August 28, 2008

L&T taking anti takeover measures – Report

ET reported that Larsen & Toubro is finally instituting a structure that will be a buttress against hostile bids. It is set to revamp its corporate structure to create a dozen operating companies under the direction of a separate board of directors. Effective July 1st 2008, the move will lead to L&T becoming the umbrella organization with a board to administer the performance of all businesses and ownership of the brand, pegged at around USD 2 billion. It will also help L&T, for long a vulnerable takeover target due to the absence of a dominant promoter group, to preserve its identity. Indian institutions hold a combined 30% stake in L&T while L&T Employees Welfare Foundation holds 13%.

Mr YM Deosthalee CFO of L&T said that the creation of operating companies will help L&T have more focused operations in the marketplace. He added that "It will help the operating companies to concentrate more on their business and their customers. The board of the operating companies will help them to take expeditious decisions. Their own HR policy will help them retain talent."

But he said that the operating companies will not be separate legal entities. He added that "Therefore, it is imperative that we gear up our organization structure and processes to meet the enhanced expectations of all stakeholders. To ensure greater empowerment, each operating company will have independent support functions. However, some processes will be driven from the operating divisions to ensure synergy across the operating companies."

L&T plans to have operating companies in these businesses, building & factories, infrastructure, metallurgical, material handling & water, electrical projects & Gulf operations, hydrocarbon upstream, hydrocarbon mid-downstream, power, heavy equipment & systems, shipbuilding, electrical & automation, machinery and industrial products. All these companies will have independent support functions like finance & accounts, HR, supply chain management and corporate centre. They will look after the businesses of nearly 60 special business units of the diversified conglomerate. CEOs of these operating companies will report to L&T board member.