‘Risk of third wave lingers, but we hope it will not be severe’
Indian mutlinational conglomerate Larsen & Toubro Ltd. is betting on key focus markets such as West Asia, Africa and the Far East for growth. Within India, it will continue to target projects funded by multilateral agencies, said S.N. Subrahmanyan, MD & CEO, in an email interview. Excerpts:
How is the infrastructure scenario in India and globally?
Both the Indian economy as well as all its constituents comprising households, corporates and government are seeking to get back to growth momentum. The pickup in high-frequency economic indicators builds hope for the coming quarters. Government is committed to infra formation in India and we believe large parts of the national infrastructure pipeline [target] will be achieved.
Creation of a development finance institution and announcements around recycling of operating assets are credible measures that have been recently taken up. With the pickup in oil prices, the Gulf Co-operation Council (GCC) is looking a lot better; and Africa with consistent multilateral funding support should do well. Having said that, the risk of a third wave and its consequent economic fallout does linger in our mind at this juncture, but we hope this will not be severe.
What are the key drivers that will boost infrastructure?
The government is seized of the fact that investment spends can create the much-needed employment opportunities and add multiplier impact to economic activity. In a normal year, public spends comprising those by the Centre, the States and public sector units add up to 7% of India’s GDP. For the next 4-6 quarters till private investments pick up, the heavy lifting in terms of capex formation will have to be carried on by the government.
We see various prospects in different areas of infrastructure like metros, hydel projects, tunnelling and bridge construction, in roads, power transmission & distribution, water spends and hydrocarbon projects including activities taking place in factories; and commercial activities such as data centres, big auditoriums, the central vista etc.
What kind of support do you expect from the government?
With an aim to speed up economic normalisation, the Indian government accelerated public investments in key infrastructure sectors. The wheels of India’s capex cycle had been set in motion with a strong revival in investment-led growth supported by the ‘Atmanirbhar Bharat Mission’ and production-linked incentive schemes.
The government also rightly stepped in to announce a series of fiscal relief measures. Largely, they were in the form of loan guarantees, access to food and shelter and healthcare facilities. There was also a thrust to exports and assistance to small and medium enterprises and local manufacturing.
The greatest opportunity and the biggest need in front of the government is to create jobs. Important determinants ahead revolve around sustained capex ordering from the government and an enabling environment for execution and liquidity to contractors. A robust pre-qualification criterion for projects, timely settlement of retention money and claims, reduced arbitration and enhanced conciliation processes and a less stringent bank guarantee exposure will augur well.
How have your international orders shaped up?
Our principal markets apart from India are West Asia, to some extent Africa, and to a lesser extent the Far East. We see some positive momentum in Africa. There has been revival of both power transmission and water projects in certain parts of Africa. We have bid for some hydrocarbon jobs in certain countries, and we do hope that with the stabilisation of oil prices, we will see some positive movement on some of those projects in the GCC.
Domestic tendering and awarding activity was subdued in Q1 but with economic normalisation from Q2 onwards, we will see a revival. For the remaining nine months of FY22, we see total ordering prospects of around ₹9 trillion comprising domestic opportunities of ₹6.3 trillion and ₹2.7 trillion of international prospects.
How have other focus markets behaved?
As I said earlier, internationally, our key focus markets are West Asia, Africa, and Far East. Post the CoVID scenario and with the pick-up in oil prices we are confident about the Central Asia market bouncing back. Within India, we will continue to target projects which are funded by the multi-lateral agencies.
What is the status of migrant labourers after the second wave?
Unlike the mass exodus of workforce during the first wave last year, this time we managed to majorly retain the work force by ensuring adequate medical facilities and strict COVID protocols at all levels of operations.
The message that L&T cares and that the workforce is safe at the campus was loud and clear with an emphasis to practise COVID precautions. Apart from educating the workmen on the ills of the pandemic and precautions to be taken, we also organised vaccinations for workmen by tying up with local hospitals and seeking help from the authorities. As a result, a high percentage of our workmen across sites have received their first jab. Currently, our labour force is back to normal levels and we hope that the impact of the third wave, if any, is muted.
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