L&T defers shipbuilding expansion

Larsen and Toubro Ltd (L&T), India’s largest private sector engineering and construction firm, has deferred its entry into the commercial shipbuilding business and has also decided to scale back its investment for a new shipyard at Kattupalli near Chennai. Instead, the company is concentrating on ship repair and naval shipbuilding.

An L&T official said the initial projected investment of Rs3,000 crore will be almost halved to about Rs1,600-2,000 crore, and made in two or more phases. “It is like any other large project where one doesn?t invest a large amount in one stroke,” confirmed M.V. Kotwal, senior executive vice-president (heavy engineering) and an L&T board member, adding that the company is completing procedural formalities. “We have envisaged Rs2,000 crore for the new shipyard. We will not look at putting everything at one time; instead we will wait and watch how business evolves,” he said.

Under its scaled-down plans, the firm will continue to build and repair ships at its Hazira facility in Gujarat, where it has orders worth $350 million (Rs1,750 crore) to build 10 ships. The facility is used to build specialized vessels such as RoRo and LoLo ships, heavy lift vessels and naval vessels, including submarines, in addition to repairing ships, a business that is immune to business cycles.

The company has maintained that shipbuilding is a natural diversification for it and will help it leverage its strengths in fabrication and heavy engineering. L&T entered the shipbuilding business last year when it decided to use a part of its Hazira facility for the purpose.