L&T axes 14,000 jobs in 6 months in resizing exercise

Engineering and construction giant Larsen and Toubro has cut about 14,000 jobs during the July-September quarter due to business slowdown and restructuring, in one of the largest retrenchments to have been witnessed in the country.

Saying the exercise was part of initiatives "to right size staffing in various businesses", chief financial officer R Shankar Raman added, "The digitisation and productivity enhancement initiatives taken by us boiled down to redundancies of roles and we have been able to shed as a group 14,000 (staffers) in the six months to September.''

"It was a strategic decision that if a business is not in good shape, we are trying to resize it. If there is time to get the business back to normalcy, it is important to reduce the under-recoveries. So, the jobs that we are finding redundant, we are allowing people to move on," Shankar Raman said.

"We have an employee base of 1.2 lakh across various businesses, and we have laid off 14,000 people during the first half of fiscal 2017," he added.

Without giving specifics of the different verticals in which the layoffs happened, Raman said, "Financial services have de-focused on certain lines of businesses and let go a lot of people. The same is the case in minerals and metals."

He further said that the company has tried to look at its businesses in a different way to remain competitive.

"We have adopted various initiatives to be competitive. We have tried to introduce digitisation whenever necessary, so in case if we needed 10 people for a job we tried to bring it down to five. The layoffs have been done in businesses which are moving slow due to various reasons including delayed execution, among others," Raman said.

He said the company has tried to make its back offices more digital.

"There are certain low performers (businesses) and we have to relook at them. In the competitive world, you need to be agile and smart and move forward," the company's deputy managing director and president S N Subrahmanyan said.

He, however, mentioned this was a one-time decision and not a target that it has set for laying off people.

"This laying off was a one-time move and not a target that we are running behind," he said.

Earlier in May, the company's subsidiary L&T Finance Holdings had handed pink slips to over 500 employees. Company chairman and managing director Y M Deosthale had termed the sacking as "separation of staff from across the sectors based on their poor performance".

He had also warned of more stress in rural areas. L&T Finance used to have major presence in rural areas but has scaled down exposure due to the distress in the hinterlands.

"We may see some stress in the farm sector for the next five to six months. The situation may improve only in the second half of the year, that too if there is normal monsoon," Deosthalee said.

Justifying the decision to cut 14,000 jobs, Shankar Raman said, "It is important that we stay agile and cost competitive in these tough times. So, we are also looking at corporate functions and all other initiatives."

S N Subrahmanyan, deputy managing director and president at L&T, has been quoted as saying in a report in BloombergQuint that "the job cuts were an effort to stay relevant".

Though the company has insisted that it is not a "recurring exercise", it has indicated that "the business will take some time to get back to normalcy".

L&T's statements are important as the company's order book position and outlook are seen as a benchmark to gauge the mood in the infrastructure sector - a key growth driver for the economy. The massive job cuts at the conglomerate, at a time when the government data shows the country is growing faster than China, indicates major fault-lines in the economy.

In the first half of FY17, the company's revenue increased 8.6 per cent to Rs46,885 crore. Profits rose to Rs2,044 crore from Rs1,197 crore a year ago.

L&T recently announced a five-year strategy to scale up revenues to Rs2 lakh crore. The plan identifies some non-performing businesses which the company is now relooking at.