L&T revenue miss reflects weakness in investment cycle: Pro

Pragya: At least on a consolidated basis, the company has reported an absolute EBIT of about Rs 3,609 crore which would translate into a margin of 12.9 percent for the consolidated year. So, absolutely EBITDA is actually down by about 5.5 percent year-on-year. And margins are down by about 140 basis points. Last quarter, the company reported 12.1 percent margins, so sequentially you are seeing 70-80 basis points bump up in the margins. But at least on a year-on-year basis it is a fair bit of a decline. And on the top-line it is just a five percent growth at about Rs 28,023. I am still looking for the standalone numbers which the company seems to have not reported or at least we are waiting by for that press release to open. But prima facie, what is your take on these results?

Jain: Usually, the margins are more a projection of the season. So, I will not be further by 0.5 percent margin here and there. But the revenue basically, it seems that the execution has been slightly slower than our expectation. So, definitely the numbers are around Rs 1,500 crore less than what we were thinking. And accordingly the EBIT is basically slightly less than what we were thinking.

Sumaira: On the consolidated basis net sales have come in a shade above Rs 28,000 crore, EBITDA in absolute terms on a consolidated basis is at Rs 3,609 crore, margins at 12.9 percent and a profit number of Rs 2,069 crore. How do these numbers look to you prima facie?

Hazari: Prima facie they appear to be below analyst expectations because all I would say is given the way the rest of the companies have reported earnings so far it was to be expected that such a large company like L&T which is a direct play on the investment cycle would also disappoint.

So the disappointment in the numbers really should be a disappointment because that is the way the rest of the corporates have reported earnings so far and it is to be expected because really on the ground level there has been no real major pick up in either investment activity or the execution of projects which have got stuck. They have not been moving as smoothly as one would have thought in the beginning of the last financial year. So, my issue is that it should have been expected that a company like L&T would disappoint the expectations.

Pragya: The consolidated order inflows of the company for the full year have come in at Rs 1,55,367 crore. Basically that would imply a growth of about 22 percent on a year-on-year (YoY) basis. The company had set out a guidance on the order inflow number of about 15-20 percent which they had of course revised lower in quarter three but 22 percent consolidated order intake growth on a YoY basis is definitely a beat on what the management had set out and the cautious management commentary which they had set out in quarter three. How would you read those numbers?

Hazari: The 22 percent growth is a positive surprise, but we just have to see from where are the orders coming because is it defence orders which are boosting this? Because if it is for defence, then it should not come as a surprise because the defence industry has been giving out very large orders. But if it is coming from the domestic engineering and construction (E&C) side that would also be a major positive for the Indian economy.