MOSL: SUSTAINABILITY METER | LARSEN & TOUBRO-Green portfolio contribution rising-Health & safety – a monitorable
​SUSTAINABILITY METER | LARSEN & TOUBRO: Green portfolio contribution rising; Health & safety – a monitorable
Larsen & Toubro’s (LT) Sustainability Report 2016 (SR16) is centered on the ‘Rooted to the Future’ theme. This focus is well reflected in the company’s sustainable practices, including creation of a vast pool of ~ 43,354 employees, who it believes are one of the key stakeholders in building a sustainable future. Though LT has performed well on several key performance indicators (KPIs) of our sustainability (ESG) framework, we would still like to closely look at a few important parameters such as toxic emissions, industrial relations, attrition rate, health & safety, geographical revenue concentration, and unbilled portion of revenues.
Health & safety, defense revenues – monitorables
- LT has consistently witnessed a fatality rate of 8-10 per 100k workers over the past five years. While the company has taken several health & safety initiatives, the impact on the numbers is not yet visible.
- The company is involved in the production of parts of defense equipment, which can potentially be used as a part of nuclear weapons delivery systems. According to media reports, LT made the hull for the INS Arihant, India’s first nuclear-powered submarine. Such products are opposed by arms control advocates. LT’s defense segment accounts for less than 2% of revenues, which is insignificant. However, we believe this is a monitorable.
Rising attrition rate
- LT’s attrition rate increased from 10% in FY12 to 18% in FY16. Furthermore, according to media reports, the company laid off 14k employees across businesses over April-September 2016.
- However, management highlighted that the attrition numbers reported by media are out of context since they represent gross separations, including retirements and release of staff employed on contract basis on expiry of contract tenures. The net reduction in manpower, according to LT’s FY17 Annual Report (page 223), is 1,700. Management also expects to mitigate natural attrition in future through automation and productivity measures.
Larsen and Toubro is engaged in the following business segments: Engineering & Construction; Electrical & Electronics; Machinery & Industrial Products; and Other. Engineering and construction segment comprises execution of construction projects in civil, mechanical and electrical engineering. Electrical and electronics segment comprises the manufacture and sale of switchgear, petroleum dispensing pumps, and medical equipment. Machinery and industrial products segment comprises the manufacture and sale of industrial machinery and equipment. Other segment includes property and software development, generation of power for consumption by Haldia Petrochemicals Limited, and financial services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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