Engineering and construction giant Larsen & Toubro's management said that its reported push towards electronics manufacturing services (EMS), which is receiving support from the Union government through production-linked incentive schemes, is being aimed towards non-consumer segments, and has the possibility to deliver "handsome returns" for the firm.
"We are looking at EMS in specific areas, not in consumer durables and electronics. We are looking at manufacturing solutions in communications, aerospace, and light engineering equipment. This segment has the possibility to deliver handsome returns to the company if we are able to scale up, to establish these facilities, to have the domain expertise, product quality and competitiveness, and scale will determine the ultimate profitability," said R Shankar Raman, the chief financial officer of L&T, in a post-earnings media briefing.
India's largest EPC firm reported a 16 percent growth in its consolidated net profit at Rs 3,926 crore for the July-September quarter, missing Street estimates, while its consolidated topline grew by 10 percent year-on-year to Rs 67,984 crore.
Its core engineering and construction segment margin grew slightly year-on-year to 6.3 percent. Order inflows grew by 45 percent year-on-year to around Rs 1.16 lakh crore, driven by a large growth in the energy segment, particularly from the West Asian markets, as well as a slight growth in the infrastructure segment.
Of the Rs 52,686 crore of orders received by L&T in the infrastructure segment in Q2, around 52 percent came from India. Private sector investments are also showing signs of a pickup, after years of concern over primarily government-led capital expenditure.
"We are seeing a revival in order inflows for infrastructure...private sector investments are also picking up. We received orders from segments such as residential and commercial properties, data centres, hospitals, and airport projects, all of which have major private sector participation," Shankar Raman noted.
While Shankar Raman expressed confidence in meeting, and perhaps exceeding the order inflow growth guidance of 10 percent for FY26, as well as the 15 percent revenue growth guidance, he pressed on the need to grow the core margin to meet the guidance of 8.5 percent for the year. For FY25, L&T reported order inflows of Rs 3.57 lakh crore, and a consolidated revenue of Rs 2.56 lakh crore.
The company, which has been looking to exit the Hyderabad Metro concession for years due to backended returns and high debt, said that it has started talks with the Telangana government for a possible divestment, with the firm looking to complete the transaction by the end of the current financial year.
L&T's management, which has made large order gains in the west Asian markets in the hydrocarbons segment, particularly in Saudi Arabia and Kuwait, said that the capital outlay programmes in some of these countries have been "better than expected", despite geopolitical concerns such as the Israel-Gaza war, now in a fragile ceasefire. However, sentiments are slowing growth in green energy, even as L&T expands capacity in the segment.
"Things are moving slowly in the green energy segment, because of the general sentiment around the globe in terms of what is happening in the US and the policy decisions being taken. However, in the places where we are, we are pushing ahead with the Indian Oil Corporation green hydrogen order. We have signed a memorandum of understanding with Itochu and we are pushing ahead for the project in Kandla...and we are also looking at serious opportunities in the Middle East with firms such as Masdar...," said Subramanian Sarma, deputy managing director of L&T.
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