Larsen and Tourbo Limited has become the first Indian company to enter with such a deal with the oil and refining giant, the Sinopec group that is regarded as the largest Chinese company in terms of total sales.
The two sides have agreed to collaborate across a wide product range in both China and across the world. Put simply, L&T would be Sinopec's favoured equipment supplier in its projects in China and in its foreign ventures.
"This agreement is an important stepping stone. It will form the basis of other agreements in different products between the two companies," M V Kotwal, Senior Executive Vice President and member of L&T Board told TNN after signing the "strategic agreement" with Jiang Zhenying , director of Sinopec Procurement Division, recently.
A.M Naik, Chairman & Managing Director L&T flew over to Beijing for the final phase of negotiations and to be present during the deal inking ceremony suggesting how important it is for the India's leading equipment supplier. Also present at the ceremony was Cai Xiyou, Senior Vice President of Sinopec and other senior officials of both organisations.
The agreement mentions that Sinopec finds L&T to be one of the most reliable foreign suppliers of equipment for their plant located within China and elsewhere.
L&T said it regards Sinopec as "one of the most valuable customer committed to long term relationship."
The umbrella agreement will enable L&T to sell a range of equipments including valves, switchgears, pumps, electrical machinery and engineering services to Sinopec. L&T is manufacturing some machinery like switchgears and valves in China. Sinopec has indicated it would be interested in buying L&T products manufactured both in China and India.
Barring a few information technology companies that have entered into limited collaboration agreements with local companies, none of the major Indian have been able to build bridges in the Chinese corporate structure.
The relationship is expected to help the Indian company enhance its credibility in China and look for a wider array of customers among Chinese companies and multinationals with major manufacturing bases in this country.
This agreement goes beyond the process of buying and selling. The two sides have agreed to share their experience and achievement in operation management, market research, logistic management, and contract execution optimisation processes.
The understanding between two companies is on the "principles of "equality and mutual trust, co-sharing the risk & benefit, reciprocity and common development," an L&T source said.
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