Institutions want change

Eleven years from now, that is, in 2010, will Larsen & Toubro look very different from what it is now? We''ll have to wait and see. The company''s management is composing a Vision 2010 document that will set the direction of change at this Rs 6,000-crore engineering group.

The need for change is obvious. Competition has intensified, opportunities have multiplied, and if the group has to cope with the situation, it must focus on what it can do best. It is generally agreed that engineering procurement and construction is what it does best.

So that is likely to be the focus of its future activities. But we won''t know for sure, will we, until the document is out? That will take another six months, it is reported.

What''s also happening is that financial institutions, which hold 36 per cent of L&T''s equity, are getting into the act. Under heavy criticism for not having safeguarded minority shareholders'' interests in companies like Modi Rubber, where the FIs have large stakes, these institutions have chosen to get activist at L&T.

Four financial institutions are involved with L&T -- Industrial Development Bank of India, Unit Trust of India, Life Insurance Corporation of India and the General Insurance Corporation of India. They have set up an eight-member core committee to identify a successor to the company''s chief executive officer, S.D. Kulkarni, who retires in end-March 1999.

The institutions have also signalled their intention to oversee a complete recast of the company. Among the things the core committee wants at L&T:

• reduction of the number of whole-time directors on the board
• proportionate representation among institutional nominees
• nomination of professionals to the board
• separation of the core engineering and construction activities from non-core areas

The committee plans to bring in a consulting firm. The consulting firm will devise a suitable business strategy for L&T and look into the constitution of the board and the operations. It will also identify a new chief executive for the company. The L&T board will formally appoint the consultant.

The L&T management has set up task forces to suggest restructuring. The report of these task forces will constitute the company''s Vision 2010 document.