India’s biggest engineering and construction firm Larsen and Toubro Ltd (L&T) will invest close to Rs1,000 crore to set up a special economic zone (SEZ) focused on engineering in an effort to benefit from tax incentives offered to such zones and expand to meet growing demand for its products.

L&T, managing director and chairman A.M. Naik

“We are in the process of acquiring land adjacent to the existing engineering complex at Hazira for building a new facility as part of our expansion plans. The company has submitted an application to the commerce ministry for developing the new facility as an SEZ," said an executive at L&T, who did not want to be identified. A company spokesperson declined to comment.

L&T is looking to acquire about 1,000 acres of land at Hazira to set up new factories and expand its operations to execute orders from clients that have been growing at about 35-40% a year. “Capacity constraints could hurt execution of orders if we don’t expand," the executive added.

The heavy equipment business of L&T ended the September quarter with orders worth Rs42,028 crore. The new facility will house, among others, factories for manufacturing super critical boilers, steam turbines and generators used in power plants through a joint venture with Mitsubishi Heavy Industries Ltd of Japan.

This equipment, an integral part of energy-efficient, coal-based power plants, is expected to bridge the gap between demand and supply of power plant equipment even as India prepares to increase its power generation capacity using super critical technology.

L&T ventured into shipbuilding last year by converting a part of its heavy engineering complex at Hazira into a yard that could build three mid-size ships with a cargo carrying capacity of 15,000-20,000 tonnes in a year.

The new SEZ will help the company increase its shipbuiding capacity at Hazira to construct eight ships a year. On Wednesday, shares of L&T fell Rs1.15 or 0.03% to end the day at Rs4,283.85 each on the Bombay Stock Exchnage. The exchange’s benchmark index gained 84.98 points to end the day at 20,375.87 points, an all time high.