L&T shares up on pact with Spain's Navantia for ₹43,500 cr submarine project

Shares of engineering and construction major Larsen & Toubro Ltd are trading in green today after the company announced an agreement with Spain-based Navantia for submission for the techno-commercial bid for the Indian Navy’s prestigious P75 (India) submarine programme at Madrid today. The project is expected to be valued at over 4.8 billion euros (₹43,500 crore), India's largest defence acquisition project.

Shares of L&T opened gap-up at ₹2,454.65 on the BSE and surged to an intra-day high of ₹2,478.35, trading below its 52-week high achieved last week. The company's market cap, at the current share price, stands at ₹3,47,738.70 crore. The return on L&T scrip stands at 0.05% in one week; 5.79% in the last one month; and 16.49% in the past six months; and 18.49% in the year-to-date period.

The Project 75 (I) requires the Indian bidder to tie up with a foreign collaborator and execute the programme for delivery of six conventional submarines equipped with air-independent propulsion (AIP), while achieving targeted indigenous content.

This would also be followed by a 30-year lifecycle sustenance contract of similar value. Also, P75(I) will be the first programme to be processed under the ambitious "Strategic Partnership (SP)" model of acquisition of the Ministry of Defence.

As per the agreement, Navantia will carry out the design of P75(I) submarines based on its S80 class of submarines, the first of which was launched in 2021 and is undergoing sea trials prior to its delivery to the Spanish Navy at the end of 2023.

Apart from S80 class, Navantia has been involved in the design and construction of Scorpéne class of submarines together with DCNS (Now Naval Group) of France, which have been exported to Chile and Malaysia.

Navantia has also been involved in the Scorpene submarines (Kalvari class) built in India including handholding of the Indian yard.

P75(I) programme calls for an integration of an AIP system. As per the company statement, Navantia’s state-of-the-art 3rd Generation AIP solution is the “most advanced and efficient AIP system in the world”, apart from also being the most compact, easiest to exploit and maintain and environment friendly. It uses bioethanol as a source of hydrogen which is known to be cost efficient, easily available, and does not call for any special infrastructure.

"High density of hydrogen in ethanol improves the AIP system’s efficiency. Ethanol, being in liquid form, eliminates the risks associated with storing hydrogen. In addition, wide availability of ethanol enables the system to be refueled anywhere in the world," the company says.

L&T and Navantia are also seeking cooperation in other military programmes as well as in green energy opportunities, including offshore wind through Navantia Seanergies division, it adds.

SN Subrahmanyan, CEO & MD, L&T says Navantia’s glorious 300-year-old track record in naval construction & technical expertise gives the company a “competitive advantage. “We are committed to providing the most contemporary solution for Indian Navy’s requirements at a competitive price.”

Besides, L&T has signed a master ship repair agreement with the U.S. Navy. L&T’s state-of-the-art Kattupalli Shipyard near Chennai – a major node in the Southern Defence Corridor – has been undertaking voyage repairs of the Military Sealift Command vessels. After elaborate assessment by the US Navy and the Military Sealift Command, the Shipyard qualified for the Master Shipyard Repair Agreement (MSRA), the company says, adding that this is equivalent to undertaking warship refits, for which the Shipyard has already been qualified by the Indian Navy and the Coast Guard.