Larsen & Toubro carves out 9 business verticals - Power, hydrocarbons and infrastructure among the key verticals

Larsen & Toubro has carved nine of its businesses into separate independent verticals to be manned by business heads with exclusive boards to support them. Power, hydrocarbons and infrastructure are among the key verticals.

The strategic initiative had been drawn up with a long-term plan in place to keep pace with a growing economy as well as factor in the stupendous growth L&T has achieved in the last five years.

Gross revenues from FY05 to FY10 have risen three-fold from Rs 15,300 crore to Rs 46,900 crore with market cap sailing over Rs 120,000 crore as of December 31, 2010. The criteria for creating the ICs, through agglomeration of several units, were on the basis of their ability to scale Rs 5,000-crore revenues in the near term.The business heads of these entities will continue to report to the Chairman and Managing Director. The board of each of them, in addition to an L&T board member, will have a chairman, three representatives each of the company and non-executive directors.

“It is to make decision making closer to the businesses, besides decentralisation of power and autonomy to meet the requirements of the industry,” said Mr J. P. Nayak, President and Board Member, L&T.However, the reorganisation of the business structure will not have any legal standing as none of the companies will be registered.The business heads will report to the Chairman of L&T and its board will continue to reign supreme.

Mr Nayak said the new structure would enable greater empowerment and autonomy while ensuring accountability and transparency, in turn resulting in higher growth. It will also help develop a deeper leadership pipeline and attract lateral talent.Synergies will continue to be derived across businesses through key accounting management and shared revenues. Importantly, it would lead to higher value creation for all stakeholders.

On listing, Mr Nayak said the logical progression for the entities would be to become subsidiaries first to move forward.He said L&T would continue to be a hybrid holding company with five subsidiaries. The restructuring will not have any impact on reporting the financials.