Larsen & Toubro splits ECC division into four

Larsen & Toubro will split its Engineering Construction and Contract (ECC) division into four separate companies soon, according to Mr J. Ganguly, Executive Vice-President, L&T Ltd.

The four functional areas within ECC – Buildings & Factories, Infrastructure, Power Transmission & Distribution and Mineral Metal & Water – have already started operating as independent divisions with effect from July 1, he said, adding that the formal split would take a couple of years to be completed.

Listing plans

There are also plans to list them on the stock exchanges, once they acquire “a critical mass” for getting registered as separate entities, Mr Ganguly said.

“We are in the process of a major restructuring of ECC. The break-up was inevitable because we had grown substantially over the last two years,” Mr Ganguly said.

Mr Ganguly said the four new divisions would operate as subsidiaries or associate companies, ECC being the holding company for all the four initially.

However, once the restructuring was complete, L&T would take over as the holding company. The brand of L&T could thus be attached with each division for nomenclature, he clarified.

In 2008-09, ECC has a target of achieving a turnover of Rs 18,000 crore, which is nearly double its turnover of Rs 9,500 crore in 2006-07.

“Each of the four divisions now contributes Rs 3,000-4,000 crore to the company’s exchequer and we would go for separate registration once they grow to at least Rs 5,000 crore each,” he said.

Last year, the construction major registered a turnover of Rs 13,000 crore, growing at 37 per cent over the previous fiscal.

According to industry sources, the ground for the restructuring process, being conducted by the Boston Consulting Group (BCG), was laid way back in 2003 when India’s largest construction organization ECC had regrouped its erstwhile complex model of 18 Strategic Business Units (SBUs) into a four-business sector model that exists today, reports The Hindu Business Line.