Going after the government’s planned Rs50,000 crore investment for warships, India’s largest engineering and construction firm Larsen & Toubro Ltd (L&T) plans to build defence warships and para-military vessels at its proposed shipyard at Kattupalli, in Tamil Nadu, to cater to the needs of the Indian Navy.

“L&T plans to enter the defence shipbuilding sector. The proposed shipbuilding facility at Kattupalli will build defence ships also, apart from general cargo ships and jack-up rigs for the offshore oil industry. L&T is the only entity in the private sector that holds a licence from the government to build warships," said a person familiar with the thinking, who did not want to be named.

A. M. Naik, chairman, Larsen & Toubro Ltd

Garden Reach Shipbuilders & Engineers Ltd, Goa Shipyard Ltd and Mazagon Dock Ltd are authorized to build warships. All the three yards are state-owned entities controlled by the Union ministry of defence.

Cochin Shipyard Ltd, controlled by the Union ministry of shipping, has licence to build air defence ships.

L&T’s defence division already makes ancillary equipment for ships, such as propulsion steering gears and shafts. “Building ships for the Indian Navy is just an extension of this business," the same person said. The dry docks and jetties at the Kattupalli yard, used for building civilian ships, will be utilized for making warships as well. “But the processes and management will be separate and each business will function as an independent cost and profit centre," said the person.

L&T plans to bid for the navy’s submarine building programme, dubbed Project 75 and 76, which involves building 24 submarines with an investment of $14-16 billion (Rs55,580-63,520 crore).

D. Morada, a spokesman for L&T, declined to comment for this story.

India has already signed a $3.5 billion deal with French-firm DCNS, or Direction des Constructions Navales Services, to acquire six Scorpene class submarines in October 2005, out of the total 24 submarines in the navy’s project.

The project included a licensed production of submarines in India under a technology transfer agreement, which was awarded to the state-owned Mazagon Dock. L&T had unsuccessfully bid for this project.

L&T plans to participate in the project when the navy invites requests for proposals to build the balance 18 vessels locally. L&T may team up with a domestic state-owned firm or a foreign partner if it wins the tender, the person said.

L&T will also form a joint venture (JV) company with the Tamil Nadu government to build the shipyard-cum-port facility at Kattupalli, just 2km from the Union government-owned Ennore port.

The state government will hold 2-3% stake in the JV company that will develop India’s biggest shipbuilding facility, capable of constructing very large crude tankers that can carry 300,000-350,000 tonnes of crude oil and Suezmax vessels, which can carry 120,000 tonnes of dry bulk cargoes such as coal, iron ore and steel, and are called thus because they can pass through the Suez Canal.

L&T will invest close to Rs3,000 crore to build the shipyard-cum-port facility. When fully operational, the shipyard is likely to employ close to 10,000 people.

The port will cater to clean cargoes and also handle project cargoes of the nearby special economic zone being developed by the state government-owned Tamil Nadu Industrial Development Corp. Ltd.

L&T plans to begin construction of ships by end-2009, with plans to deliver the first ship by 2010-11.