Larsen to Add 10,000 People in 3 Years, Reiterates Forecasts

By Saikat Chatterjee

Nov. 16 (Bloomberg) -- Larsen & Toubro Ltd., India's biggest engineering company, said it will hire 10,000 people in three years and meet the revenue target for the year as orders from railways and power companies help counter a slowdown in other industries.

``The slowdown in some areas has been made up in other areas such as power, railways and shipbuilding,'' Chairman A.M. Naik told reporters in New Delhi, where he was attending the World Economic Forum's India Economic Summit, which began today. ``We have the same guidance as we have given in the beginning of the year.''

The company expects orders to increase as much as 35 percent in the year to March 31, he said.

Larsen & Toubro depends on orders to build plants for steel and automobile companies that are delaying or curtailing expansion plans in the wake of the worst financial crisis since the 1930s. The Mumbai-based engineering company is seeking to boost orders from railway and power companies in India that are less affected by the financial turmoil.

India will need to spend $600 billion on adding capacity to meet electricity demand, which may triple to 335,000 megawatts by 2017 if the current growth rate is maintained, according to McKinsey & Co. The government plans to spend $100 billion on generation, transmission and distribution of power to meet growing demand.

The company has an order backlog of about 609 billion rupees ($12.4 billion) from steel, copper and power companies in India and overseas.

Hiring Plan

While Larsen & Toubro has slowed hiring, the company will still add 10,000 people in three years as it starts new units in Chennai and Coimbatore in the southern Indian state of Tamil Nadu, Naik said.

The company will stick to its capital expenditure targets although many customers have been hit by the slowdown, Naik said.

JSW Steel Ltd., the country's third-biggest producer planning a new factory, has reduced the size of the project by almost three-fourths to 40 billion rupees. Steel Authority of India Ltd., the nation's second-biggest producer, said on Nov. 11 it may lower output as the global financial crisis cuts car and construction demand and commodity prices tumble.

Tata Motors Ltd., India's biggest truckmaker, said it will cut production at two of its plants temporarily to avoid inventory building up.

Naik also called for lower interest rates, to shore up the Indian economy.

India's central bank unexpectedly cut interest rates for the second time in two weeks on Nov. 1 and reduced the amount of money lenders must hold in reserve in a bid to protect the economy from the global slowdown.

Larsen's stock has fallen 62 percent this year, compared with the 54 percent drop in the benchmark Sensitive Index, on concern orders may slow as the financial crisis holds up project financing.

To contact the reporters on this story: Saikat Chatterjee in New Delhi at schatterjee4@bloomberg.net.