Can you identify for us how large is the Middle East for L&T and how large it could become in the next three to five years?
Subramanian Sarma:The Middle East has been a very important market for L&T for quite some time. We have been present there for more than two decades and this market is growing quite rapidly. Our market share from the Middle East definitely has grown over the years. And it also depends on what level of activities happen in the domestic business because it is a percentage of the total. So, we expect that for the next few years Middle East will continue to play a very important role for us in terms of opportunities particularly in the energy sector as well as in the power transmission and distribution sector where we are executing quite a few of large solar parks and energy transition related projects and there will also be certain opportunities emerging from infrastructure, but then we are going to be much more selective in our approach. So, all in all, I think we see a very positive outlook for the next few years.
Taking a leaf from the sectors that you see more business coming in from the Middle East region, in the next four to five years, where do you see your Middle East order book going to from where it is currently?
Subramanian Sarma: The businesses we are really focusing on in the Middle East are hydrocarbon and solar park and related energy storage solution projects. Here, we see opportunities of $50-60 billion over the next three years, roughly $20 billion per year pipeline. It could grow even further, depending on where the oil prices remain and how much additional capital gets attracted to these sectors.
You represent the energy vertical of the massive conglomerate L&T. I want to understand how much of the incremental orders are coming from legacy oil and gas, hydrocarbon type of work and how much is from renewables, because we understand that the entire Middle East is also trying to put a lot of projects around renewables.
Subramanian Sarma: Yes, there is a three-pronged approach being followed by most of the national oil companies there. One is to continue to monetise their existing assets, which is the upstream and midstream, both offshore and onshore. Second is also to look at certain crude to chemicals type of projects where there is more value addition. Third, of course, is the low carbon solutions, such as production of green hydrogen, green ammonia, and what we need is also green power for that.
Now we have a presence in all the three segments. I would say that we will continue to win our conventional upstream projects and we may also have some opportunities in the crude to chemicals sector and definitely a large share in the solar parks where we have a very strong presence as we are one of the major contractors there, including what we are doing for NEOM in Saudi Arabia.
Currently, 36% of your order book is coming from the Middle East. That is almost one-third. Do you see the profile of this business hanging right now from low basic turnkey projects to high-end projects? The capex in the Middle East now would be drastically different than what it was five years ago. In the next five years, the capex requirement would be highly skill based and has to be backed by IP. It would be at a different complexity.
Subramanian Sarma: I am not seeing that significant a shift in the type of projects. We will continue to see various forms of EPC type of projects in the conventional sector, as well as in the solar park. There could be variations of the contracting model, but not a significant shift. The presence we have and the track record we have built over the last so many years, positions ourselves in a very good stage to benefit from this.When it comes to the Middle East, could you give us a geography of how you count the Middle East? Is it about Saudi Arabia? Is it about Kuwait? Could you give us a country-wise breakup where the business is high and where the business is low?
Subramanian Sarma: I think the Middle East in broader terms includes the Kingdom of Saudi Arabia, and then Kuwait and Qatar, UAE, Oman, These are the major players. Currently, I think the intense level of activities is quite high in the Kingdom, and closely followed by Qatar and UAE. We expect Kuwait also to come up with some major projects in the next financial year and Oman is exploring various projects related to the energy transition. Particularly, they are also talking about huge solar parks and green hydrogen projects in the Duqm area on the east coast of Oman. So, the Kingdom is leading, very closely followed by Qatar and UAE.There is a new Middle East corridor also at play, that is going to change the connectivity from India to the Middle East. How do you view that and what kind of change do you think if this Middle East corridor once implemented will have?
Subramanian Sarma: Currently, we are not seeing much of that on the ground. I mean, definitely it has been a great initiative signed up during the G20 summit and maybe there is a lot of work happening on the drawing board. But on the ground, we are not seeing much and there is not much talk about that. But the bilateral relationship between India and most of our neighbouring countries has been phenomenal. It has been very good and all the Indian companies and manufacturers are benefiting from that. We are viewed differently and if you continue to perform well, all the companies from India will have a larger share of that market.
