Larsen & Toubro (L&T) will tie up with banking facilities for projects in the Middle East.
In the Middle East- which is the second largest market for the company after India- it is not looking for financing for projects but to create an overseas banking ecosystem.
“In India, banks know us very well whereas, in the Middle East, the banking system does not know us well.,” said R Shankar Raman, CFO & Whole–Time Director, L&T. “The project execution in the Middle East will be self-financing but the tie-up with banks will be for collecting the advances one needs to give guarantees. They are required for credit, warranty of equipment, liability periods, and so on. The idea is to make sure that we build relationships and over time depending on Indian banks would be insufficient to look after the needs of India and overseas. Also, for the customers in the Middle East, it is easy to accept a Middle-Eastern bank providing them the facilities.” .
The consolidated net profit for the June quarter for L&T rose 46 per cent year-on-year to ₹2,493 crore, while revenue rose 34 per cent to ₹47,882 crore. The company’s order inflow for Q1 FY24 was at ₹655 billion with 23 per cent of orders from the Middle East. The revenue composition for the quarter comprised 16 per cent from the Middle East.
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Overseas growth
L&T is also rapidly increasing its overseas shares across segments.
“In absolute terms, we are having ₹1,20,000 crore out of the ₹4,12,000 crore of the order book is international. This roughly translates to about 29-30 per cent. When we say international, 85 per cent is from the Middle- East. The ecosystem and branding in the Middle East is very important which is what we are attempting,” said Raman.
Localisation in the Middle-East
The company will also undertake localisation of the workforce in the segments they operate for the Middle-Eastern market.
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“The contracts that we have in the Middle East including hydrocarbon power, transmission, water, and so on, there is a certain percentage of the local population that is to be trained, skilled, and employed. It is a part of the ecosystem development that the countries are doing. The areas to start will be the low-skill low-impact areas and with the rules evolving in the area one has to have welders, fitters, and managers. Unlike India, people in the Middle East get educated and come back to their homeland so we can get some qualified managerial personnel. The evolution will take place among technical capabilities. It is a positive aspect as one can have the local population joining forces and it will also not put pressure on the Asian workforce,” added Raman.