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Larsen & Toubro to bid for overseas hydrocarbon projects worth $3 billion

MUMBAI: Larsen & Toubro plans to bid for hydrocarbon projects worth $3 billion outside India in 2013-14 to compensate for the slowdown in the local market and drive its order book. "Ordering process is slowing down in India due to various reasons. We see an order pipeline from ONGC and GSPL but with elections round the corner, the overall ordering may continue to be muted in the country," K Venkataramanan, chief executive officer and MD of L&T, told ET. 

"We will be bidding for hydrocarbon projects worth $3 billion in the Middle-East and Malaysia in FY14. It is very competitive but we hope to have a success rate of 20-24%," he said. Faced with the slowdown in the domestic infrastructure sector and intense competition from peers trying to grab a share of the shrinking pie, L&T has increased its thrust on overseas markets. Besides the impact of the slowdown in new orders, its order book has been under pressure due to slow moving orders which led to the company writing off jobs worth Rs 17,000 crore in the year ended March. Hydrocarbon business accounts for almost 10% of the company's total order book worthRs 153,604 crore. 

L&T recently initiated the process to set up a separate subsidiary, L&T Hydrocarbon Engineering, for hydrocarbon business aimed at scaling up the business internationally and listing the company subsequently. 

The company aims to increase the subsidiary's sales to $5 billion over the next five years from $2 billion now and subsequently list the subsidiary to enhance shareholders' value. Shares of the company closed at Rs 1,419.50 on 
BSE on Wednesday, up 1% from the previous close even as benchmark index Sensex ended flat at 19,568.22. L&T is pre-qualified to bid for projects in the Middle East and Malaysia and wants to expand its presence in Africa and in the Commonwealth of Independent States. The company is also exploring stepping up its business in the US from being a mere equipment supplier to a project contractor given the opportunities in the energy space, especially in shale gas. 

"Credibility of L&T's order flow guidance has recovered, given the FY13 26% year-on-year order flow growth versus guidance of 15-20% year-on-year. 

However, there is skepticism on whether the company will be in a position to achieve 20% (guidance) in FY14. Our view is at this stage 15% year-on-year order flow growth is visible,"
Lavina Quadros, analyst at brokerage Jefferies India Private, said in a recent note.