Engineering and construction major Larsen & Toubro’s Saudi Arabian subsidiary, L&T Saudi Arabia LLC has bagged a major international engineering, procurement and construction (EPC) order from the Saudi Arabian Oil Company (Saudi Aramco).
Speaking to CNBC-TV18 regarding the order, SN Subrahmanyan, L&T Infrastructure & Construction says the Rs 700 crore worth order is very prestigious for the company. The company eyes double digit margins from the order and is hopeful to add more international orders, especially from the Middle East, to its kitty this year.
Below is the verbatim transcript of the interview
Q: Can you give us the size of this order win? What kind of margins will you enjoy with this order?
A: It is good to begin the year with fair amount of orders both domestic and today this extremely prestigious one from Saudi Aramco. Saudi Aramco controls bulk of the kingdoms oil production and refining. We won the contract to do a very high end transmission line and cabling towards one of the islands where huge amount of gas and oil processing will be done. This is for construction of nearly 55 Kms of 230 Kv double circuit transmission line and we are happy about it. Aramco sets very high specifications and the demands are also of very high nature. First to have won this order and further to take it forward to its execution and logical conclusion is demanding but it will give us lot of prestige and take us forward from Aramco’s point of view. Q: Can you give us some financial details in terms of the order size, execution time and how much would it add to your numbers?
A: This is Rs 700 crore order and the margins would be comfortable. It is typical of what L&T gets and we hope to do it that way.
Q: What kind of ballpark margins would you be looking at, will they be in high double digits, will they be in single digits? How do these kind of international orders fit into your margin profile?
A: This will be typical of what L&T makes, it will be in double digits and so, it is a good order.
Q: What does the current order book look like? What would be the financial picture of L&T Construction in FY15?
A: The current order book including what we declared yesterday, around Rs 3000 crore of domestic orders, would be about Rs 1.54 lakh crore and so, we hope to have handled this quarter from L&T Construction point of view in a decent manner. We remain cautiously optimistic about the immediate future too.
Q: What about the international order pipeline, how bullish would you be on that? You have outlined a target where 25 percent of revenues and 30 percent of order intake would come from the international markets. Do you hold that target or do you think by the end of FY14 and towards FY15 your contribution could increase from the international markets?
A: What our chairman has said is enough, it is the target he has set and we are on our way towards that. Yes, we are optimistic about getting a few other international orders in the immediate future and there are prospects where we are very well placed.
Q: What geographies would that be in?
A: Predominantly in the Middle East that is Oman, UAE and Qatar and we remain positive that whatever we have bid for and where we are well placed, hope it gets converted into logical conclusions. We remain optimistic that we are building up resources there and will continue to maintain the guidance or close to it as much as we can.
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