L&T Q4FY19 preview: Commentary on Mindtree acquisition in focus

Larsen & Toubro (L&T), the engineering and construction major, is scheduled to release its March quarter (January-March period) results for the financial year 2018-19 (FY19) on Friday. The company is expected to report robust performance on all fronts led by strong order inflows. During the quarter under review, L&T secured orders worth over Rs 47,000 crore and is expected to report strong order inflows growth. Key monitorables include commentary on Mindtree acquisition, working capital and order inflow.

Analysts at ICICI Securities expect L&T’s standalone revenue to grow 14 per cent on year-on-year (YoY) basis to Rs 30,702.9 crore. EBITDA (Earnings before interest, tax, depreciation and amortisation) margin is expected to improve 20 basis points (bps) to 13 per cent. Net profit or profit after tax (PAT) is likely to grow 24.5 per cent at Rs 2,866.5 crore. 

Services businesses are expected to grow healthy at 23 per cent, says Reliance Securities. Based on order announced in 4QFY19, "we expect it to beat its FY19 order inflow guidance. On the operating performance, we expect margin at 13.9 per cent, up 60 bps YoY and, thus, PAT at Rs 3,900 crore, up 23 per cent YoY," it said in the results preview note.

Edelweiss Securities expects 14 per cent YoY growth in core Engineering, Procurement and Construction (EPC) revenues led mainly by the infra segment. Services businesses are expected to grow healthy at 25 per cent, it says.

MINDTREE TAKEOVER 

On Thursday, L&T acquired another 2 per cent stake in Mindtree by purchasing shares from the open market, taking its overall holding in the mid-sized IT company to 25.93 per cent. A day before, the infrastructure major bought over 37.53 lakh shares, or 2.28 per cent stake, worth Rs 367.8 crore in the company. 

Earlier this month, it had purchased around 20 per cent stake of VG Siddhartha and Coffee Day in Mindtree through a block deal for about Rs 3,210 crore. L&T is in the fray to buy up to 66 per cent stake in Mindtree for around Rs 10,800 crore -- marking the country's first-ever hostile takeover bid in the IT industry.

At the bourses, L&T has remained subdued during the last one year, thus underperforming the benchmark S&P BSE Sensex. The stock has fallen 1 per cent between May 9, 2018 - May 9, 2019, as against over 6 per cent rise in the S&P BSE Sensex.