Product details

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Abstract

In September 2004, the engineering and construction giant Larsen & Toubro (L&T), had sent a proposal to the joint secretary of shipping for a joint venture with the loss making Hindustan Shipyard Limited (HSL). Under the proposed scheme, L&T wanted to form a 60:40 joint venture as an associate company of HSL with a majority stake held with L&T. It envisaged a strong collaboration between the engineering and design expertise of L&T and the domain expertise of HSL would herald a new area of growth. L&T wanted HSL to transfer assets (minus liabilities) as a portion of equity. The company proposed to infuse funds and the utilisation of HSL assets via the joint venture to bring about a turnaround of the loss making public sector undertaking. L&T wanted the government to remain the owner of HSL. The joint secretary of shipping sent a welcome response and the preliminary approval to initiate talks between L&T and HSL. Accordingly, the joint secretary asked L&T to broadly elucidate the proposed shape of the joint venture and communicate the same to the chairman and managing director of HSL. In early 2005, L&T's top management presented the joint venture plan to the joint secretary of shipping, the Ministry of Finance and the Planning Commission. In this meeting a decision was taken to evaluate HSL's worth. The valuation was conducted in March and April 2005. After that the picture became vague. The pace of the process slowed down and that left Mr Naik confused. Though 15 months had elapsed after the process was initiated, he was hopeful that the venture would materialise in the days to come. He thought that L&T could move ahead with the public-private partnership (PPP) model, the concept of co-investment would be a feasible alternative to disinvestment of public sector undertakings in India. Analysts and industry observers debated on whether L&T's attempt of PPP was the right move or not. What did L&T envision to achieve through the deal? Where could it take L&T, if the PPP deal was successful? Was PPP trustworthy, when it came to projects related to defence?
Location:
Other setting(s):
2005

About

Abstract

In September 2004, the engineering and construction giant Larsen & Toubro (L&T), had sent a proposal to the joint secretary of shipping for a joint venture with the loss making Hindustan Shipyard Limited (HSL). Under the proposed scheme, L&T wanted to form a 60:40 joint venture as an associate company of HSL with a majority stake held with L&T. It envisaged a strong collaboration between the engineering and design expertise of L&T and the domain expertise of HSL would herald a new area of growth. L&T wanted HSL to transfer assets (minus liabilities) as a portion of equity. The company proposed to infuse funds and the utilisation of HSL assets via the joint venture to bring about a turnaround of the loss making public sector undertaking. L&T wanted the government to remain the owner of HSL. The joint secretary of shipping sent a welcome response and the preliminary approval to initiate talks between L&T and HSL. Accordingly, the joint secretary asked L&T to broadly elucidate the proposed shape of the joint venture and communicate the same to the chairman and managing director of HSL. In early 2005, L&T's top management presented the joint venture plan to the joint secretary of shipping, the Ministry of Finance and the Planning Commission. In this meeting a decision was taken to evaluate HSL's worth. The valuation was conducted in March and April 2005. After that the picture became vague. The pace of the process slowed down and that left Mr Naik confused. Though 15 months had elapsed after the process was initiated, he was hopeful that the venture would materialise in the days to come. He thought that L&T could move ahead with the public-private partnership (PPP) model, the concept of co-investment would be a feasible alternative to disinvestment of public sector undertakings in India. Analysts and industry observers debated on whether L&T's attempt of PPP was the right move or not. What did L&T envision to achieve through the deal? Where could it take L&T, if the PPP deal was successful? Was PPP trustworthy, when it came to projects related to defence?

Settings

Location:
Other setting(s):
2005

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