L&T profit before tax for Q3FY20 dips 5%, firm misses street estimates

Engineering conglomerate Larsen & Toubro (L&T) reported a 5 per cent decline in profit before tax (PBT) for the December 2019-ended quarter on account of lower disbursements and profits for its financial services arm.

After tax, the company reported a consolidated profit of Rs 2,353 crore — a jump of 15 per cent. While the infrastructure segment revenue for the company took a hit, the overall order inflow grew at a slower pace of 2 per cent. The management, however, maintained its order and revenue guidance for the full year.

For the December 2019-ended quarter, L&T PBT was at Rs 3,223.23 crore, compared to Rs 3,401.22 crore reported a year ago. The consolidated gross revenue for the same period was at Rs 36,243 crore — a growth of 6 per cent year-on-year. The company missed the Street estimates.

In a Bloomberg poll, 17 analysts estimated the revenue at Rs 39,368 crore and 11 analysts estimated net profit at Rs 2,404 crore.

“It has been a challenging quarter. It is well known, well commented and well accepted that economic growth has slowed down. We see as opportunities as deferred, not lost,” said Shankar Raman, whole-time director and chief financial officer, L&T. He added that economic reforms in the country are moving to the front burner.

Raman added, “The government needs to deal with some structural issues. In a year or year and a half, the cycle should reverse.”

The total order inflow for the company grew at 2 per cent to Rs 41,579 crore, largely helped by growth in international orders. The company’s outstanding order book was at Rs 3.06 trillion as of December 2019.  The company maintained its full-year guidance of 10-12 per cent growth in order inflow for the full year.

Company executives added the Budget will act as an enabler for the next 12 months. The National infrastructure Pipeline (NIP) has planned Rs  102-trillion investments in the next five years. Executives added they will look for financing details for the planned NIP.

Segment-wise, L&T’s infrastructure business revenue witnessed a decline of 5 per cent. In terms of orders, company executives said they are concerned about the predetermined budget of projects and the lack of competition. S N Subrahmanyan, managing director and chief executive officer, said there are orders where L&T is a single bidder; it needs to bid multiple times to win the award. In certain other orders, L&T’s bid has been higher than what the government had budgeted for the projects, he said.

Infra revenue dips for first time since segment reporting

L&T’s infrastructure segment reported revenue of Rs 17,249 crore, a year-on-year (YoY) decline of 5 per cent. This is the first time L&T infra segment revenue has declined YoY since it started reporting this segment. “There have been challenges… Change of governments has led to stoppage of work, public litigations have come in the way of project execution, and pollution has prevented construction sites from work… Most of these are behind us,” said Shankar Raman.

Under development, infra projects in the National Capital Region were hit due to air pollution, where 45-60 workdays were lost. The Mumbai coastal road project, the company added, was hit due to public litigation issues. In addition, states like Andhra Pradesh also contributed to the decline in revenue, owing to change in the ruling government.