of USD 1 to 1.5 billion each."

The functional restructuring was likely to be completed this year. L&T would wait for average turnover of Rs 5,000 crore and above, before registering them as separate companies.

ECC initially hold four subsidiaries and L&T might subsequently become the holding company. The divisions would be called L&T Infrastructure, L&T Power Transmission and so on.

The ECC is not only the largest construction company in India and also doing global operations in four major areas building and factories, infrastructure, power and minerals, metals & water.

In 2006-07 L&T turnover was around Rs 9,500 crore which went up to Rs 13,000 crore FY 2008 and it is expected to move to Rs 20,000 crore during this fiscal.

Beside ECC, L&T has Engineering & Construction Projects, Heavy Engineering, Electrical & Electronics, Machinery & Industrial Products and Information Technology & Engineering Services.

He said the restructuring was being done in accordance with advice from the Boston Consulting Group (BCG)