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Larsen & Toubro posted a 9 percent rise in consolidated net profit in Q3 FY2015 on the back of revenue growth but the result failed to meet the Street's expectations. The company has also lowered its order guidance to 15-20 percent from 20 percent at the start of the financial year anticipating delays in order booking.
Net profit was up to Rs 866 crore in Q3FY2015 from Rs 796 crore in same period previous year due to improved performance of its technology and financial services divisions.
Revenue and order inflow rose largely due to contribution from the infrastructure sector while other segments such as power, hydrocarbons, heavy engineering and metals and minerals remained weak.
During the quarter the company reported revenue of Rs 23,847 crores, which is ten percent higher than Rs 2,17,232 crores achieved in third quarter of last year. Order inflow was up 19 percent to Rs 34,580 crores. About 70 percent of orders in first nine months of the fiscal were in infrastructure sector.
However the result disappointed the street and the stock closed 6.6 percent lower at Rs 1,573. While L&T's consolidated revenue was higher than Bloomberg estimate (Rs 23,040 crores), its reported net profit came lower than the estimate of Rs 1,138 crore.
Higher depreciation, increase in finance costs and lower profits in core business segments dragged down the profit. L&T's senior executive president (infrastructure and construction) S N Subrahmanyan said the company expects margins to remain stable due to easing of commodity prices.
While the company's hydrocarbon business is facing headwinds, a promising trend for the company has been increase in domestic order intake. About 82 percent of the orders bagged in third quarter were from within the country representing 60 percent growth over same period last year.
Larsen& Toubro's chief financial officer R Shankar Raman expects a slowdown in hydrocarbon sector investments in Gulf following a sharp fall in the crude oil price but the company is not anticipating a negative impact on infrastructure sector in that region.
Additionally hydrocarbon projects worth $1.8 billion in Gulf region are facing cost and time overuns and the company expects to raise claims upon completion of the projects in next 2-3 quarters.
"At the end of nine months we have achieved 10 percent revenue growth. The fourth quarter is traditionally earns the highest revenue and we will work hard to ensure that we achieve 10-15 percent growth. We are seeing traction in metro, water and renewable and transmission and distribution projects. We have achieved 16 percent growth in order inflows and now expect order inflow to be in the range of 15-20 percent. The pipeline looks strong but it depends on how soon it materialises into orders,'' he added.
Journalist Swapan Dasgupta joins L&T Board
Veteran journalist and political commentator Swapan Dasgupta has been appointed on the board of Larsen & Toubro. Dasgupta joins the board as a nominee of the Specified Undertaking of the Unit Trust of India (SUUTI) replacing A K Jain. He will take charge as a director from April 1. Sunita Sharma has been appointed as a Director representing Life Insurance Corporation of India from April 1.
