Beefing up capabilities in power, railways: L&T

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Beefing up capabilities in power, railways: L&T

YM Deosthalee, Whole Time Director and CFO, L&T, said the Q1 FY10 numbers are better than company's internal estimates. He said the company was beefing up capabilities in power and railways. "We have set up an engineering and construction wing for railway projects."

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Q: Just to supplement it, would you be looking at buying Kalindee? L&T Capital already has I think 14%?

A: Yes, we have some stake, about 14%. There are various options. Acquisition is not the only option, one can have strategic alliance. One can look at working together. So, there are all options and we will examine. At this point in time, we have not finalised our thinking on whether we are going to acquire or takeover. I don't think anybody can make such statements.

Q: Do you expect that margins will be maintainable on the non-interest front? On the interest front, do you see that you will be able to bring it down? That has been quite a burden in the first quarter.

A: As far as margins are concerned, you would have seen that the margins have smartly improved in the engineering and construction business. In this environment where we have had lots of difficulties, we have been consistently improving margins. In the first quarter, there is a 100 bps improvement in the engineering and construction business, which is more than 80% of our business now.

Secondly, we are not booking jobs with lower margins. We are not taking contracts with lower margins. Therefore, our efforts will always be to maintain this margin. As things stand today, we are quite hopeful that these margins, which are in any case good margins. Last year as well, we had improved, maintained in some cases and improved in some other cases. Our effort will be to maintain this margin.

As far as on the interest front, there are two aspects of it. Number one is, we had shifted our borrowing profile from international borrowing to domestic borrowing. In the second half of last year, there was a big liquidity problem. You know that in October-December we had a problem and some of the borrowings have been contracted during that time. Our overall borrowings have also gone up by Rs 2,500 crore during this period. As a result of which, there is an increase in interest cost, which is as expected. However, having said that, our total interest percentage - interest cost - is just about 6% at the gross level. At the net level, it is actually around 3% or so. So, there is an increase in interest expenditure. It is arising out of additional borrowing. Also, there is a change in the borrowing profile from international to domestic. We expect that the same trend will be maintained going forward.