- Construction and engineering giant L&T reported a consolidated net profit of ₹2,553 crore for the December quarter on Monday.
- Revenue grew 17% year-on-year during the quarter to ₹46,390 crore, driven by an improvement in infrastructure project execution.
- The company said it remains bullish on growth prospects based on an expected uptick in India Inc.’s capex cycle.
- The company’s CFO, Shankar Raman, is optimistic about exceeding the order inflow guidance of 12-15% for full FY23.
Construction and engineering giant Larsen & Toubro (L&T) on Monday reported a consolidated net profit of ₹2,553 crore for the third quarter, up 24% on last year, boosted by infrastructure projects and the IT and technology services segment. The company said it remains optimistic about exceeding its expectation for FY23 order intake.
The company said it benefited from an improvement in infrastructure project execution and continued momentum in the information technology and technology services segment. Revenue for the quarter was up 17% year-on-year to ₹46,390 crore. International revenues remained consistent and made up 37% of the company’s sales.
The company’s profit margin before interest, taxes, depreciation and amortization (EBITDA) contracted slightly during the quarter – L&T reported EBITDA margins of 10.92% in the third quarter, down from 11.4% a year ago.
While Q4 is traditionally a strong quarter for L&T, the company’s chief financial officer, R Shankar Raman, was optimistic about exceeding the 12-15% order inflow forecast for FY23. “All I can say is that we will exceed the order guideline we have given, but by how much I don’t know. That would be speculative, but there is no cause for concern.”
‘Large private capex investments are likely’
L&T reported a 21% year-on-year growth in order intake – at a group level, the conglomerate received orders worth ₹60,710 crore, of which international orders accounted for 25% or ₹15,294 crore.
“This growth [in order inflows] was largely driven by an increase in orders from domestic markets. Traditionally, Q4 has been an important quarter for us for new projects, and we hope this trend continues,” said Raman.
The company’s consolidated order book stood at ₹3.87 lakh crore at the end of the third quarter, with a 26% share of international orders.
“Most of the order book we have is in areas where there has been a lot of focus on completing the projects and that bodes well for the visibility of the company’s earnings,” said Raman on the post-earnings call, optimistic about the company’s topline prospects.
L&T counts on the revival of India Inc.’s capital spending cycle. Earlier, a report from the Reserve Bank of India underlined that the government’s various initiatives and improved corporate balance sheets are expected to revive the upward cycle of capital spending.
“Large private capex investments are likely to be in energy transformation, emerging technology, healthcare, logistics, industrial parks, data centers, etc.
Infrastructure and IT segments are driving growth in order intake
The stars of L&T’s Q3 were the infrastructure and IT segments – more than half of the order intake during the quarter was in the infrastructure segment, at ₹32,530 crore, a growth of 28%.
Infrastructure segment EBITDA margins fell to 7% in the third quarter from 7.1% in the same period last year. Raman said the weak margins in this segment are due to inflationary pressures, but noted that many of the company’s contracts have cost variation clauses built into them, which should help alleviate inflationary pressures to some extent.
On the other hand, IT and technology services segment reported a 25% year-on-year growth to ₹10,517 crore. However, EBITDA margins contracted significantly – to 19.2% in the third quarter, compared to 23.6% a year ago. “Segment margin was primarily impacted by one-time merger integration costs in LTIMindtree,” the company stated, explaining the sharp decline in this segment’s margin during the quarter, noting that 93% of segment revenue came from international markets.
L&T’s energy projects segment registered a 12% YoY growth to ₹9,051 crore in the third quarter, mainly due to a large domestic order in the hydrocarbon business.
L&T was able to reduce its net working capital in the December quarter, enabling it to offer its shareholders a better return on equity. Net working capital was 19% in the December quarter compared to 22.9% a year ago. “Given the scale and complexity of the organizations and businesses that L&T manages, this represents a significant reduction in the company’s resource commitment,” said Raman.
L&T’s Q3 in figures:
|Particularities||Q3 FY23||2nd quarter FY23||Q3 FY22|
|Gain||₹46,390 crore||₹42,763 crore||₹39,563 crore|
|Net profit||₹2,553 crore||₹2,229 crore||₹ 2,055 Crore|
Source: company reports
Adani Group shares are witnessing high volatility amid a battle of words between the company and Hindenburg Research
Adani Group companies lose ₹3.22 lakh crore in market value amid battle with Hindenburg Research
Adani Enterprises’ ₹20,000 crore FPO is now open, analysts remain cautiously optimistic