Tough times ahead for L&T despite strong Q3 show

MUMBAI: Engineering major Larsen & Toubro expects tough times to continue despite reporting healthy quarterly earnings, as the weak investment climate has slowed down new orders. A cocktail of events like the investment scenario, slowdown in projects, delay in policy initiatives and the public-private partnership projects coming to a halt has already hurt infrastructure companies like L&T.

This, coupled with the fact that the country is entering the election mode, will further dent the order pipeline, the company said, after reducing its order inflow guidance for the year to 15% from 20% earlier. “There’s a fighting chance that we may meet the revenue growth guidance (15-17%) this year. We will have to work very hard to achieve it,” CFO R Shankar Raman said.

He said that the company has so far won orders worth Rs 67,000 crore in the current fiscal and requires to bag another Rs 30,000 crore worth of order in the last quarter to March to meet the 20% growth target which looks difficult given the macro environment.

“It is not that we are losing out to competition for projects. It is just that there are very few jobs being awarded,” he said. The company also warned that almost 9% of its order book worth Rs 171,184 crore is slow moving and may be potentially written off. “We have identified these projects as slow moving. At the end of the year, we will take a call on whether or not they are going to be productive,” the CFO said. These orders are primarily from roads, metals and mining sectors.

On Wednesday, L&T reported recurring profit after tax, excluding exceptional items and the hydrocarbon business which has been hived off into a subsidiary, of Rs 1,136 crore for October-December, up 12 % over the corresponding quarter of the previous year.