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The performance of Larsen & Toubro (L&T) during the quarter ended September 30, 2019 has been lauded by analysts.
According to a report by Edelweiss, the growth in core engineering procurement construction (EPC) and infrastructure orders reflect strong execution in the domestic market. The company’s improved operating margin has been underpinned by better infrastructure and hydrocarbon margins.
In a quarter where L&T Group companies (except technology businesses) moved to a new tax regime, its performance has looked up. This, according to analysts, is commendable. The deferred tax rates are 25.17 per cent and Minimum Alternate Tax of Rs 700 crore was written off.
One factor which weighed on its performance was the net working capital requirement. “This continues to be elevated at 23 per cent due to the stretched payment cycle amid a tough liquidity environment, in addition to the vendor support policy,” noted Edelweiss. Orders from ONGC and HPCL in the domestic market and Saudi Aramco from the international market were considered to be positives.
However, analysts voiced concern regarding the slower growth in order book, deferment in decision-making regarding new orders from the private sector, and policy-related issues in segments like power, heavy engineering and defence.
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