L&T net jumps 39%, but cuts revenue,order-book guidance to 10%

 Engineering major Larsen & Toubro (L&T), which today reported a 38.85 per cent increase in consolidated net profit at Rs 972 crore for the December quarter, has pared its revenue and order-book targets to 10 per cent from 12-15 it had set in the beginning of the year, citing a slew of external and domestic headwinds.

The infrastructure conglomerate's total income from operations inched up to Rs 26,286.98 crore during the quarter under review, from Rs 25,928.07 crore a year ago.

"During the beginning of the financial year we had given a guidance of 12-15 per cent growth in both order inflow as well as revenue. But looking at the current situation and considering the several headwinds the sector is facing, we have lowered the targets to 10 per cent," group chief financial officer R Shankar Raman told reporters here.

But he was quick to add that given the execution challenges on the ground, the company does not expect substantial improvement in the next couple of months.

Explaining the execution challenges, he said "there are challenges of right-of-way, land acquisition, regulatory clearances, shifting of utilities, among others. We do not expect these to change soon so such headwinds will continue to be a challenge. Apart from this liquidity and unwillingness of the clients to make payments on time are also impacting business," Raman said.

He based the 10 per cent optimism to the fourth quarter which normally is a busy season for the sector as government departments will be using up their annual budgets in the March quarter.

During the quarter, its expenses rose slightly to Rs 24,486.57 crore as against Rs 24,170 crore in the previous fiscal, he said.

He said the company has garnered fresh orders worth Rs 34,885 crore at the group level during the December quarter even though the business environment was subdued. Its overseas orders at Rs 11,865 crore constituted 34 per cent of total orders, which on a cumulative basis, stood at Rs 95,706 crore for the nine months to December. Major orders were secured by infrastructure and hydrocarbon segments.

Consolidated order-book stood at a healthy Rs 2,58,585 crore as of end December, which was only 1.4 per cent higher on a year-on-year basis. International order book constituted 29 per cent of the total.

L&T said its infrastructure segment achieved customer revenue of Rs 12,467 crore, which was up 6 per cent.

The transportation infrastructure and water and effluent treatment businesses contributed to the revenue growth during the quarter. International revenue constituted 37 per cent of the total customer revenue of the segment.

During the reporting quarter, infrastructure segment won fresh orders worth Rs 21,516 crore despite sluggish investment climate, and    some of the anticipated orders did not materialise due to delay in bid process, he added.

Its IT and technology services achieved customer revenue of Rs 2,454 crore during the quarter, registering growth of 9 per cent. Likewise, financial services logged customer revenue of Rs 2,108 crore, up 11 per cent, driven by higher loan disbursements mainly in microfinance, housing and wholesale finance.

Raman said domestic growth appears to take longer time as investment momentum remains weak and the banking system is burdened by NPA overhang.

On the impact of then noteban, Raman said, the move has caused disruption in the economy while its impact on business sentiment is yet to be conclusively assessed.
"The government should understand that all the money in the system is not black and the market is not only about speculation, but it is for investment as well, though there are speculations," he said.

Raman added that challenging business conditions are expected to continue in the next few quarters until the government moves to lift growth through "infra spend and tax reforms take effect".