L&T's order book situation to be grim for rest of year: SMC Global

Post Covid, central and all the state governments are walking a tight rope as far as budget and doing out orders are concerned.

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The silver lining is that the company has stated that execution will improve quarter on quarter and so it has to be seen how things move in the next quarter, says Saurabh Jain, Assistant Vice President – Research (Retail Equities), SMC Global Securities.

L&T revenue seems to be largely in line. The margins are not bad and more or less in line with the pole. What is your view?
Everybody knew the June quarter was anyway going to be a miss. Now it has to be seen how the company sails the rest of the fiscal year because last time they had said that things are expected to return to normalcy in the second half of the fiscal. Now it is to be seen in the context how the infrastructure scene pans out considering the pandemic situation and the state governments' tight budget. We will wait for the company guidance on how they expect to sail into the rest of the quarters and what is the likely possibility of things returning to normalcy.


Let us talk about the individual segments barring ITand TS where there has been a growth in double digits. It has been disappointing across the board?
If you look at the infrastructure segment, power transmission, airport, industrial water system, water supply would continue to be areas of concern given the fact that the central government and all the state governments are walking a tight rope. It has to be seen whether the state governments will be able to borrow more funds this time around and whether they will open up their projects and shell out orders to a company like L&T. It should be a difficult year in terms of getting orders because the last order book for the infrastructure segment was Rs 2,22,000 crore out of Rs 3,05,000 core of the total order book.


If you look at other segments like hydrocarbon, because of the way the situation is panning out, oil has slipped quite a lot and it would be difficult in these times and companies will tend to spend less on maintenance and expansion activities. So, I guess this would be a weaker area.

Also, the Ministry of Defence has tightened its purse. they are not shelling out orders much. In fact, in the last quarter also we saw them awarding less orders which L&T did speak about. So, barring the IT segment, the order book situation will remain grim for the rest of the year. The silver lining is that the company has stated that execution will improve quarter on quarter and so it has to be seen how things move in the next quarter. It is a space where you have to see continuously how the things are moving.
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