toubro?
v Strengths:
L&T-Ites have strong mainframe capabilities.
A broad portfolio of infrastructure related offerings.
L&T-Ites is capable in performing infrastructure management work that is commonly
bundled with application management like production systems support, database
management, and server monitoring.
L&T-Ites has 5 offshore infrastructure delivery centers located in Baroda, Bangalore,
Mysore, Chennai, and Powai.
v Weaknesses:
Weak presence in Global delivery management.
Weak help desk threatens to invite new clients.
v Opportunities:
Telecom infrastructure management.
Mainframe management capabilities will give opportunity to L&T-Ites to go for large
infrastructure deals and hosting biz.
v Threats:
Paucity of certified staff to support and disaster recovery offerings may become threat in
long term for its expansion program in Europe to support mission-critical work.
Parent Company
Category
Construction Services
Sector
Conglomerates
Tagline/ Slogan
USP
STP
Segment
Positioning
SWOT Analysis
Strength
Weakness
1. Dependence on domestic operations for revenue generation In FY2011, the company's domestic (India) operations
contributed more than 80% of the total revenues.
2. Increasing debt impacting financial flexibility - L&Ts
interest and brokerage expenditure over the period increased
Opportunity
Threats
Competition
1. ABB
2. Bechtel
3. Hindalco
4. Sundaram Fasteners
5. Gammon India
Competitors
6. Lanco Infratech
SWOT Analysis of Larsen and Toubro, L&T Company Case Study Dissertation
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Strengths
and systems. The company has manufacturing facilities in India, China, Oman
and Saudi Arabia; and has its customers in more than 30 countries. L&T has a
strong brand name, having built the world's largest coal gasifier made in India
and exported to China, the world's biggest ethylene oxide reactor for a
petrochemical complex in the Gulf, the world's largest Fluid Catalytic Cracker
regenerator for a refinery, and the world's longest limestone conveyor. L&T also
played a critical role in building India's first nuclear powered submarine. In
FY2013, the largest ten players in the Indian engineering sector reported $47
billion of revenues with L&Ts market share of over 60% ($28.3 billion). In August
2013, Engineering News Record, the international contractors magazine, ranked
L&T Construction 48th among the worlds top international contractors and 28 th
among the worlds top global contractors, based on 2012 revenues. The
company can leverage its strong brand name and market leadership position to
gain competitive advantage and also expand into international markets.
In technology services, L&T develops optimal solutions for its global clients.The
embedded systems unit provides technological assistance across a broad
spectrum of operations including design, maintenance, re-engineering, testing,
prototyping, and industrial design. A strong technical expertise helps the
L&T has a very strong pipeline of projects which would be completed in the next
few years. Order book as at March 31, 2013 was worth INR1,536,040 million
(approximately $28,293.9 million) as against 708,200 million (approximately
$13,045 million) as at March 31, 2009. Further, the companys order book inflow
increased at a compounded growth of 14.2% since FY2009. It was primarily due
to bulk orders received by the company from engineering and construction. The
company received 49% of the orders received from the infrastructure sector. The
engineering and construction division received new orders worth INR797,660
million (approximately $14,692.9 million) in FY2013 for projects such as 220/33
kV Grid Station at Zakher & Ayn Al Faydha in the UAE, 11 kV Power Distribution
Network for Emirates Palace, Concourse 4 of Dubai International Airport, a tunnel
between Shankar Vihar and Hauz Khas awarded by Delhi Metro Rail Corporation,
Rajasthan Atomic Power Plant, Riyadh Metro Project, Al -Batinah Expressway
Project, and others. Large number of projects in L&Ts pipeline ensures a steady
revenue growth.
Weaknesses
L&T is largely dependent on its domestic operations for generating its revenues.
In FY2013, the company's domestic (India) operations contributed more than
70% of the total revenues. The company's revenues can be affected with any
adverse events occurring in the domestic market such as adverse economic
conditions and foreign currency fluctuations, among others. Higher dependence
on domestic operations to generate revenues could drastically affect L&T's
revenues and profitability. Increasing debt impacting financial flexibility L&Ts
debts are increasing steadily. The companys debts in the form of loans increased
to INR619,940 million ($11,419.3 million) in FY2013 from INR327,980 million
($6,041.4 million) in FY2011. Increase in loans registered a compound annual
rate of change (CARC) of 35.5% over the FY2011-13 period. As a result, L&Ts
interest expense over the period FY2011-13 increased to INR20,950.2 million
($385.9 million) from INR8,027.5 million ($147.9 million) in FY2011. L&Ts
increasing debts is impacting the companys financial flexibility.
Opportunities
L&T has entered into several joint ventures in the recent past. During March
2013, the company completed the ownership transactions related to its India
based group company Audco India Limited (AIL), a manufacturer of industrial
valves. In December 2012, L&T signed a contract with PETRONAS Carigali
Myanmar (Hong Kong) Limited for executing an offshore engineering,
procurement, construction, installation and commissioning project valued at over
$100 million. Also during 2012, L&T acquired Indo Pacific Housing Finance, Ltd., a
housing finance company and the UK based Thalest Limited, a holding company
engaged in offering integrated platform management system and integrated
bridge system solutions for naval warships and mercantile marine ships, vessels
and floating systems. In the same year, L&T formed a strategic partnership with
the UK based Cyan Holdings plc, an integrated system design company to
collaborate in the development, supply and delivery of advanced metering
solutions comprising utility meters equipped with Cyan's wireless communication
capability for AMI, smart metering and smart grid pilot projects.
High global oil and gas capital expenditure plans likely to enhance business
The global oil and gas capital expenditure (Capex) plans are forecasted to remain
high over the coming years. This is likely to provide more business opportunities
for the companys engineering and construction projects division in 2014. Key
drivers of growth in this sector in near future include increasing brownfield
prospects particularly in Middle East and Africa; the trend within Indian refining
units going for downstream petrochemical units for value added products; and
growing prospects in new business lines (gas processing, poly propylene and coal
gasification). In addition, the growing thrust on gas production and transportation
is expected to increase investments in cross country gas pipeline projects and to
bring in more business. L&T is well placed to tap the growing global oil and gas
capex plans and enhance its business in the coming years.
Threats
The Indian economy witnessed a decadal low growth in FY2013 with GDP of 5%.
The country has seen economic expansion drop since the start of the FY2011 to
levels even below the crisis years of FY2009. The slowdown which started in the
industrial sector also extended to services sector. While the moderation in
growth in agriculture was largely on account of the rainfall deficiency, the
deceleration of industrial production growth to 1.2% in FY2013 from 2.7% in
FY2012 was mainly due to domestic supply bottlenecks, contraction in mining
and slowing growth in manufacturing and electricity sectors. Also, the country
continued to face persistent challenges due to high inflation, tight monetary
policy, deteriorating external balance and the global uncertainties. In addition,
government expenditure growth decelerated from 8.6% in FY2012 to 3.9% in
FY2013 due to the fiscal consolidation by the government to reduce the deficit.
Continued economic challenges in India, the companys largest geographic
market could lead to further slow-down in industrial production and impact L&Ts
business prospects.
project award decisions. Environmental and land acquisition issues are current
barriers in the near term for expansion of mining equipment demand. Power
projects and new projects in minerals and metals sector face hurdles due to land
acquisition issues, environmental clearances, and coal linkages. Moreover, in
2013, Indian government passed The Land Acquisition, Rehabilitation and
Resettlement Bill, 2011. As per the bill, compensation for the owners of the
acquired land should be four times the market value in rural areas and twice in
urban areas. Projects involving land acquisition that are undertaken by private
companies and public private partnerships must have consent of 80% of the
people affected. L&T presently has many ongoing projects under public private
partnership. For instance, the land acquisition bill is expected to raise Navi
Mumbai airport's project cost by INR50,000 million ($921 million). Challenges in
land acquisition are likely to affect L&Ts business.
The company faces stiff competition in the international market. The engineering
and construction segment faces intense competition from construction majors in
the Middle East including ABB of Sweden and Bechtel of the US.These companies
have substantially greater resources and superior capabilities than L&T. In the
domestic market, the company primarily competes with players like Hindalco,
Sundaram Fasteners, Gammon India, and Lanco Infratech among others. Stiff
competition in the marketplace could erode the company's market share and
reduce its profitability.