L&T gets orders worth Rs 27,000 cr from domestic clients in April so far

Analysts see these order wins as spill-overs from the quarter ended March, 2020

Engineering conglomerate Larsen & Toubro (L&T) on Friday announced a significant order win for its building and factory business. With this order, the company has announced order wins worth up to Rs 27,000 crore so far in April.

Most of these orders were from clients in the domestic market. In total, they are valued between Rs 14,500 crore and Rs 27,000 crore. The company does not disclose exact order values, but shares a range.

Analysts see these wins as a spillage from the March quarter.  However, the firm stands to gain owing to a large order book as well  as exposure to diverse markets.

On Friday, L&T announced order win in the range of Rs 1,000-2,500 crore. The works related to the setting up of a cement plant, a real estate project and smart data centres. All orders were from the domestic market.

This is the fourth order win announced in April. The earlier ones included building a regional rapid transit system in Uttar Pradesh, water management orders in Karnataka, power transmission orders from its overseas markets, information technology infrastructure project from the Indian Army and a distillation unit project for Indian Oil. These orders were valued between Rs 13,500 crore and Rs 24,500 crore.

“Most of the orders that L&T has reported in the last few days are related to the fourth quarter, where customer clearances would have taken longer. Once slippages from the last quarter are over, we do not expect any fresh orders from the private sector in the near term except for those coming from international markets or from the government sector,” said Renu Baid, vice president for research at IIFL Institutional Equities.

For the quarter ended December 2019, L&T’s total order inflow was Rs 41,579 crore, and the company’s outstanding order book was Rs 3.06 trillion. In January, the company maintained its full-year guidance of 10-12 per cent growth in order inflow for the full year. The guidance back then did not reflect the disruptions caused by the coronavirus disease (Covid-19) and the subsequent nationwide lockdown in March.

Baid expects L&T’s Rs 3.06 trillion order book to put it on a strong footing compared to peers. “Most capital goods firms have order backlog for the next six-nine months, after which there will be concerns on revenue visibility. With Rs 3 trillion worth of order book, L&T is an outlier, which should keep it occupied for at least 18-20 months if not more,” she said.

Analysts at ICICI Securities also expected companies like L&T to consolidate the engineering, procurement and construction markets in terms of tender wins. “Companies with strong balance sheets and minimum leverage will stand to gain given the tight liquidity scenario. Some smaller and marginal players will suffer due to leverage leading to reduction in competitive intensity in some tenders and gradual consolidation by larger players,” analysts with the brokerage wrote in a note.