Larsen & Toubro, India’s biggest engineering firm, has shed 14,000 employees, or 11.2% of its total workforce, in one of the biggest corporate retrenchment exercises in recent times. The $16-billion diversified conglomerate said on Tuesday the step was an attempt to “right size” its strength in the face of business slowdown. Digitisation of operations also caused redundancies that led to downsizing.
“The company has taken a lot of initiative to right size staffing in various businesses. 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 in the six months to September,” Chief Financial Officer R Shankar Raman said.
L&T expects the economic environment to remain challenging in coming months though a pickup in government orders is making up for private sector slack.
Raman said that retrenchment exercise is a “correction”.
The CFO said that the move should not be viewed as a sequential event. L&T has been facing challenges with customers deferring orders and falling oil prices contributing to a sharp slowdown in the Middle-east, one of its biggest bets. Competition has increased in domestic market as companies fight for a shrinking order book pie. It also incurred losses due to inability to pass on cost escalation and other issues. In the first half of FY17, its revenue increased 8.6% to Rs 46,885 crore. Profits rose to Rs 2,044 crore from Rs 1,197 crore a year ago.
In April, ET was the first to report that L&T Finance Holding, the nonbanking finance company of the engineering major Larsen & Toubro, had asked over 550 employees to quit due to high costs and a muted business environment. In July, ET followed it up with another story detailing L&T Infotech’s high attrition rate of 18%.
“If we believe that some business will take some time to get back to normalcy, it is important that we reduce under-recoveries. We are redefining roles and jobs which are redundant, we are allowing people to move on. It is across businesses,” Raman said.
He did not give details of the number of people sacked in different businesses. “Financial services has defocused on certain lines of businesses and has let go a lot of people. Same is the case in minerals and metals,” Raman said.
L&T launched a five-year strategic plan this year aiming to scale up revenue to Rs 2 lakh crore. The plan identifies some non-performing businesses that have been put under scanner and call on them will be taken in 18-24 months.