L&T net rises 36% in Q1 on order growth

Our Bureau Mumbai | Updated on July 25, 2018 Published on July 25, 2018

SN Subrahmanyan, Chief Executive Officer & Managing Director, Larsen & Toubro (right), with R Shankar Raman, CFO, at a press conference in Mumbai on Wednesday

International projects up; Order flow to grow as govt shifts gear ahead of polls

Larsen & Toubro (L&T), the country’s biggest engineering and construction firm, posted a 36 per cent growth in net profit at ₹1,215 crore for the quarter ended June compared to ₹893 crore a year earlier.

Its consolidated revenue for the quarter stood at ₹28,283 crore, up 18 per cent from a year ago, driven mainly by better execution in project businesses and robust growth in the services business.

L&T won new orders worth ₹36,142 crore across segments during Q1, an increase of 37 per cent compared to the corresponding period last year, with pick-up in domestic ordering activity.

The consolidated order book stood at ₹2,71,732 crore for the quarter.

According to L&T CFO R Shankar Raman, infrastructure, heavy engineering and hydrocarbon sectors led the order inflows. International orders stood at ₹9,404 crore which is 26 per cent of the total order inflow.

L&T’s Infrastructure business secured orders valued at ₹19,395 crore during Q1, up 16 per cent on a y-o-y basis.

The growth was mainly driven by EPC projects awarded by government agencies for rural water supply and lift irrigation schemes. International orders contributed to around 23 per cent of the total order inflow of the segment during the quarter.

International orders

“Contrary to the expectation that international orders will decrease, they have actually improved by 19 per cent,” Raman said. He added that tendering activity was strong during this quarter both in the domestic and international markets “which is a good news for the industry and for the company”.

Being an election year, the company is seeking to ensure strong order inflow in the first nine months of the current fiscal. At the same time, elections are also about people looking at how much of development work the government has done, SN Subrahmanyan, L&T CEO and MD noted, adding the pressure on the government to award projects and push projects could actually benefit the company.

“You see some decision-making positiveness and we have been a beneficiary of it, we continue to hope that the second and third quarters probably even early part of fourth quarter will be beneficial for us,” he added.

L&T has been in the process of business restructuring and processes optimisation to achieve better performance for couple of years.

Defence engineering

As part of restructuring exercise, the company has also introduced ‘Defence Engineering’ as a new separate segment bifurcated into Defence and Aerospace business (earlier a part of Heavy Engineering Segment) and Shipbuilding business which supports company’s long-term vision for becoming one of the leading players in defence sector.

Its metallurgical and material handling business has moved into the larger Infrastructure segment.

Defence Engineering Segment recorded revenue of ₹727 crore, up 34 per cent while the order book of the segment stood at ₹11,599 crore. At the same time, according to Subrahmanyan, the defence segment needs to see major programmes being tendered which is not yet the case, especially in the shipbuilding segment.

While Defence & Aerospace business unit was able to secure orders, Subrahmanyan pointed out that aggressive bidding from public sector players kept new order inflow for L&T below the potential.

Power business

While all major businesses of the company have registered increase in revenues and order inflows, L&T’s Power business specialising in thermal power plant equipment has seen a 39 per cent decline due to limited opportunities and aggressive competition chasing them.

The company is evaluating various options, including divestment of the business going forward, he said.

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Published on July 25, 2018
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