Focused approach drives growth for L&T IES

MUMBAI, INDIA: It has been a decade for India’s top engineering conglomerate Larsen & Toubro (L&T), since it set up the Integrated Engineering Services (IES) business unit dedicated to the core areas of product engineering and process engineering.

The L&T legacy has helped the unit to serve diverse verticals such as automotive, aerospace, off-highway vehicles, consumer durables, energy and utilities, construction engineering, pharmaceuticals, power, marine and others. It is not just serving those diverse sectors but also gaining business too.

According to Dr. Keshab Panda, L&T IES CEO, the vertical structure has been integrated with mechanical and electronic engineering in April 2010 and this has helped file some 11 patents in embedded engineering space this year.

“Now with our stable sales organization in Americas, Europe, Japan, India, Middle East and Africa, we have met our numbers for Q1& Q2. And our H1 revenues have increased by USD 2 million and grew by 61 percent against H12009,” Dr. Panda says.

“The growth is due to our focused delivery approach in high-end engineering services and we expect to grow around 60-65 percent by the end of March 2011,” Dr. Panda adds.

While L&T IES faces strong competition from top IT companies, Dr. Panda comments, “Our revenue in terms of mechanical engineering services compared to big guys like HCL, Wipro, TCS and Infosys is more or less equal or higher because of our skilled people.”

Although the company grew by 61 per cent, Dr. Panda already is aiming target for the next year. He stresses that this growth rate needs to be sustained and secondly, points at serious lookout for merger and acquisition (M&A) in specific areas in coming months.

“We can go for M&A to integrate our business and our board is so far okay with it. Also, we have identified a few countries, where local regulations are suitable for M&A activities and in the next couple of months we will go to our board to discuss the potential M&A and close those deals,” Dr. Panda explains his business plans.

However, he clarifies that for these M&A deals, the company would not be going to countries where it is more of a body shop.

With 144 customers and business across globe, L&T IES has posted a growth of 63 per cent in North America and 53 per cent in Europe against H1 2009. The customer accounts range from USD 1 million to USD 5 million. With over 95 per cent overseas customers, it’s the foreign markets that dominate the company’s overall business and revenues.

While businesses world over were hit by slowdown, the Vadodara headquartered firm took some strategic decisions to overcome the pricing pressures.

“Out of 144, we dropped some 21 accounts in North America and Middle East, which were below USD 1 million as these accounts were not going to increase their business and the operational cost in serving these clients was high,” Dr. Panda explains.

Further he adds, “In hard core engineering and skill-based engineering services, no one is going to give you higher pricing rates. So we had to look at the average billing rates both onsite and offshore; and then bring in improvement in the average billing rates every quarter.”

For L&T IES, the focused approach is more important for its business. Dr. Panda points out, “We are looking at services model rather than billing model, where our focus is to increase fixed billing projects and do more end-to-end process and product engineering services; and not just skill-based projects or 3D modeling and drawings.”

With a total strength of 3672 people, out of which some 500 odd staff are based in the US and Europe, the company is likely to hire some 100 plus staffs in next two months.