Page 13
L&T RELOCATES MINING DIVISION TO KOLKATA; SEES REVENUE RISIN G
Larsen and Toubro Ltd (L&T), India’s largest engineering firm,
is relocating its mining unit to Kolkata from Chennai to be
closer to the major mining belt of east India. It expects revenue
to rise as the outlook for this core sector improves with the
new government’s thrust on industrial growth. “This division
has been relocated to Kolkata from Chennai in bits and pieces… the design office and bulk materials handling are still in
Chennai, but eventually everything will be in Kolkata,” said
S.N. Roy, whole-time director and senior executive vice president (corporate affairs and power) at L&T. L&T is banking on
the new government’s policies to help grow the metals and
mining sector after a lull over the past few years and is gearing
up to be part of this growth, he said. “L&T expects that bottlenecks in mining will be removed in the coming months and
sees a revival of the sector with huge investments from both
domestic and international investors.” The mining division of
L&T, called Metallurgical and Material Handling (MMH), has
engineering procurement and construction solutions for operations such as iron ore crushing, coal washing and bulk materials handling. It contributes around 3% to the company revenue. Roy said he expects the share doubling in three-five
years. L&T had a consolidated net profit of Rs.4,902 crore in
fiscal 2013-14 on a revenue of Rs.85,128.40 crore. Roy did not
say if new investments were planned for this division, but said
revenue growth will be driven by the domestic revival of mining and new business from overseas mining projects. Analysts
said L&T’s steps to ramp up its mining is timely, but it would
be a year or two before profits start showing. “If the government gives boost to a lot of infrastructure-related activity, then
L&T’s mining business can see a growth of 15-20% over three
to four years,” said Dhirendra Tiwari, head of research at Antique Stock Broking. In fiscal 2013-14, L&T’s mining division’s
revenue was Rs.1,600 crore, of which Rs.1,000 crore came from
construction machinery and Rs.600 from material handling
projects in mines. India’s mining sector contracted by 0.6% in
FY14, as compared with a contraction of 2.3% in FY13, as legal
and regulatory action in Karnataka, Goa and Odisha against
environmental degradation and illegal mining saw bans and
restricted mining. Conservative approach Despite the brighter
outlook for the mining sector and the overseas prospects that
offer a good opportunity to diversify, L&T is treading cautiously. Roy said he is watching how growth unfolds and is
not immediately looking to own mines, but choosing to remain
an equipment and service provider to mine owners instead. “As
of now, L&T does not have plans to participate in the auction, as
our core strength is for building plants and not in commodity
business,” Roy said when asked if L&T will bid for the upcoming ‘C category’ iron ore mines in Karnataka under a Supreme
Court order. “We want to be asset light, not asset heavy,” he
said. Neither is the company interested in taking up outsourced
mining projects under the mine-developer-operator (MDO) route
from Coal India Ltd. “However, L&T has tied up with many
prospective MDOs to provide technology solutions,” Rao added.
That said, L&T has shown some interest in owning mines in the
past: it has two applications for mining leases for two bauxite
blocks in Odisha, called Sijimali and Kutrumali, that are pending
with the state government. “The government of Odisha had
sought some clarifications on our mining lease applications
which have already been furnished,” Roy said. “Our applications are understood to be in advanced stage of processing and
we hope to be granted mining lease shortly.” The main beneficiary of these two blocks, when they turn into mines, will be Anil
Agarwal-promoted metal and oil company Sesa Sterlite Ltd that
has an agreement with L&T for buying the bauxite. However,
owning mines at some point was not categorically ruled out by
Roy. “When projects come up, we can get into auctions if the end
user is there. Business policy is very dynamic, we are there to
make money. So if there is opportunity, we will get into it,” he
said. L&T is also looking at an iron ore deposit in Odisha for
which it had carried out a ‘rapid exploration study’, similar to
prospecting (preliminary exploration of mineral). The company’s
approach to overseas operations is also cautious. Roy said mining operations are now being undertaken in the Middle East and
Africa, and the company is looking to ramp up operations by
taking on projects from international companies. “In six months
to one year we are going to expand. In the Middle East we have
done a few jobs with companies there and in Africa we are going
to start… we have posted some people there,” he said. But Roy
ruled out entering Afghanistan, where Indian companies led by
Steel Authority of India Ltd in a consortium have won rights to
explore and mine iron ore reserves. Roy cited security as paramount to the company. Likewise, L&T won’t enter southern African countries because they were seen as unsafe, he added.
DISCLAIMER: This is a compilation of various news appeared in different
sources. In this issue we have tried to do an honest compilation. This edition is
exclusively for information purpose and not for any commercial use. Your suggestions are most valuable.
Your suggestions and feedback is awaited at :A GEMCO KATI INITIATIVE
VOLUME 1, ISSUE 8 — JULY 2014
[email protected]