Larsen & Toubro Ltd will exceed its revenue and order inflow targets for 2023-24 due to the strong order momentum it is seeing at the moment, the company's Chief Financial Officer R Shankar told reporters after the company released its December quarter result (Q3FY24) on January 30.
The engineering major at the start of 2023-24, had said that they expect revenue to grow at 12-15 percent and order intake growth at 10-12 percent in the current financial year.
“We are well positioned to exceed our guidance and are likely to end the current financial year with 20 percent growth in order inflow for a full year and high teen growth in revenue,” Raman said in a response to a question on whether the company will raise its annual guidance.
Larsen & Toubro (L&T) reported a consolidated net profit of Rs 2,947 crore for the December quarter of FY24, up 15 percent from the year-ago period, on better execution of infrastructure projects and continued growth in the IT and tech services portfolio.
Revenue zoomed to Rs 55,128 crore, 19 percent higher than last year, the company said in an exchange filing on January 30.
However, the company's numbers were lower than market expectations.
An average of estimates of four brokerages pegged the diversified conglomerate to report an over 30 percent year-on-year (YoY) jump in profit at Rs 3,324.3 crore. Revenue was expected to grow 20 percent to Rs 55,720 crore on the strength of a strong order book.
Shankar also said that during the quarter the company incorporated L&T semiconductor technologies with an investment of Rs 830 crore to foray into the fabless semiconductor chip design.
He added that during the quarter L&T also completed the manufacturing of the first-ever electrolyser made in India of 1 MW capacity at its manufacturing unit in Hazira.
Electrolysers are used to produce green hydrogen, and L&T has already licensed the technology from France-based McPhy Energy.
L&T plans to hive off its electrolyser manufacturing business into a separate entity and offload a stake to Indian Oil Corporation (IOCL).
Shankar added that military escalation in Europe and West Asia has led to supply chain disruptions, and these coupled with high-interest rate regimes in various parts of the world are disruptors of growth and order inflows for L&T.
"As far as Red Sea is concerned, it is a matter of concern, due to the importance of the Suez Canal for logistics. Given that this seems to be a lingering problem, we have started working on alternate routes," Shankar said.
He added that L&T has started improving its Earnings Before Interest, Taxes, Depreciation, and Amortization margin during October-December as orders won at aggressive prices in 2022-23 completed execution and new orders started being carried out.
Raman added that L&T's operating margins are likely to improve further in the March quarter and keep improving in 2024-25.
At the end of June, around 35-40 percent of L&T's then order book of Rs 3,01,159 crore from the infrastructure projects segment was made up of orders that were won at aggressive prices.
L&T had last quarter broken its five-quarter streak of seeing a fall in operating margins in its infrastructure projects segment.
L&T's operating profit margin from the infrastructure projects segment rose to 5.5 percent in Q3FY24 from 5.4 percent in Q2FY24 when compared to 5.1 percent in Q1FY24.
When compared on-year, the operating margin of its infrastructure projects segment fell 150 basis points in Q3FY24.
Raman also said that L&T expects a slowdown in the awarding of incremental projects in the first half of 2024-25 and said the company is prepared for a slowdown in order inflow in the next two quarters.
"It's going to take a lot for the government to move away from its current capital expenditure-led model of growth. So I think both given the need of the economy as well as the wisdom of pursuing a certain policy, growth initiatives and developmental investments will continue," Shakar said.
He added that while domestic orders from India may see a slowdown in the next few months, international orders from Oman, Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates are expected to remain strong going forward.
"Fortunately the economies of these countries are doing well, oil prices are holding up and oil prices can fund the vision these countries have," Raman said, adding that at the moment L&T does not plan to drastically increase its presence in other international markets.
Divestment
Raman added that there has not been any development in the divestment plans of L&T for now.
He added that L&T has availed Rs 900 crore of the Hyderabad metro soft loan approved by the Andhra Pradesh government and has used it to repay the debt of the project.
He added that the daily ridership of Hyderabad Metro has risen to a peak of around 5.5 lakh passengers in the quarter ended December 2023 from 5 lakh daily passengers in the previous quarter.
Earlier this year, the state government of Telangana decided to provide a Rs 3,000 crore soft loan to L&T and allowed the company to sell or lease some of the land parcels that were handed over to the company as part of the concessionaire agreement.
L&T plans to reduce Hyderabad Metro's debt burden to Rs 8,000 crore after taking the interest-free loan from the government and also monetise 260 acres it owns.
L&T Hyderabad Metro Rail has a debt burden of 13,000 crore, this is apart from the Rs 2,000 crore loss the company has suffered in the past few years.
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