Larsen & Toubro (L&T), India’s largest engineering and construction firm, is looking to diversify its business by planning to enter the Rs 31,000 crore general insurance market. 

"We have taken a decision to enter the insurance business on a standalone business. We are not looking at any partnership," said YM Deosthalee, CFO, L&T.

Sources say the new entity would be housed inside its subsidiary, L&T Finance, which currently finances most of its sub contractors. For this, the work has already begun with recruitments from other insurance firms.

The insurance business is one such business where the initial investments are usually low but to grow the business, money needs to be pumped in on a regular basis. 

"We will invest Rs 50 crore to Rs 100 crore at first. But we are open to raising more cash via an IPO in the near future," said Deosthalee.

But it won't be easy to crack a market that has already seen large corporate houses like Bajaj, Tata, Max India and financial institutions like ICICI and Reliance Capital fight it out.

The public sector insurers together clearly control the market with a over 60 per cent share and most of their private sector peers are recording negative growth but still the potential is enormous. 

"For a construction company it makes sense as it means a lot of synergies for them, if they manufacture equipment, they will also have to insure it and now they can do both. Apart from this, all the non life products are reinsured by global players so corporates see them a s a profitable option," said Robin Roy, associate director - financial services, PWC.

So far L&T's financial foray has been predominantly via its arm L&T Capital but that's used more for its capital market investments. But now with insurance it is clear that after IT, L&T boss A M Naik would want his engineering company to emerge as the next big financial powerhouse.