L&T net profit rises by 32% at Rs 765 crore

Engineering major Larsen and Toubro today posted a 32 per cent growth in net profit at Rs 765 crore for the second quarter, compared to Rs 580 crore in the corresponding quarter last year.

Its net sales grew 18 per cent to Rs 9,260 crore from Rs 7,866 crore in the same quarter last year. The company’s operating margins for the quarter stood at 10.8 per cent as compared to 10.6 per cent.

“We have reversed the provision for Satyam shares held by us, in this quarter. Even if we exclude that, we have shown a healthy growth,” said Y M Deosthalee, Group CFO, L&T.

After excluding the reversal of provision made for Satyam, that accounts to Rs 71 crore, the net profit of the company grew by 22 per cent on a year-on-year basis. This quarter, the company sold 28 million shares in Mahindra Satyam, reducing its stake by 2.42 per cent. It made a provision in the first quarter of 2009-10 as the open offer price set by Tech Mahindra was at Rs 58 per share as opposed to the Rs 81 per share average acquisition price of L&T.

Analysts are upbeat about the revenue growth. “The topline was above our estimates, as expected a 11.5 per cent growth. An 18 per cent growth is a positive suprise, as the sector has not shown good growth in topline in the last few quarters. L&T has set a good benchmark,” said Shailesh Kanani, senior research analyst at Angel Broking. The margins for the company’s largest segment – engineering and construction (E&C) – increased by one per cent to 12.6 per cent. “We have got this improvement in margins in spite of the fact that there has been a substantial increase in almost all commodity prices except cement,” said Deosthalee. The company has about two-thirds of its construction contracts under a pass-through mechanism wherein any increase in costs would be borne by the customer.

On the other hand, the revenue of the electricals and electronics segment dropped by five per cent for the quarter. In the second quarter, L&T witnessed an 11 per cent growth in order inflows and the total orderbook of the company stands at Rs 1,15,393 crore. “Most of the companies are considering the prices of commodities. Some are looking at the global situation and not going ahead with their expansion plans,” said Deosthalee. In spite of the delays, the company said it would not alter its year-end forecast of 25 per cent increase in order inflows for this financial year.

L&T which has filed a draft red herring prospectus for its financial services business with the regulator, said it plans to go for an IPO before the end of this calendar year.

Meanwhile, L&T Infrastructure Finance Company Ltd (L&T Infra) said it would be raising Rs 700 crore through its public issue of tax saving infrastructure bonds. “We have come up with Long Term Infrastructure Bonds under section 80CCF of the Income Tax Act where subscription of up to Rs 20,000 made by an individual would be eligible for deduction from taxable income,” L&T Infra CEO Suneet Maheshwari told reporters here.

“We plan to raise Rs 700 crore from this public issue of Long Term Infrastructure Bonds, which would be in the nature of secured redeemable non-convertible debentures,” said Maheshwari. He further said that all funds raised by the bonds would be utilised to finance various infrastructure projects. The bonds have a maturity of 10 years with two exit options for investors, where the company would offer buyback facility at the end of five and seven years from the date of allotment.