L&T’s engineering arm bags order for Indian navy; stock rises

Larsen and Toubro Ltd. (L&T) on Tuesday announced in an exchange filing that its precision engineering systems business arm secured a 'significant' order from Hindustan Shipyard for the Indian Navy. L&T defines 'significant' orders as those valued between ₹1,000 crore and ₹2,500 crore. The company has won this order for part construction of Two Fleet Support Ships (FSS).

This announcement pushed the company's share price up by 1.5% to ₹3,685.00 apiece on the BSE today. The stock opened at ₹3,657, compared to the previous closing price of ₹3,630.60 on the BSE.

Previously, the Indian Navy had signed a contract in 2023 with Hindustan Shipyard to design and construct five FSS, which are specialised naval vessels providing logistical and material support to naval task forces at sea. Each FSS will be over 220 metres long and have a displacement of around 45,000 tonnes, making them among the largest vessels in the Indian Naval fleet, the company states in a release.

The construction of these vessels in domestic shipyards aligns with the Indian government's 'Aatmanirbhar Bharat' vision. Both shipyards will work concurrently to ensure timely delivery of the ships. This cooperative shipbuilding strategy will be crucial in advancing India's national goals of swiftly bolstering the Naval fleet, stimulating economic activity, and advancing technology within the maritime sector.

L&T will construct two of these fleet support ships at its greenfield shipyard in Kattupalli near Chennai on India's east coast. This facility, designed in-house and built to global technological standards, is considered the most modern shipyard in the country, it adds.

L&T's involvement in defence shipbuilding began in March 2010, and since then, the company has designed, constructed, and delivered over 70 defence vessels.

In another development, L&T's wholly-owned subsidiary, L&T Semiconductor Technologies Ltd, signed a share purchase agreement to acquire a 100% stake in SiliConch Systems Pvt. Ltd. The acquisition involves an upfront payment of ₹133 crore, subject to customary closing adjustments, and a deferred payment of ₹50 crore over four years, contingent on achieving specific targets. This brings the total acquisition cost to ₹183 crore. The acquisition of SiliConch is expected to be completed by 15th September 2024, subject to customary closing conditions.

Recently on Monday, L&T's renewable energy division announced the finalisation of 'mega' orders with a Middle Eastern developer to construct two gigawatt-scale solar PV plants with a combined capacity of 3.5 GW. L&T classifies 'mega' orders as those valued between ₹10,000 crore and ₹15,000 crore. The company further noted that the orders will involve grid interconnections, including pooling substations and overhead transmission lines. Detailed engineering and initial construction activities are set to begin soon.

Additionally, L&T highlighted that these developments will expand its renewables portfolio to a cumulative capacity of 22 GWp (Gigawatt Peak), encompassing both operational and upcoming solar and wind projects.

T Madhava Das, whole-time director & sr executive vice president (Utilities) at L&T said, “The successive order wins stand testimony to our proven engineering and project management capabilities to meet the requirements in terms of plant performance, workforce mobilisation, safety, quality and timeline. We cherish this level of customer trust.”