L&T in race against time to meet FY17 revised order inflow guidance

Order inflow guidance was revised from 15% to 10% and revenue guidance was seen at 10% against 12%

With only a few days left for the current financial year to end, it’s a race against time for engineering conglomerate Larsen & Toubro Ltd (L&T) to meet its revised forecast of 10 per cent growth in order inflow.

In January, L&T revised its guidance for order inflow from 15 per cent to 10 per cent and for revenue growth from 12 per cent to 10 per cent for 2016-17, citing delays in ordering activity and other execution headwinds. 

Analysts said the order inflow forecast of 10 per cent growth over the last financial year was unlikely to be met, considering the orders reported so far.

“What they need is about Rs 55,000 crore (worth of orders) in the March quarter to meet the 10 per cent target, which looks unlikely even after considering the non-reported orders,” said an analyst from a domestic brokerage firm who did not wish to be identified.

In an e-mail response, an L&T spokesperson declined to comment on market speculations.

L&T, which had reported a total order inflow of Rs 1.36 lakh crore in 2015-16, bagged orders worth Rs 95,700 crore in the first nine months of the current financial year. So, the company needs Rs 54,300 crore worth of fresh orders in the March quarter to meet Rs 1.50 lakh crore worth of order inflow target for 2016-17.

“Based on the orders reported so far, it looks unlikely that 10 per cent guidance would be met. However, once the order reporting for the last week of March is over, we would have a better picture,” said a second analyst from a domestic brokerage firm.

On Monday, L&T announced its building and factories business segment had won orders worth Rs 2,490 crore, and another Rs 705-crore order would be executed by the joint venture with Shriram EPC. On Tuesday, L&T Construction announced an order win worth Rs 2,903 crore.

“The proportion of unannounced orders has been quite high in the past three quarters and that might as well be the case for Q4. On a full-year basis, we do not expect any significant disappointment on our estimates which were building at five per cent to 10 per cent, against the management estimates of 10 per cent to 15 per cent for order intake,” said Pawan Parakh, analyst with HDFC Securities, adding that he remains positive on the stock as there may be a spillover of orders to the first quarter of the next financial year.

The company may also not report certain order wins to maintain client confidentiality. However, analysts expect L&T to meet an eight per cent growth in order intake considering the benefit of unreported orders. 

For the March quarter in the last financial year, L&T had disclosed Rs 25,400 crore worth of orders, while Rs 12,300 crore contributed as unreported orders to the total order inflow.