L&T confident of meeting FY25 order inflow guidance, says CFO; prospective order pipeline fall to Rs 5.5 lakh crore

R. Shankar Raman, President, Whole-time Director & CFO: Don't expect any major tax related announcement as part of the Budget for 2025-26

The management of Larsen & Toubro (L&T) on January 30 said that there are opportunities worth Rs 5.5 lakh crore from project orders that the company will look to bid for in the ongoing financial year and over the next few quarters.

"As we look ahead, the prospect pipeline for order inflow is encouraging at about Rs 5.5 lakh crore. Roughly about Rs 4 lakh crore is from the infrastructure segment, and about Rs 1.4 trillion rupees from energy segment, essentially hydrocarbon. About 40 percent of the prospects of this Rs 5.5 lakh crore is from international markets," L&T's chief financial officer R Shankar Raman said.

The company had at the start of 2024-25 started that it was eyeing an order prospects of Rs 9 lakh crore in 2024-25, which has fallen to Rs 5.5 lakh crore. L&T's order prospects had earlier dipped in the quarter ended June 30, 2024, from about Rs 12 lakh crore in fiscal 2024 to Rs 9 lakh crore for fiscal 2025.

Raman, while speaking at the company's post Q3FY25 earnings conference call, also said that L&T is confident or meeting its order inflow guidance of 10 percent on year growth for 2024-25.

"L&T is in a happy position today with a significant amount of orders under our belt for achieving our guidance.," the CFO of the the engineering and infrastructure conglomerate said.

Raman added that he does not expect any major tax related announcement as part of the Budget for 2025-26.

"The middle class is being taxed a lot more than what they are comfortable with and there is pressure for some reduction. But I don't expect any bold changes in the tax structure because I think the government is looking for stability," he said.

The consolidated order book of the L&T group stood at Rs 5,64,223 crore or Rs 5.6 trillion as on December 31, 2024, with international orders having a share of 42 percent, the company had said on January 30.

The order book of Rs 5,64,223 crore represents a growth of 20 percent over Rs 4,69,807 crore as on December 31, 2023, L&T had said.

The CFO said that the slowdown in order inflows seen in Q1FY25 and Q2FY25 from the Indian market was mainly on account of the Lok Sabha elections and should not continue going forward.

In Q1FY25, L&T saw its order inflow rise to Rs 70,936 crore, a growth of 8 percent over the corresponding quarter of the previous year, due to strong ordering momentum from countries in the Middle East. In Q2FY25, order inflows fell 14 percent year-on-year due to a high base as L&T had bagged two ultra-mega orders in Q2FY24.

However, Raman warned that the ongoing Israel-Hamas war can disrupt order inflows. "My base case assessment is if things stay as they are today, this underlying tension will continue in the ecosystem," R Shankar Raman said.

He added that despite the on-going geopolitical concerns, countries like Saudi Arabia have created an in-depth plan for 2030 and 2035.

The CFO said that there exists opportunities worth $60 billion from infrastructure projects in the middle eastern countries, out of which L&T is targeting to win 5-10 percent.

He also said that L&T is still awaiting clarity on the Defence Ministry's decision to mark L&T's bid as non-compliant as part of a Rs 70,000 crore tender for the acquisition of six submarines

"Let me tell you that we have signed an NDA and which is still in operation and we have sought some clarifications on that decision that has been announced and we are awaiting the clarification, nothing more I will be able to add at this point in time," R Shankar Raman said.

Under Project 75 India, the Indian Navy wants to buy six advanced submarines that can stay underwater for three weeks. The Defence Ministry rejected L&T's proposal in partnership with Spanish Navantia because it was not compliant with Indian Navy requirements.

The infra major showed the Indian Navy how their air-independent propulsion system was functioning in Spain. However, officials demanded a sea-proven system, as required in the tender document. This means that state-owned Mazagaon Dock Shipbuilders and its partner ThyssenKrupp Marine Systems of Germany will be the only vendors left in the race to make the submarines.

As far as revenue guidance of 15 percent is concerned, the company is keeping pace with the guidance with a couple of months to go, he said, adding that even core margins of 8.2 percent would be achieved.

In the third quarter, L&T achieved the highest-ever single-quarter order inflows of Rs 1.16 lakh crore, registering a growth of 53 percent over the year-ago period.

The company has also optimised its fund utilisation, containing working capital at 12.7 percent of total revenue on a 12-month trailing basis, R Shankar Raman said.