L&T facing labour squeeze at project sites, banking on Gulf returned workers

Larsen & Toubro (L&T), India's largest construction and engineering company, said work at its project sites has been affected due to shortage of labour.

"We have 950 (project) sites at any given point of time. At 90 percent of our sites, around 40 percent of labour has left," said SN Subrahmanyan, its CEO and Managing Director.

Around 2,30,000 labourers work across its project sites during normal times, a large proportion of them are migrant workers from north and eastern parts of India. Due to the novel coronavirus, or COVID-19, led lockdown, many of them have returned back to their villages.

Subrahmanyan said they need at least 100,000 workers to ensure the work goes on full throttle.

The management said it is trying to recruit Indian migrant workers returning from the Gulf who have lost their jobs as governments and private investors are cutting back on spending there, battered by the steep fall in crude oil prices. "We are trying to mobilise labour. We expect things to normalise 20-30 days," Subrahmanyan said.

L&T said work at its sites was impacted due to the problems related to supply chain and logistic issues of men and material.

The management said it is not in a position to offer any guidance on order inflow due to uncertain condition, however the company said it will be banking on contracts from states and the Centre, backed by funding from multilateral agencies like World Bank, Asian Development Bank (ADM) and Japan International Cooperation Agency (JIICA).

It also dropped hints of a difficult Q1 FY21.

The consolidated order book of the group stood at Rs 3,03,857 crore as at March end, a year-on-year growth of 4 percent. International orders constituted 25 percent of the total order book.

L&T on June 5 reported a consolidated profit of Rs 3,197 crore for the quarter-ended March, a 6.5 percent decline YoY despite lower tax cost.

Consolidated revenue from operations grew 2.2 percent year-on-year to Rs 44,245.28 crore in Q4 FY20, impacted by COVID-19-led lockdown in the last fortnight of March, while the execution pace was impacted due to clients' liquidity position.

The company's working capital position too slipped in FY20. In FY19 work capital stood at 18 percent to sales, but the same deteriorated to about 23 percent in FY20.

"To some extent, the deterioration is also on account of us allowing vendors to get paid regardless of our customer collections. The terms of trade with all our contracts are increasingly becoming interest linked when it comes customer advances. A combination of these factor has impacted working capital," Shankar Raman, CFO, L&T, said.

On the Schneider deal, Raman said the company is on course to closing the deal. "Once the lockdown is lifted, we should be able to progress and complete pending issues of the transaction."