TheNFAPost Podcast

Highlights:

1.      Larsen & Toubro recorded Highest ever orders booked in a quarter, 76% increase y-o-y, on receipt of prestigious and large contracts

2.      It can be attributed to the biggest EPC contract in the country and first of its kind – the prestigious High-Speed Rail order

3.     Order Book at a record high, ₹ 331,061 crore;  The Group order inflow for the quarter ended December 31, 2020 registered a strong growth of 76% over the corresponding quarter of the previous year and stood at Rs. 73,233 crore

4.      International orders during the quarter constituted 14% of the total order inflow

5.      On a cumulative basis, the order inflow for the nine months period ended December 31, 2020 stood at Rs. 124,846 crore

6.      The consolidated order book of the Group stood at a record Z 331,061 crore as at December 31, 2020, registering a robust growth of 9% over the March’20 level. The international orders constitute 20% of the total order book

7.      The Gross Revenues of Rs. 35,596 crore for the quarter ended December 31, 2020, registered a sequential growth of 15%

8.      Consolidated Profit After Tax (PAT) for the quarter ended December 31, 2020 at Rs. 2,467 crore registered growth of 4.9% over the corresponding quarter of the previous year.


Mumbai, NFAPost: L&T Group, an Indian multinational engaged in EPC Projects, Hi-Tech Manufacturing and
Services with over $21 billion in revenue, registered 4.9% growth in its consolidated profit after tax (PAT) for the quarter ended December 31 at Rs 2,467 crore compared with the corresponding quarter of the previous year.

According to company release, the growth in PAT is largely attributed to higher profit from IT & TS segment and sale of
commercial property in Realty (“Others” segment).

The Gross Revenues of Rs 35,596 crore for the third quarter for the fiscal 2021 registered a sequential growth of 15%. The Covid-19 restrictions continued to have an impact on project site execution and Hyderabad metro operations that led to a marginal decline in revenue of 2% over the corresponding quarter of the previous year.

International revenue during the quarter at Rs 12,967 crore constituted 36% of the total revenue. The consolidated gross revenue for the nine months period is at Rs 87,891 crore.

During the quarter the Company was awarded the biggest EPC contract in the country and first of its kind – the prestigious High Speed Rail order. With this, the L&T Group order inflow for the quarter ended December 31 registered a strong growth of 76% over the corresponding quarter of the previous year and stood at ₹ 73,233 crore. International orders during the quarter constituted 14% of the total order inflow. On a cumulative basis, the order inflow for the nine months period ended December 31, 2020 stood at ₹ 124,846 crore.

PAT also includes gain on divestment of Rs 209 crore from discontinued operations for the quarter ended December 31, 2020. The gain of divestment is towards (a) Further adjustments accrued against the sale of the Electrical & Automation business to Schneider Electric SE and (b) sale of the UK based Marine control & automation systems subsidiary to Rolls-Royce Power Systems AG.

PAT for the nine-month ended December 31, 2020 is at ₹ 8,290 crore. Infrastructure Segment Infrastructure Segment secured orders of ₹ 45,574 crore, during the quarter ended December 31, 2020, higher by 80% on y-o-y basis, with receipt of two marquee orders of High Speed Rail.

Further, notable orders received included an order for a special bridge project (Assam), domestic orders for rural water supply schemes (Madhya Pradesh), international orders in Power Transmission & Distribution and Metallurgical and
Material Handling business.

International orders constituted 7% of the total order inflow of the segment during the quarter. The segment order book stood at ₹ 245,316 crore as at December 31, 2020, with the share of international order book at 19%. The segment recorded customer revenue of ₹ 15,828 crore for the quarter ended December 31, 2020, registering a sequential growth of 22%.

However, compared to the corresponding quarter of the previous year, the revenue declined by 7% primarily on account of progress being impacted due to Covid-19 preventive measures. The share of international revenue was 23% of the total customer revenue of the segment during the quarter.

The EBITDA margin of the segment for the quarter ended December 31, 2020 is at 6.2% for the current quarter as compared to 6.1% for the quarter ended December 31, 2019. Effective April 1, 2020, the Smart World and Communication business which was reported under Infrastructure Segment has been reclassified to “Others Segment”
and accordingly, previous year figures have been regrouped wherever necessary.

Power Segment

The Power Segment did not secure any major order during the quarter ended December 31, 2020, attributed to absence of green field thermal power project opportunities.
The order book of the segment stood at ₹ 13,710 crore as at December 31, 2020, with the international order book constituting 6% of the total order book.
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The segment recorded customer revenue of ₹ 897 crore during the quarter ended December 31, 2020, registering a y-o-y increase of 29% on the back of strong opening order book. International revenue constituted 7% of the total customer revenue.

The segment EBITDA margin for the quarter ended December 31, 2020 was at 2.0%, lower compared to 3.4% recorded in the corresponding quarter of the previous year. The margin for the quarter reflects a major portion of the jobs at their early stages of execution and yet to achieve the margin recognition threshold.

Heavy Engineering Segment

Heavy Engineering Segment secured orders at ₹ 998 crore during the quarter, almost a 100% growth on y-o-y basis led by orders contracted in the Nuclear business. International orders constituted 61% of the total order inflow. The order book of the segment stood at ₹ 3,645 crore as at December 31, 2020, with export orders having a 48% share.

The segment recorded customer revenue of ₹ 733 crore, marginally higher than the corresponding quarter of the previous year. International sales comprised 55% of the total customer revenue of the segment during the quarter.
The EBITDA margin of the segment at 20.0% for the quarter ended December 31, 2020 registered a decline over the corresponding quarter of the previous year at 23.5%, on account of changes in job mix.


Defence Engineering Segment

Defence Engineering Segment received orders worth ₹ 705 crore during the quarter ended December 31, 2020 which were mainly domestic, registering substantial growth on a low base of the corresponding quarter of the previous year.
The order book of the segment stood at ₹ 8,795 crore as on December 31, 2020, with export orders constituting 13%.
The segment recorded customer revenue of ₹ 1,022 crore registering a marginal growth of 2% over the corresponding quarter of the previous year. Exports constituted 31% of the total customer revenue of the segment during the quarter.
The EBITDA margin of the segment at 16.9% for the quarter ended December 31, 2020 was lower as compared to the corresponding quarter of the previous year at 20.9%, as previous year witnessed a particular order reaching margin
recognition threshold.

The Military Communication Business of Defence Engineering Segment has been transferred with effect from April 1, 2020 to Smart World and Communication business and reclassified to “Others Segment”. Accordingly, previous year figures are regrouped wherever necessary.


Hydrocarbon Segment

The Hydrocarbon Segment secured orders valued at ₹ 12,820 crore during the quarter ended December 31, 2020, supported by receipt of some large value domestic orders in the petrochemicals space. International orders constituted 4% of the total order inflow of the segment during the quarter.
The segment order book stood at ₹ 45,887 crore as at December 31, 2020, with the international order book constituting 36%. The segment reported customer revenue of ₹ 4,407 crore during the quarter ended
December 31, 2020, marginally higher than the corresponding quarter of the previous year. The international revenue constituted 51% of the same.
The EBITDA margin of the segment for the quarter ended December 31, 2020 at 12.2%, almost in line with that of the corresponding quarter of the previous year.

IT & Technology Services (IT&TS) Segment

The segment comprises (a) L&T Infotech (b) L&T Technology Services and (c) Mindtree. IT & Technology Services Segment achieved customer revenue of ₹ 6,505 crore during the quarter ended December 31, 2020, registering y-o-y growth of 7%, led by L&T Infotech. Overseas sales constituted 93% of the total customer revenue of the segment for the quarter ended December 31, 2020.

The EBITDA margin for the segment increased to 25.5% for the quarter ended December 31, 2020 as compared to 21.0% of the corresponding quarter of the previous year, attributed to higher revenues, improved manpower utilisation and lower operational costs.

Financial Services Segment

The segment recorded income from operations at ₹ 3,401 crore during the quarter ended December 31, 2020, registering a y-o-y decline of 4%. The Book marginally increased to ₹ 100,099 crore as compared with December’19
at ₹ 99,453 crore

The operating margin of the segment for the quarter ended December 31, 2020 was at 11.0%, lower as compared to 21.3% of the corresponding quarter of the previous year due to higher provisions towards credit cost.

Developmental Projects Segment

The segment registered customer revenue of ₹ 814 crore during the quarter ended December 31, 2020, a decline of 34% over the corresponding quarter of the previous year on account of lower ridership in Metro services at Hyderabad and lower PLF in Rajpura 1400 MW power station, affected due to rail roko agitation by farmers in the state of Punjab.

The EBITDA margin of the segment for the quarter ended December 31, 2020 declined to 0.1% as compared to 17.3% during the corresponding quarter of the previous year due to under-utilisation of Metro services on Covid-19 related
restrictions.

“Others” Segment

“Others” Segment comprises (a) Realty, (b) Construction & Mining Machinery, (c) Rubber Processing Machinery, (d) Valves and (e) Smart World and Communication.

During the quarter, the Construction and Mining equipment business was awarded its biggest order ever for supply of 46 units of Komatsu Mining equipment to an esteemed customer.

Customer revenue of “Others” Segment during the quarter ended December 31, 2020 at ₹ 1,989 crore registered growth of 30% over the corresponding quarter of the previous year, with sale of commercial property in the Realty business.

Export sales constituted 9% of the total customer revenue of the segment during the quarter, majorly pertaining to the Valves business. During the quarter ended December 31, 2020, the segment EBITDA margin stood at 34.3%, higher compared to 18.7% in the corresponding quarter of the previous year on the back of the aforesaid commercial property sale in the Realty business.

Q4, FY2022 expectation


In a statement, the company came up with its outlook for the last quarter saying that India’s economy is recovering at a better-than-expected pace since the fiscal second quarter of FY’21, with the Government taking initiatives for enabling demand revival through significant capex ordering in the infrastructure sector.

“Consequently, sectors such as Metros/RRTS/HSR, Roads and Expressways, Water, Renewables and Power Transmission & Distribution are witnessing increased traction as far as bidding/tendering activity is concerned. The Government’s renewed thrust on several policy initiatives like ‘Atmanirbhar Bharat’ and ‘Make in India’ has led to improved economic prospects. Various fiscal and monetary stimulus packages announced including the extension of Production-Linked Incentive (PLI) Scheme to 10 flagship sectors, has positioned India as an alternate hub for global manufacturing.

The company states that the post lockdown pent-up demand, improved prospects in affordable residential real estate, green shoots in Cement and Steel capex outlays, are signs of improved confidence on economic revival. However, significant private sector led capex could continue to remain in wait & watch mode, in the medium term.

India’s economy could rebound back in FY’22, with successful Covid vaccination drive helping to restore normalcy and kickstart business activity, increased investment in infrastructure, supported by a much awaited economy
friendly Union Budget.

“On the global front, the business sentiments remain cautious as localised repeat outbreaks of the Covid-19 virus and the resultant lockdown continues to hamper sustained economic recovery. The near term outlook features continuing uncertainty on the trade front between US and China and forecast of subdued oil prices affecting Middle East economies.
New project opportunities are mostly seen in Water, Transportation, Power Transmission & Distribution and Renewable Energy & Green fuels,” states the company

The prospects for IT & TS segment appear promising with increased opportunities in technology led outsourcing and digital transformation. With the spectre of the pandemic yet lingering amidst us, the business pursuits need to factor the safety precautions warranted to ensure responsible conduct towards the new emerging opportunities and growth prospects. Against such a backdrop , the Company will focus with cautious optimism on (a) large project wins (b) smart
execution of its large order book and (c) preservation of liquidity and optimum use of capital and other resources.



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