December 16, 2017

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Out of India: DK Sen, Larsen and Toubro Infrastructure

Larsen and Toubro
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Touted as one of India’s largest and fastest growing multinational conglomerate engaged in technology, energy, engineering, construction, manufacturing, and financial services, Larsen and Toubro (L&T) has been actively spreading its wings in the GCC, bagging some of the important projects on the way. The company has been present in the Middle East for over four decades, with its debut project being the Abu Dhabi International Airport in the late 80’s.

Some of its landmark project wins include a $161.3mn contract in Saudi Arabia for the Riyadh Metro in September
2015. L&T’s railway business unit was awarded the contract by the BACS consortium, which comprises Bechtel,
Al Mabani, CCC, and Siemens, for the construction of ballastless tracks for Riyadh Metro Lines 1 and 2. The project
involved the construction of 62.86 km of double ballastless tracks in tunnels, viaducts, at grade sections, and three
depots. The project is scheduled to be completed in 40 months.

The contractor is also involved with the works for the Midfield Terminal at the Abu Dhabi International Airport in
the UAE capital. Larsen and Toubro will build concrete hard stands for aircraft parking around the new building, including contact and remote stands. The airside works include taxi lanes along the apron parking stands and link taxiway connections to the existing airside infrastructure with a tunnel on the airside. The major item of works for the airside include earthwork, concrete pavement, asphalt pavement with markings, drainage, general utilities, airfield ground lighting, gate services such as flood lighting, visual dock guidance system, and structural works/systems for airside tunnel.

Also in Abu Dhabi, the Indian contractor is working on the improvement of Mafraq to Al Ghweifat border post
highway. The firm is also awaiting a new project from Dubai’s Roads and Transport Authority (RTA). In the Sultanate of Oman, Larsen and Toubro is actively pursuing the construction of the package four for the Batinah Expressway and the dualisation of the Bid-Sur Road.

At present, the company is implementing projects worth approximately $7.7bn across the GCC region, according
to DK Sen, director and senior executive vice president (infrastructure), L&T. Sen also holds additional
responsibilities as the chairman on the boards of L&T Infrastructure Engineering Company and L&T Oman. He mentions: “We are quite optimistic that we will secure some huge projects in Kuwait and Africa in the near future. From an infrastructure business standpoint, we execute jobs on engineering, procurement, and construction (EPC) lump sum as well as on re-measurable basis in the fields of roads, airport infrastructure, metros, railways, as well as roads and infrastructure development of townships.”

Currently, the company is operating in four countries in the Middle East and boasts of a strong track record of
executing prestigious and challenging mega projects. Sen adds: “We will continue to deliver our projects on time with superior safety and quality standards and remain focused on improving the efficiency of project delivery with an effective internal process control team. Having understood the nuances and sensitivities in each market, we will continue to explore and be focused on the markets that will give us the right projects.”

Challenges faced
L&T has been constantly involved with successful execution and on time delivery of mega projects in India, according to Sen. “We possess the required resource base, technical knowhow, in-house construction methods, design cells, and a large bandwidth of management staff. Strong back office engineering support back home in India who can design and present the most cost optimal solutions is also one of our other forte. We have a strong supply chain spread across on global level helps us in sourcing the material of a superior quality and at an
optimum cost.”

But despite completing some challenging projects in the region, the road has not been easy for the global conglomerate. Having faced with competition from all the regional players in the field of infrastructure, Sen points out that one of the major challenges the company faces in the Middle East include the regulatory
requirements like restrictions on the visa for the workforce. “We, being an Indian organisation, try to mobilise our
workforce from our domestic sources where we have specially trained the workforce by imparting new skills
through our skills development centre (CSTI). But due to the visa restrictions, we are forced to source the workmen
from other sources and training has to be given to them again.”

Future outlook
Due to the falling oil prices and government’s decision to cut down on financing, the contractors in the Gulf
have been facing cashflow constraints for the past year. Sen duly agrees that due to the uncertainty in the market
condition and drop in international oil prices over the last year, there has been a dramatic impact on the economic
outlook of the GCC countries, and hence, re-structured the way projects are executed in the region.

“The inflow of new construction projects in the market have seen a considerable slowdown due to the ongoing economic turmoil. This economic downtrend forced the investors to re-think project execution and prioritise
developments, which are more need-based and social infrastructure projects such as schools, hospitals, etc. The GCC countries have always focused on building these kind of prioritised projects; and with the new outlook, we are quite confident that the economic situation will improve in the coming quarter.”

Sen also remains confident that the company will not face any immediate impact on the revenue of the company
from international business, since “we have a healthy order backlog”. He adds: “Currently, we remain focused
on delivering the projects secured by us and look forward to the right opportunity to make a foray either through local partnering or by our own resources depending on the project risk, profile, and size.”

The company is trying to explore new regions like Africa to diversify its portfolios, since according to Sen, there
has been a decline in the inflow of construction projects. Sen concludes: “We are here to stay put and look for reputed projects where we can strengthen our design capabilities and will be looking for big projects in partnership
with local players as well.”

 

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