L&T Q2 Results: Profit Beats Estimates


Larsen & Toubro Ltd.’s second-quarter profit rose on better project execution across segments beating analysts’ estimates.

Net profit of India’s largest engineering-to-construction company rose 26% year-on-year to Rs 2,819 crore in the three months ended September, according to an exchange filing. That compares with the Rs 2,334.4-crore consensus estimate of analysts tracked by Bloomberg.

The earnings were largely driven by strong performance across segments, primarily led by information technology and financial services.

L&T Q2 FY23 Highlights (YoY)

  • Revenue from operations rose 23% to Rs 42,762.6 crore, compared with the estimated Rs 39,149.3 crore.

  • Operating profit rose 23% to Rs 4,899.4 crore against the Rs 4,378-crore forecast.

  • Operating margin came in at 13.7%, against 11.5% a year earlier.

International revenues during the September quarter stood at Rs 15,473 crore, contributing 36% of the total revenue.

Total orders secured at the group level during the period were Rs 51,914 crore, a growth of 23% year-on-year. The orders came from public spaces, nuclear power, irrigation, ferrous metal, health, renewables and refinery sectors.

International orders were 33% of the total order inflow at Rs 17,341 crore.

As of Sept. 30, 2022, the consolidated order book of the group stood at a record Rs 3,72,381 crore, with international orders comprising 28%.

“The company has undertaken preparatory work to exit the Hyderabad Metro project,” said R Shankar Raman, chief financial officer at L&T, during a media interaction.  

However, prior to divestment, the company plans to reorganise the capital structure to make the project attractive to investors, Raman said. 

The level of debt on the project is disproportionate to the level of traffic running on the metro, he said. The company plans to reduce the total debt on the books to Rs 7,000 crore, from Rs 13,000 crore, in the next two to three years, he said. 

To that extent, the company has borrowed an interest-free loan of Rs 3,000 crore from the Telangana government to repay the interest-heavy loans on the project. The company has also taken permission from the Telangana government to monetise the land parcels around the Metro.  

“The proceeds from the sale will be used to reduce the interest burden on the unit,” Raman said.  

The infrastructure projects segment recorded revenues of Rs 19,370 crore in the quarter ended September, registering a growth of 39% on account of strong project execution across various sites.  

Order inflows were at Rs 25,058 crore, a two-fold growth over the previous year. International orders were at around Rs 6,700 crore, or 27% of the total order inflow of the segment. 

The segment’s operating margin during the quarter, however, dropped to 6.6% against 8.3% recorded a year earlier. 

Margins for the quarter were impacted due to cost pressures witnessed in a few projects, the company said. 

The segment revenue rose 29% year-on-year to Rs 10,151 crore in the September quarter, reflecting continued growth in the IT&TS sector, the company said. 

International billing contributed 93% of the total customer revenues of the segment. 

The aggregate revenue of the three listed subsidiaries in this segment saw a growth of 4% year-on-year to $1,270 million ($1.27 billion). The Ebitda margin for the segment dropped to 21.9% compared with 23.2% a year earlier. The margins were impacted by the elevated employee costs, driven by demand for talent and high attrition rates, the company said. 

The energy projects segment’s performance was subdued during the quarter as no projects were awarded during the period, Raman said.

The segment customer revenue dropped 7% YoY to Rs 5,586 crore in Q2 FY23, on account of slower-than-expected progress across a few projects in the hydrocarbon business, he said. 

The order inflow dropped 42% YoY to Rs 8,441 crore, since the previous year had the benefit of receipt of a mega international order in the hydrocarbon business, L&T said. 

International order inflow constituted 3% of the total order inflow of the segment during the quarter.  

L&T Finance Holdings, its listed subsidiary’s operating income rose 6% YoY to Rs 3,152 crore during the quarter ended September. 

The growth was attributed to higher disbursement in retail business, in line with its strategy of retailisation of the loan book. 

The total loan book at Rs 90,098 crore, grew by 4%, as compared to Rs 86,936 crore in September 2021, due to growth achieved on increased disbursements in the retail portfolio and targeted reduction in defocused businesses.  

The Indian economy is doing relatively well and is expected to continue its growth momentum, albeit at a slower pace than earlier anticipated, the company said.

High inflation coupled with threat of an adverse balance of payments amidst an increasingly uncertain global economic environment are possible headwinds to the country’s growth trajectory, it said.

Large-value private sector investments that were set for a major revival may get delayed due to persisting geopolitical and global economic turbulence.

On a positive note, the central government with the success of its production-linked incentives scheme, is likely to expand it to more sectors.

The government is expected to intensify its efforts on structural reforms in critical areas such as labour, logistics, health and education.

Robust tax collections this year will enable the government to sustain budgeted investments, it said.

Shares of L&T closed 2.50% higher before the results were announced, compared with a 1.31% rise in the benchmark BSE Sensex.


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