Foreign focus will help tackle rupee blues, says L&T

90% of dollar-denominated loans are hedged

Larsen & Toubro (L&T) is betting on international business to meet the twin challenges of a domestic slowdown and the rupee depreciation. Chairman A M Naik on Thursday said this financial year, a quarter of the revenue and 30 per cent of order intake would be accounted for by foreign markets. Standalone revenue and order inflow for 2012-13 stood at Rs 61,471 crore and Rs 88,035 crore, respectively.

L&T said the fall in the rupee wouldn’t impact its finances severely, as 90 per cent of its dollar-denominated loans were hedged and the company was a net foreign-exchange earner annually. On a standalone basis, the company has debt of Rs 11,000 crore, of which about Rs 7,500 crore is dollar-denominated. The company reviews hedge positions continually. However, the cost of imports would be impacted due to the falling rupee, he said.

“We expect Rs 25,000 crore worth of orders from abroad. We are focusing on the Gulf, CIS (Commonwealth of Independent States) and Southeast Asian markets. In addition, we are exporting products all over the world,” Naik said, adding the growing international order book would improve its dollar earnings. “Last year, our order book stood at Rs 1.75 lakh crore; this would increase by Rs 10,000-15,000 crore. Operating margins in the current financial year would remain at last year’s levels,” he added.

Naik said the domestic business outlook remained dim and added that he did not expect any big ticket decisions to kick start infrastructure growth till next June. "The economic development situation is not good. People say growth is at about 5%. One wonders if it is really so today. The rupee is weak and even the best economists in the world can not predict what level rupee will fall,'' he remarked.

Naik said the company was creating a subsidiary for its engineering services business and expanding its electrical products business by setting up factories in Indonesia, Saudi Arabia and Australia.

Higher remuneration for management
At the company’s 68th annual general meeting on Thursday, shareholders approved a resolution to increase the commission to its top management. The commission payable to the executive chairman was fixed at 0.4 per cent (earlier 0.3 per cent) of the post-tax net profit, excluding from exceptional items. Commission for the chief executive and managing director was revised to 0.3 per cent from 0.25 per cent; other directors and deputy managing directors would earn up to 0.2 per cent (earlier 15 per cent) and 0.25 per cent (earlier 18 per cent), respectively.

The resolution said this was a maximum limit and the actual commission paid to chairman and other board members will be recommended by the remuneration committee.