Highways and More. L&T moves into fledgling domestic BOT market for transportation jobs. (Photo courtesy of Larsen & Toubro)

Three years before India’s in-dependence, two Danish engineers predicted the need for an indigenous contractor to fill voids left by the departing British. Their hunch paid off. Their creation, Larsen & Toubro Ltd., now is by far India’s largest construction group, growing ever bigger on the back of buoyant home market and cultivating more business abroad.

In size, L&T is unrivaled at home. With sales last year growing 35%, to about $3 billion, the company is nearly five times bigger than Jaypee Group, New Delhi, one of its nearest competitors. And its business scope is wider, not only than that of other Indian contractors, but also of most international firms.

At one end of the scale, L&T is building modest homes for former slum dwellers in land-strapped Mumbai. At the other, this month it completed and shipped a 2,400-tonne gas injection plant to Abu Dhabi from its Gujarat fabrication yard. Metros, bridges, buildings, nuclear powerplants, dams and just about every other piece of infrastructure are also in the company’s portfolio.

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Looking to expand internationally, executives offer their firm’s versatility as a mark of India’s, and of its construction industry’s emergence from a low-cost, low-quality culture. But by boasting of its extensive library of international codes and journals, for example, L&T reveals a lingering need to affirm its technological prowess before western eyes.

Within India, however, L&T betrays no such self doubt. The company is "good but a bit arrogant," says the chief executive of one India-based foreign consultant. But such mild rebukes are countered by clients who value the contractor’s resources.

By helping introduce to India incremental bridge launching for part of the 760-kilometer Konkan Railway, completed in 1998, L&T wins praise from E. Sreedharan, who headed that project. He also points to L&T’s part in importing tunnel-boring technology, for the Delhi Metro project.

The firm’s diversity stems from the industrial roots of its founders, Henning Holck-Larsen and Soren Kristian Toubro, who created the company largely as an equipment manufacturer in 1938. Their formation six years later of Engineering Construction Corp. Ltd. launched the group’s contracting business, which now accounts for over 85% of its revenue.

Based at a 10-hectare campus in Chennai (formerly Madras), ECC’s general contracting business accounts for about 60% of group sales. Turnkey work in hydrocarbon, industrial and power sectors contributes most of the rest.

ECC is "the only [Indian] company with civil, mechanical, electrical and industrial [engineering]," says the division’s senior vice president, K.V. Rangaswami. "Having different portfolios helps us." Nevertheless, ECC is becoming more selective, eschewing difficult parts of the country and bidding only for projects bigger than $10 million. ECC’s projects range in value up to $200 million, averaging about $30 million.

Introducing Privatization

While conventional contracting provides the bulk of L&T’s work, the company increasingly is active in build-operate-transfer contracts. Rangaswami welcomes the greater control.

About 75 BOT highways contracts of about 50 km each will be bid in the next 18 months, says K. Venkatesh, vice president for development projects. In the last five years, L&T has won four of about 25 BOT contracts bid, investing several hundred million dollars in equity. ECC’s highway revenue is expected to dip 8%, to $130 million, this year before rising to $220 million with continuing growth, says M. H. Desai, head of roads and runways.

Airports also provide new business. Despite its size, L&T needs international partners for some major jobs. It owns nearly a fifth of the consortium that won India’s first privately financed airport, at Bangalore. Due for completion in 2008, the roughly $250-million project will include a 4,000-m runway and terminal to handle 4.5 million people a year.

L&T also is complementing its ports-contracting work with operations through its International Seaports (India) Pvt. Ltd. It has secured three port contracts and is bidding for three more.

Supporting its turnkey effort, ECC has a building design department with 600 staff in Chennai. About 80% of the department’s work is for company projects and the rest is for outside firms, says chief architect Rajan Venkateswaran. To prepare for high-rise work, Venkateswaran’s department has committed 10 designers for a year to develop details for a national 512-m-tall tower.

Adding Up. L&T builds up offshore staff. (Photo by Peter Reina for ENR)

L&T also is expanding internationally. Having made "sporadic" forays overseas, ECC aims to raise foreign business from 15% of the total to around 25% by 2010, says Rangaswami. Contracts "must have long-term prospects," he says. The Arabian peninsula, generating $400 million in sales last year, is his main focus. Next is East Africa, where the firm has an industrial project in Kenya.

Like India’s information technology firms, L&T is increasingly exporting design services through offshoring deals with U.S. and other foreign engineering companies. The Global Engineering Services unit, established earlier this year, has around 50 designers, will double by the new year and will reach 250 next fall, say executives.

GES has some 20 designers working for two U.S. firms, and the division head G. Bandopadyaya has 20 more companies in his sights. "So much work is available," says Bandopadyaya, that he expects to have 1,200 offshoring engineers within five years.