"L&T's Middle East Order Book Surges Amid Saudi Arabia's Construction Boom"

Larsen & Toubro (L&T), the renowned Indian conglomerate, has witnessed substantial growth in its order book share, primarily driven by the construction surge in Saudi Arabia, as confirmed by company executives and industry experts. In stark contrast, at the commencement of the fiscal year 2020, West Asia contributed just 11.4 percent to L&T's order book, valued at Rs. 2.94 trillion.

Over the past few years, L&T has strategically ascended to one of the top Engineering, Procurement, and Construction (EPC) contractors in West Asia. This achievement can be attributed to the company's approach of localization, which involves establishing local offices, deploying senior managers to better understand market dynamics, and forming strategic alliances with local business groups.

Anup Sahay, Executive Vice President (Corporate Strategy and Special Initiatives) at L&T, emphasized the significance of this localized approach in the region's success. Sahay pointed out that maintaining proximity to clients through local offices, comprehending market and client expectations through senior manager placements, and forging alliances with local partners have all contributed to L&T's formidable presence in West Asia.

According to company data, L&T has deployed more than 10,000 employees on average in West Asia over the last three years for various projects. A 2023 Deloitte report on the Gulf Cooperation Council (GCC) construction market revealed that contracts worth approximately $94 billion were awarded in 2022, despite a year-on-year decrease of over $20 billion. Notably, Saudi Arabia's project market outshone the combined efforts of other GCC states with contracts nearing $54 billion.

L&T has strategically secured orders in diverse sectors in Saudi Arabia, including metros, transmission lines, water resources, gold ore processing, oil and gas, and renewable energy.

However, challenges persist in the region. Sahay acknowledged difficulties related to manpower, especially concerning work visa processes and deployment timelines. Nationality-based employment caps imposed by certain countries can hinder efforts to establish a diverse workforce. Additionally, the availability of skilled labor poses a challenge for L&T's extensive order book. To mitigate these issues, Sahay mentioned increased mechanization, automation, and offsite production, supplemented by the in-house development of specialized construction and installation equipment.

The Deloitte report also raises concerns about the potential overheating of the Saudi project market due to supply chain pressures and heightened demand for basic materials and logistics.

In addition to the reported Rs 1 trillion in orders from West Asia up to June 2023, L&T is rumored to be handling a $3.9 billion package for Saudi Aramco's expansion at the Jafurah unconventional gas production project in Saudi Arabia, although this order remains undisclosed by L&T.

L&T remains committed to expanding its presence in the region, particularly in railway and new port development projects associated with the India-Middle East-Europe Corridor, a venture unveiled at the G20 Summit. Sahay expressed the company's eagerness, awaiting further details on the project's scope and scale.

BS