Larsen & Toubro (L&T) has increased its workforce by 10 percent in the past year, adding close to 8,000 people in 2023-24, and plans to keep expanding its workforce till 2025-26, the engineering major's Chief Financial Officer R Shankar Raman said on May 8.
Shankar Raman said that despite a slowdown in order inflow seen in international orders in the fourth quarter of 2023-24 and expectation of a slowdown in domestic order inflows in the first and second quarter of 2024-25, L&T will continue to hire employees to execute its ever-growing order book, worth Rs 475,809 crore at the end of March 31, 2024.
"We will continue to hire people till 2025-26 so that as a company we are well prepared to plan out the next five years of our journey and to ensure that our current order book is executed in time," Shankar Raman said in a post earning conference call after the company declared its Q4FY24 earnings.
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He added that since around 38 percent of L&T's order book is made up of orders from international clients, the company will continue expanding its international employee base.
Shankar Raman also said that L&T's plans to hire more employees has also impacted the company's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin in 2023-24, as the company had to pay a premium for foreign employees.
Commenting on the Reserve Bank of India (RBI)'s draft proposing tighter norms for lending and heightened monitoring for under-construction infrastructure projects, Shankar Raman said that the Reserve Bank has promoted responsible investing as part of its drafts.
"I think all the regulators and the central bank are keen that the right projects get investment because funding is limited in India," Shankar Raman said.
On May 3, the RBI proposed that lenders should set aside higher provisions for all infrastructure projects that are under-construction, and also asked the lenders to ensure strict monitoring of any emerging stress.
The RBI said it issued draft guidelines ”taking into account the experience of banks with regard to financing of project loans”. Indian banks had seen large defaults across infrastructure loans starting 2012-2013 on account of exuberant lending, which led to a strain on the country’s banking system.
India is now seeing another burst of infrastructure projects, driven by the government as it tries to boost the economy. The RBI has proposed that banks set aside a provision of 5 percent of the loan amount when the project is in the construction phase.
This can be reduced to 2.5 percent when a project becomes operational and 1 percent after the project starts generating cash sufficient to cover the lenders’ repayment requirements.
Project loans that were not overdue or stressed so far attracted a provision of 0.4 percent, as per a 2021 circular available on the RBI’s website.
The central bank said lenders should monitor the build-up of stress in projects on an ongoing basis and initiate resolution plans well in advance.
The regulator also said lenders coming together in a consortium to finance projects worth up to 15 billion rupees ($179.92 million) must have an exposure of at least 10 percent.
L&T on May 8 reported a consolidated net profit for the quarter ended March 2024 at Rs 4,396 crore, up 10 percent compared to Rs 3,987 crore in the same quarter last year and Rs 3,621 crore in the same quarter in 2022-23.
Its revenue from operations for the quarter stood at Rs 67,079 crore, registering a growth of 15 percent from Rs 58,335 crore a year ago and Rs 52,851 crore in the same quarter in 2022-23, the company said in an exchange filing. The share of international revenues during the quarter was 45 percent.
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