Engineering major Larsen & Toubro has decided to shut down its switchgear unit in China due to low growth and stringent competition from local low-cost producers.
“As the growth and profitability of the business has been low as compared to the plan,it has been decided to close the business. Accordingly,the plans to exit the business is awaiting Chinese government clearance,” L&T said in its annual
report for 2011-12.
L&T had forayed into the switchgear space in China in 2006 with the establishment of the factory at Wuxi in Jiangsu province through Larsen & Toubro (Wuxi) Electric Company Ltd (LTW),a wholly-owned subsidiary of L&T International FZE,
Sharjah. LTW mainly used to cater to the Chinese market.
In its FY’11 annul report,L&T had said LTW was facing “heavy competition” from the low-cost players which was impacting its performance.
LTW was Larsen & Toubro’s first manufacturing facility in the electrical sector outside India.
LTW’s revenue grew to Rs 39 crore in 2010 financial year,from Rs 31 crore in 2009. L&T attributed the “marginal” growth to economic slowdown and delay or cancellation of projects. However,revenue dipped to Rs 33 crore for the year
LTW manufactures air circuit breakers (ACB) and moulded case circuit breakers (MCCB). The factory is equipped with manufacturing facilities,quality control and testing equipment.
The sale of the circuit breaker business might be in line with L&T’s strategy of focusing on the core businesses and sell small businesses to unlock value.