Powered by its international presence, L&T’s order flow rose 27 per cent in the September quarter. The engineering and construction company’s ability to juggle focus between the segments to make the most of current opportunities places it at an advantage over its peers.
For instance, with public-private partnership projects running into obstacles of late, L&T went slow on these. Instead, it secured big construction contracts. Its low debt-equity ratio of 0.39 times means that bankrolling projects will not be hard, an advantage other infrastructure players cannot claim.
Sustained growth
The strong order book growth in the three months ended September 30 follows an equally strong June quarter, when new orders rose 28 per cent. Revenue for the September quarter jumped 10 per cent, up from the 5 per cent growth in the previous quarter.
With lower prices of inputs such as steel, construction costs dropped two percentage points to 66 per cent as a proportion of sales in July-September over the year-ago period. The positive impact of this drop was, however, neutralised by higher staff costs – its growing international workforce necessitates higher payments – and mark-to-market losses on foreign exchange. Mark-to-market losses can occur when financial instruments held are valued at the current market value.
As a result, operating margins dropped slightly to 12.8 per cent in the July-September period, against 13.2 per cent in the corresponding period last year.
L&T’s efforts to build an international presence over the past year-and-a-half — opening offices and adding to workforce across countries — have also paid off. International orders also propped up revenue growth. In the hydrocarbons space, for instance, L&T’s international revenue jumped 21 per cent, while domestic revenue was down 9 per cent.