L&T misses order inflow, says headwinds to continue

Conglomerate expects private capex cycle to remain muted in the current financial year

Engineering conglomerate Larsen & Toubro (L&T) has missed its order inflow and revenue guidance for the financial year 2016-17, and the company expects headwinds to continue in the current financial year.

For the quarter ended March 2017, the company reported a net profit of Rs 3,024.61 crore, 30 per cent more than Rs 2,335.20 crore reported in the same period a year ago.

The company’s revenue was at Rs 36,830 crore, 12 per cent up from Rs 32,880 crore in the corresponding period of 2016.

“In our assessment, the performance has been satisfactory in the backdrop of the current environment and policies,” said Shankar Raman, chief financial officer, L&T.

Earnings before interest, taxation, depreciation and amortisation (Ebitda) were lower by 4 per cent year on year at Rs 4,340 crore. “Ebitda is lower due to impairment arising out of sales of assets and provisioning related to our financial service business,” Raman added.

The company’s order inflow for the financial year 2016-17 was at Rs 1.43 lakh crore against Rs 1.36 lakh crore in the financial year 2015-16, a growth rate of 5 per cent.

In its revised guidance for the financial year 2016-17, the company had expected 10 per cent growth in its order inflow and revenue from operations. For the year 2016-17, the company reported revenue growth of 8 per cent.

For the current financial year, the company expects the order inflow to grow in the range of 12-14 per cent and a revenue increase at around 12 per cent.

“We expect order inflow growth to come from sectors like power, hydrocarbon, infrastructure, and defence,” said A M Naik, group executive chairman, L&T.

Naik said the company missed its guidance due to delays in awarding projects. “As we go into the new year, it continues to be very challenging,” Naik said.

Naik does not expect the private capex cycle to revive in the current financial year and expects government spends to drive most of the new investments.

He said banks were flush with funds, but wary of lending to sectors which needed them the most. “Banks now have liquidity, but whom would they give it to,” Naik asked.

In the last financial year, the company put aside projects worth Rs 18,000 crore as ‘non-moving’; most of these, company executives said, were in the infrastructure sector. 

As of March 2017, L&T had an outstanding order book worth Rs 2.61 lakh crore. 

Naik further said the sector continued to suffer because of demonetisation. “Recovery after demonetisation has been very slow,” he said.

With the country’s transition to the goods and services tax (GST) regime, the company expects some hiccups. “Structural changes are definitely due. Expect one or two years of turbulence. Everybody is on a learning curve. The GST is a clean slate,” Raman said. 

On fund-raising plans, the company said, with a cash reserve of Rs 10,000 crore it would look to repay loans and did not plan to raise funds.

The company has recommended a dividend of Rs 21 per share (previous year it was Rs 18.25), which the company will pay on August 24, 2017, subject to shareholder approvals. The board also approved bonus shares to equity shareholders in the ratio of 1:2.