Larsen & Toubro Ltd's management expects the engineering major's revenue to grow at 12-15 percent and order intake growth at 10-12 percent in 2023-24 but is cautious of slowing government activity in the second half of the fiscal, in view of the Union Elections that will take place in 2024.
On May 10, L&T reported its financial result for 2022-23 where it exceeded the revenue and order inflow growth guidance of 12-15 percent. The company, however, missed its guidance for margin which declined year-on-year.
“We are conscious of the fact that towards the end of current year FY24 the country gets into Union Elections. In a sense, we will have to look at this year as a truncated year…we will have to wait and watch depending on how the election mode interferes with decision making on some of these projects,” said Chief Financial Officer R Shankar Raman.
L&T’s consolidated order book stood at Rs 399,526 crore as on March 31, 2023, with international orders accounting for 28 percent. Order inflow in the fiscal was Rs 230,528 crore, up 19 percent year-on-year, beating the 12-15 percent guidance. Government-backed domestic infrastructure orders were among the top drivers for order inflow.
“There could be some slowdown in new project announcements because as we move closer to the election, the government could be more focused on what catches the voters’ interest. If they are still fighting for ‘roti-kapda-makaan’, some of the allocations could go towards priority sectors,” Raman said.
He added that the better-than-expected tax collection for the government may support capex.
Post Covid execution weighed on margin
Raman said that while L&T’s Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margin declined to 8.6 percent in FY24 from 9.3 percent a year ago, the company aims to improve it to 9 percent in FY24.
L&T reported consolidated revenues of Rs 183,341 crore for the year ended March 31, 2023, up 17 percent on year, driven by strong execution of a large order book in the infrastructure projects segment and robust momentum in the information technology and services segment.
But even as the company tried to make up for lost time during the pandemic by pushing execution, the higher cost of execution dented the EBITDA margin.
“The margins that we reported in FY22 was about 9.3 percent. As we started FY23, the idea was to protect the margin and see whether we can work on improving it. But for the revenue to grow, we had to complete contractual obligations and beyond a certain point we had to take the input cost in our stride and complete the project to make up for the loss of time in the previous year due to Covid,” Raman said.
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