Engineering major L&T, which today reported 27 per cent rise in net for Q2 at Rs 1,820 crore, has massively slashed its earlier guidance for orders inflows to a low single-digit, citing turmoil in the Gulf and the still lingering domestic slowdown but maintained earlier view on revenue growth.
In the beginning of the year, Larsen & Toubro had guided for a 12-14 per cent rise in order inflows for the year, expecting a quicker turnaround in the domestic economy post-demonetisation and firm international orders.
On the revenue side, however, it has maintained its guidance of 12 per cent increase for the financial year.
At the consolidated level, including profits from the two listed arms, its net income rose to Rs 2,020.30 crore from Rs 1,532.15 crore.
In the year to March 2017, the company had won orders worth Rs 1.42 trillion.
But the GST roll-out from July 1 has slowed the economy, while the note-ban impact lingered to the first quarter when the GDP slowed down to a three-year row of 5.7 per cent. Confounding the matter further is the ongoing political turmoil in West Asia in general and Saudi Arabia in particular.
"We are seeing a fair amount of headwinds in the Gulf region which has been our forte. On the domestic front, though a number of projects and schemes are being announced in the country, due to various reforms undertaken by government, there is a slowdown in the tender process," S N Subrahmanyan, managing director & chief executive, told reporters.
For the reporting quarter, the company's income rose to Rs 26,848 crore from Rs 25,474 crore a year ago.
"We had given a guidance of 12-14 per cent growth in order inflows for this fiscal. However, going by the present environment both in the domestic and international markets, we think we will be able to achieve only a marginal growth in order inflows this year," R Shankar Raman, group CFO, said without offering to quantify the same.
But he maintained the earlier revenue guidance of 12 per cent increase for this financial year.
Subrahmanyan further said most of the events in the Gulf region were not anticipated. Except for the embargo on Qatar, none of the events were foreseen, he said, adding what's happening currently in Saudi Arabia, or the slowdown in Oman and Kuwait, were not anticipated.
"When such things happen at the highest level in the government for whatever reason, there is a slowdown in decision making so we see a fair amount of headwinds in decision-making in the Middle East (West Asia).
"We had said there would be a slowdown in those markets especially following the crash in oil prices, but we didn't expect it to go down so much," he said.
On the domestic front, he said the government has announced many ambitious projects like river linking, Bharatmala and Ganga clean-up, among others, but the tendering process is not likely to begin soon.
"Going by the past experience, the government is being more careful in bringing out tenders and initiating projects.
"Earlier, projects were being awarded but would later get stuck due to issues like clearances and right-of-way etc. But now it wants to ensure that at least 80-90 per cent of clearances are in place before floating tenders," he said.
Also, the reforms of Rera, note-ban, GST roll-out, bankruptcy law - all these have an impact on how things will move forward, Subrahmanyan added.
The company secured orders worth Rs 28,732 crore at the group level during the quarter amidst subdued business environment, policy uncertainties and delayed implementation.
International orders stood at Rs 10,420 crore and constituted 36 per cent of the total order inflows, taking consolidated order book stood at Rs 257,526 crore as the end of the reporting quarter.
On when it is planning to launch its InvITs, Raman said, "we've received the Sebi approval and is likely to be launched this fiscal itself. Will be putting up five road projects for the InvIT. But we have yet not finalised the valuation for these assets.
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