Informist, Wednesday, Oct. 30, 2024

By Aman Aryan and Rajesh Gajra

MUMBAI – Larsen & Toubro Ltd. sees relatively lower prospects for capital expenditure at state government level, the company's management said in a post-earnings analyst conference call Wednesday. The construction and engineering company said as of Sept. 30, about 28% of its total domestic order book of INR 3.05 trillion was from state government projects.

Central government projects accounted for 14%, while projects from state-owned enterprises accounted for 36% of the total domestic order book. The company sees lower prospects at the state level as some of the states are looking to convert some part of their revenues to provide subsidies, the company's management said. However, prospects for private capital expenditure remain strong, the company said. About 22% of the company's domestic order book is from private sector clients, the management said.

Overall, the company had a total order book of INR 5.1 trillion as of Sept. 30, up 13% on year and the share of slow moving orders is miniscule, around 0.5%, the company's management said. Order inflows in the projects and manufacturing portfolio for the September quarter were mainly driven by orders from infrastructure, hydrocarbon, precision engineering systems, as well as heavy engineering businesses, the company said, and added that the share of international orders in the portfolio fell to 62% in Jul-Sept from 68% a year ago. For international orders, the management said these orders are usually "fixed price jobs" so timely completion will lead the company to better margin realisations.

While the company's reported order book has risen on year, it sees a decline in prospects pipeline for the near term. "We have a total prospects pipeline of INR 8.08 trillion for the remaining six months" of FY25, which is "a marginal drop of 8% on a YoY (on year) basis," the company's management said in Wednesday's call. L&T management said this fall is primarily due to a fall in the hydrocarbon and carbon light prospects pipeline.

The company's management said around 17% of its total order book of INR 5.1 trillion as of Sept. 30 was funded by bilateral and multilateral funding agencies. The management also said that it was retaining its group-level guidance of order inflow growth of 10%, and that of revenue growth of 15%, for 2024-25 (Apr-Mar). "Let's see how Q3 (Oct-Dec) shapes up before we look to revising" the guidance numbers, the management said.

Asked about the performance of the Hyderabad metro rail project, the company management said that in the September quarter the metro project incurred a loss of INR 2.07 billion as against a net profit of INR 2.4 billion in the year-ago quarter. The management said the loss was on account of the interest on the loans it has taken. The company is looking at ways to improve the ridership on Hyderabad metro and is also hopeful of slightly lower interest rate on its loans to bring down the losses from the operations.

With regard to other development projects, the management said L&T will continue to participate in tenders in the areas of green hydrogen and green ammonia which have come out in the domestic market as well as overseas from Korea and Japan were the company is partnering with international players to participate. But the participation will only be in projects "where the off-take arrangements are confirmed and for a longer time... (and) there is a visibility of returns."

L&T had earlier got a first project opportunity in green hydrogen business with a private sector client to set up an electrolyser unit. In the analyst call following the June quarter earnings, the company's management had said it was evaluating various options with regard to that project opportunity. The management said in that call that it was premature to estimate the overall size of the green hydrogen business.

Wednesday, shares of L&T closed 0.8% higher at INR 3,408.35 on the National Stock Exchange. End

Edited by Deepshikha Bhardwaj

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