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February 2, 2012 STRATEGIC ANALYSIS OF L&T 1

PRESENTED BY :

TEAM L&T


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INTRODUCTION

Founded in 1938 by two Danish Engineers

Headquarters at Mumbai

Initial Business - Importofmachineryfrom Europe

Technology-driven Engineering and Construction Company

February 2, 2012 2STRATEGIC ANALYSIS OF L&T


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SIGNATURE OF EXCELLENCE

Worlds largest coal-gasifier madeinIndia andexportedto

China

Indiasfirstindigenoushydrocrackerreactor

Worlds largest Continuous Catalyst Regenerationreactor

Worlds longestgaspipeline

Building aninternational classfootball stadiumin 260 days



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L & T MARKETING

STRATEGIES Goingglobalplan

Developingexportmarket

Strategyformarketpenetration

Forgingstrongpartnershipswith Supplierbase

Innovation & TQM

Issues & hurdlesfaced

o MadeinIndia a mentalblock

o Brand licensing



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Participationininternational exhibitions

Websites & links

Roadshows

Participatinginmajortenders

Directselling

METHODS/ WAYS OF SALES

PROMOTION



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MERGERS, ACQUISITIONS &

DIVES

TITURES

L& T Financeholdings Divestiture

Tamco Shanghaiswitchgearcompany Divestiture

Citigroupfunditbusiness Acquisition

L& T Bombaydevelopers Pvt.Ltd. Divestiture

DBS Cholamandalam assetmanagement - Acquisition



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M & A (Contd...)

Satyam computerservices Increaseinstake

Tamco corporateholdings Berhad Acquisition

Cityunionbank Stake

L&T urbaninfrastructure Divestiture

L&T infrastructuredevelopment - Divestiture



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JOINT VENTURES

L&T JV withMitsubishi

Technological transfer- supercriticalboiler

o Higherefficiency

o Reductioninemission

o Operational efficiency

L&T JV with Cassidian

Design,distributeelectronic warfare,radars, avionics

o Cassidian exeprience with DRDOo Reduceindia`s dependenceonforeign companies

o Markitspresenceinglobal market



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INFORMATION TECHNOLOGY

StrategyinIT governance

RunningIT & LeveragingIT

Strategyin Virtual reality centre

Strategyin E-commerce



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ERP AND UPGRADE POLICIES

Majorbusinessisheavyequipment

o Currentlyrunning16 ERP systems

Biggest challenge : L&Ts ECC division

Somefunctionsin Excel and legacysystems

Not all in ERP different BPR & disruptsusers



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ENTERPRISE INFRASTRUCTURE

MANAGEMENT Importantpartofoptimisation bothprocess & Technology

CA Unicenterhandles complexsystems

IT InfrastructureLibrary

BS7799 Certified

Information Security

o threatmorefrominside



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SUPPLY CHAIN MANAGEMENT

Major objectives ofSCM in L&T are:

Cost Reduction

Transparent practices

Minimum landed cost

Uniform Costs

Placing products at right time and right place



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SUPPLY CHAIN MANAGEMENT

(Contd..)

L&T has divided the entire logistics function into two parts

Freight Management Centre

Day to Day Operations



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GROWTH STRATEGIES OF L & T

Newbusinessstructureroll-out (Lakshya Plan)

Capacity Expansion

o SuperCritical Boiler& TurbineGenerators

o Modularfabricationyard

o Heavy-lift-cum-pipe-layvessel LTS 3000

International Business



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RESEARCH & DEVELOPMENT

Expenditureincurredon R&D 91.54 cr in 2009-10,108.98 cr

in 2010-11

R&D expenditure as a percentageonturnover- 0.25%in

2009-10 & 0.29%in 2010-11

R&D intelecom 4G

L&T constructionresearch & testing center

L&T Infotech tosetup R&D centerat BelfastFebruary 2, 2012 17STRATEGIC ANALYSIS OF L&T


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FINANCIAL PERFORMANCE

306

420

516

696

798

0

100

200

300

400

500

600

700

800

900

FY 07 FY 08 FY 09 FY 10 FY 11

Order Inflow

BillionRs.

369

527

703

1002

1302

0

200400

600

800

1000

1200

1400

FY 07 FY 08 FY 09 FY 10 FY 11

BillionRs.

Order Book

176

249

336367

435

0

100

200

300

400

500

FY 07 FY 08 FY 09 FY 10 FY 11

Net Sales

BillionRs

.

13.9

21

27.1

31.9

36.8

0

5

10

15

20

25

30

35

40

FY 07 FY 08 FY 09 FY 10 FY 11

BillionRs.

Recurring PAT



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(Contd..)

Orderflow

Sales

OrderBook

EBITDAMargins(E & C)

RecurringPAT

15%

19%

30%

10

bps

15% Orderflow

Sales

Order

Book

EBITDAMargins(E & C)

RecurringPAT

4%

21%

sdq

06

12%

26%

Performance Highlights FY 11 Performance Highlights Q1 FY 12



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(Contd..)

91%

4%4% 1%

L & T segment-wise Order Inflow 2010-11

Engineering &

Construction

(73013 crore)

Electrical & Electronics

(3261 crore)

Machinery & Industrial

Products (2869 crore)

Others (626 crore)

Total Order Inflow = Rs. 79769 crores

36%

16%

12%

32%

4%

L & T sector-wise Order Book as at Mar 31,

2011

Infrastructure

(46920 crore)

Process (20337 crore)

Hydrocarbon

(15112 crore)

Power (42315 crore)

Others (5533 crore)

Total Order Book = Rs. 130217 crores



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(Contd..)

90%

8% 2%Order Inflow

Domestic

Middle East

Others

92%

6% 2%

Order Book

Domestic

Middle East

Others

Geographical Break-up

52%

26%

22%

Order Inflow

Private

Public

(Incl PSUs)

Devl Projects-

L & T

Customer Profile

43%

39%

18%

Order Book

Private

Public

(Incl PSUs)

Devl Projects-

L & T



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(Contd..)

86%

7%

6%1%

L & T segment-wise Sales 2010-11

Engineering &

Construction

(37550 crore)

Electrical &

Electronics

(2987 crore)

Machinery &

Industrial Products

(2699 crore)

Others

(650 crore)

Total Customer Sales = Rs. 43886 crores

82%

7%

9% 2%

L & T segment-wise result 2010-11

Engineering &

Construction

(4772 crore)

Electrical &

Electronics

(399 crore)

Machinery &

Industrial Products

(531 crore)

Others (118 crore)

Total segment result = Rs. 5820 crores



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RATIO ANALYSIS


0.3

0.4

0.5

0.4 0.4

0

0.1

0.2

0.3

0.4

0.5

0.6

2007 2008 2009 2010 2011

Debt-Equity Ratio

1.2

1.1

1.2 1.2 1.2

1

1.1

1.2

1.3

2007 2008 2009 2010 2011

Current Ratio


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15.6

19.2

9 8.2 8.9

0

5

10

15

20

25

2007 2008 2009 2010 2011

Interest Coverage Ratio

30.9 31.8

26.9 23.9 24.6

0

5

10

15

20

2530

35

2007 2008 2009 2010 2011

Return On Capital Employed

RATIO ANALYSIS (Contd)

%



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RATIO ANALYSIS (Contd)

27.128.5

2421.5

19.7

0

5

10

15

20

25

30

2007 2008 2009 2010 2011

Return on Net Worth

3.5

3.9

4

3.5

3.8

3.23.3

3.4

3.5

3.6

3.7

3.8

3.9

4

4.1

2007 2008 2009 2010 2011

Debtors Turnover Ratio

%



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0.00

10000.00

20000.00

30000.00

40000.00

50000.00

60000.00

70000.00

80000.00

90000.00

Mar-09 Mar-10 Mar-11 Mar-12E Mar-13E

Net Sales & EBITDA (Rs Cr)

0.00

1000.00

2000.00

3000.00

4000.00

5000.00

6000.00

7000.00


Consolidated Net Profit (Rs Cr)

Salesprojected at Rs.64,06 9Cr& Rs.80568 CrforFY12E and

FY13E

EBITDA marginsexpectedtoincreasemarginally at16.92%FY12E from16.85%forFY11

Consolidatednetprofittogrow at Rs.5142.48 Cr& Rs.6322.39 Cr

forFY12E & FY13EFebruary 2, 2012 26STRATEGIC ANALYSIS OF L&T

FINANCIAL PROJECTIONS


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64.69

90.50

73.1884.46

103.84

0.00

20.00

40.00

60.00

80.00

100.00

120.00


EPS Growth

Healthy EPS GrowthofRs84.46 & Rs103.84forFY12E & FY13E

At CMP of1609,L & T trades at19.05xitsFY12 earningsof

Rs.84.46 and15.49xitsFY13earningsofRs.103.84

5yearHistorical P/E tradingrangeofL & T at 25xwhichgives

enoughscopeforstock appreciationfrom CMP

P/BV forFY12E & FY13E at3.71x and3.1xrespectively


FINANCIAL PROJECTIONS (Contd..)


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HRSTRATEGIES

Lakshya Perspective Plan

Safety

Recruitment & Selection

TalentManagement

Retention



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CSR ACTIVITIES

Healthcare

Education

Environment

DisasterRelief



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SWOT ANALYSIS

StrengthsDiversified portfolio

One of the leaders in the E&C

industry

Wide distribution and network

Proposed restructuringJoint Ventures and associations

WeaknessesLong gestation period

The order book to sales ratio is

lowest for L&T

OpportunitiesEmphasisontheinfra spending

Takeoutfinancing

ThreatsRising input cost

DelayinrealizationofpaymentsChanginggovernmentregulations

RisingInterest costs



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COMPETITIVE ANALYSISL&T ECC:Indias first indigeneous hydrocracker

reactor, Indias biggest offshore

oilplatform for ONGC, worlds largest

Tubular Reactor for Kuwait

NationalPetroleum Co. and Mumbai

International Airport

HCCThe major engineering landmarks are

the worlds longest barrage at Farakka

in West Bengal, Indias first

underground metro, Indias first six-

lane expressway, the unique double

curvature arch dam at Idukki in Kerala

and one of Asias largest breakwaters atEnnore Port in Tamil Nadu.

L&T PowerMajorordersfromprivateplayers

L&T led consortiumbetterplacedtobid

forGovt. Powerprojects

Joint VenturewithMitsubishiHeavy

IndustriesLtd. (MHI), Japaninorderto

attain competenciesbenefit

BHEL:Majorordersfromgovt.

Technologicallynot as competent.



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