Defence looking up for L&T
Exports at highest ever, company expects shipbuilding turnaround in next two financial years
Engineering conglomerate Larsen & Toubro (L&T) may finally be scripting its defence story after winning a ~4,500-crore order for self-propelled guns recently.
The current financial year and the next will be significant for the company with an expected new defence manufacturing policy, fresh orders and rising defence exports.
“Over the next five years a sizeable number of orders would have been booked and revenues would have started to grow dramatically,” Jayant Patil, head of defence and aerospace and member of the heavy engineering board of L&T, told Business Standard.
L&T in April signed a contract with Hanwha Techwin of South Korea for execution of the 155mm/52 Cal tracked self-propelled gun programme for the Indian army. “A lot of action is expected this year. Six or seven large programmes of between ~500 crore and ~15,000 crore are expected to be placed with Indian companies to kick off Make in India,” Patil said.
The locally manufactured K9 VAJRA-T opens a long-term revenue stream for L&T through repeat orders and export opportunities, wrote Renu Baid and Nayan Parakh in an IIFL research note.
The new defence procurement policy allows 100 per cent repeat orders, beyond which special approvals are required. “This project, we hope, should see a repeat of the current order,” Patil said.
L&T also stands to gain from the proposed new defence manufacturing policy, which has raised hopes of long-term commitments in certain defence programmes with chosen private domestic manufacturers.
Over the medium term, defence could contribute five-10 per cent of L&T’s order book, according to Baid of IIFL. L&T’s order inflow in OctoberDecember was ~34,890 crore and its order book ~2.58 lakh crore.
“In the last financial year we crossed ~1,000 crore defence order inflow through exports. We see exports growing over the coming years,” Patil said.
L&T is also hopeful its loss-making shipbuilding facility will be out of the red in the next two financial years. L&T is one of two bidders for a landing platform dock contract that is expected to open this year. “Any large naval order will provide a 10-year revenue visibility for the shipbuilding facility,” Baid added.