Dubai, UAE – Larsen & Toubro (L&T), a Mumbai-based Indian company, has announced plans to collaborate with banks in the Middle East, the Indian newspaper The Hindubusinessline reported.
The primary objective of this tie-up is not to seek financing for projects, as L&T will continue to self-finance its project execution in the Middle East. Instead, the collaboration aims to facilitate the collection of advances needed to provide guarantees for various aspects of project execution, such as credit, warranty of equipment, and liability periods, the paper reported.
By partnering with regional banks, L&T aims to build strong relationships in the Middle East and ensure smoother project operations.
“In India, banks know us very well whereas, in the Middle East, the banking system does not know us well.,” said R Shankar Raman, CFO & Whole–Time Director, L&T was quoted to have said by the Hindubusinessline. “The project execution in the Middle East will be self-financing but the tie-up with banks will be for collecting the advances one needs to give guarantees. They are required for credit, warranty of equipment, liability periods, and so on. The idea is to make sure that we build relationships and over time depending on Indian banks would be insufficient to look after the needs of India and overseas. Also, for the customers in the Middle East, it is easy to accept a Middle-Eastern bank providing them the facilities.”
“In absolute terms, we are having ₹1,20,000 crore (approximately $1.62 trillion) out of the ₹4,12,000 crore (approximately $5.57 trillion) of the order book is international. This roughly translates to about 29-30 per cent. When we say international, 85 per cent is from the Middle-East. The ecosystem and branding in the Middle East are very important, which is what we are attempting,” he added.
In the first quarter of the fiscal year 2024, L&T reported robust financial performance, with a consolidated net profit of ₹2,493 crore (approximately $33.70 million), marking a substantial 46 per cent year-on-year growth. Additionally, the company’s revenue rose by 34 per cent to ₹47,882 crore (approximately $646.59 million) during the same period. About 23 per cent of L&T’s orders in Q1 FY24 originated from the Middle East, reflecting the region’s importance as a key growth driver.
L&T’s expansion in the Middle East goes beyond just financial collaborations. The company plans to undertake localization initiatives by training and employing a certain percentage of the local population in the sectors where it operates, such as hydrocarbon power, transmission, and water.
With approximately 85 per cent of its international orders originating from the Middle East, L&T aims to bolster its presence in the region and solidify its position as a prominent player in the global engineering and construction industry.