L&T net profit rises 19.42% in Q3

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Mumbai: India’s largest engineering and construction company, Larsen and Toubro Ltd (L&T), a corporate proxy for the broader economy, reported a 19.42% rise in fiscal third quarter (Q3) net profit on Friday, on the back of improved order inflow.

Net profit rose to Rs.1,034.80 crore in the three months ended 31 December from Rs.866.54 crore a year ago. Net sales rose 7.62% to Rs.25,387.15 crore compared with Rs.23,588.74 crore a year ago.

The results fell short of expectations by a wide margin. Bloomberg analyst surveys had forecast that the conglomerate would post a net profit of Rs.1,043 crore for the reporting quarter on sales of Rs.26,377.20 crore.

The company reported an Ebitda (earnings before interest, tax depreciation and amortisation) margin of 10.3% for the quarter against 12.1% in the corresponding quarter of the previous fiscal.

Ebitda for the quarter was Rs.2,650 crore, against Rs.2,890 crore last year, an 8% decline.

L&T garnered fresh orders worth Rs.38,528 crore at the group level during the last quarter. The international order inflow during the quarter, at Rs.11,115 crore, constituted 29% of the total order inflow. Major orders during the quarter were secured by the infrastructure segment.

The consolidated order book of the group stood at Rs.256,458 crore as on 31 December, higher by 14% on a year-on-year basis, with international orders constituting 27% of the total.

Since 1 April, L&T shares have fallen 36.4%, while year to date, the stock is down 14.2%. On Friday, L&T shares closed at Rs.1,102.20 on the BSE, up 2.33% from its previous close, while India’s benchmark Sensex index rose 1.6% to close at 24,870.69 points.

On Friday, India’s transport minister said he is seeking as much as Rs.70,000 crore ($10.3 billion) in government spending to boost road construction and spur economic growth.

In addition to a more than 50% increase in budgetary allocations in the fiscal year starting April, Nitin Gadkari said in an interview that his ministry is also looking to borrow overseas. The overall target is Rs.5 trillion of road projects over the next three years, he said.

Prime Minister Narendra Modi has prioritized faster construction of highways, railways and other infrastructure since taking power in May 2014. Such public expenditure is providing an economic crutch as parts of the private sector tackle debt and limit investment.

In its outlook statement, L&T said the domestic economy continues to face headwinds to growth despite favourable macroeconomic factors.

Tight liquidity and weak global cues have kept the market tentative, it said.

A steep decline in oil prices, slowing growth in China, falling commodity prices, a downturn in global equity markets and significant depreciation of emerging market currencies vis-a-vis the US dollar have contributed to a volatile economic environment, the firm said.

“While industrial and private sector capex has been muted, and is likely to remain so for some more time, the government is pushing infrastructure through increased budgetary allocations, public sector undertaking-led spending and through bilateral and multilateral funding agencies. Nevertheless, the overall investment climate remains cautious with the overhang of excess capacities in many sectors,” L&T said.

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