Order flows signal better times ahead for L&T

Bhavana AcharyaBL Research Bureau Updated - March 12, 2018 at 09:36 PM.

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Larsen & Toubro’s June quarter numbers belied the gloom surrounding the country’s infrastructure scene. With a 28 per cent rise in new orders won for the quarter (over a year-ago), L&T’s order book now amounts to 2.7 times its yearly sales. This bodes well for the company’s ability to sustain growth.

Infrastructure scores

L&T has been managing the slowdown better than its more specialised peers. For instance, L&T bagged a Rs 6,700-crore contract for building a section of the dedicated freight corridor and another Rs 2,085 crore order for laying an expressway in Oman in the June 2013 quarter.

Over the past few quarters, it was L&T’s expertise in urban infrastructure and hydrocarbons that kept the orders coming even as those from capital goods, power and mining dwindled. L&T’s efforts to bag more projects overseas are also paying off – international orders made up 14 per cent of new orders in the June quarter. In contrast, in FY11 they were just 8 per cent of inflows.

But all was not well with L&T’s revenues in the June quarter. Even as it wrapped up existing projects in segments such as power and mining, new ones didn’t quickly take their place.

Costs were up on a higher wage bill as L&T added to its workforce. International and engineering businesses also typically see costs bunched up in certain quarters. Operating profits thus, shrank nine per cent in Q1 compared to the year ago, triggering a net profit decline. But since sales and cost recognition in the segments L&T operates in tends to be lumpy, a single quarter’s drop is not a cause for worry.

In the year ahead, L&T can expect good order flow from segments such as water, railways, buildings, power transmission and distribution and hydrocarbons, besides the overseas market.

Published on July 22, 2013 17:04