Hindustan Unilever sees no demand recovery though sales improve

By Devidutta Tripathy and Tommy Wilkes

MUMBAI/NEW DELHI (Reuters) - Larsen & Toubro Ltd (L&T) , one of India's biggest conglomerates, dampened hopes for a quick recovery in domestic demand and said international orders were fuelling its growth.

The company, whose diverse activities from transport and military equipment to financial services, make it a bellwether of the economy, said international orders doubled in the three months to the end of June from a year ago and now constituted 44 percent of new orders.

Across the business, orders rose a more modest 11 percent, helped by major infrastructure, hydrocarbon and heavy engineering orders.

"Conditions in the domestic market are still sluggish," chief financial officer R. Shankar Raman told reporters on Monday after L&T posted a 10 percent rise in first-quarter revenue.

"We are waiting for the domestic industry to pick up, growth to pick up."

L&T has been expanding overseas to offset weak demand at home amid a sharp economic downturn.

Profit after tax came in at 9.67 billion rupees, more than double last year. This was aided by the sale of Dhamra port, which netted it 13.5 billion rupees and rescued the firm from posting a loss.

Other project sales during the quarter included stake sales in L&T Finance Holdings Ltd and City Union Bank Ltd .

Executive Chairman A.M. Naik said in May he saw an improvement in the business outlook after the election of a new government raised the possibility of the authorities approving a backlog of projects that has hit infrastructure.

But the prospect of a revival in domestic demand is yet to filter through to a big rise in new orders, nor encourage infrastructure companies such as L&T to commit to new capital expenditure - central to any sustained economic recovery - because of spare production capacity.

Raman said he expected L&T to meet its guidance of 15 percent revenue growth and a 20 percent rise in order inflow in 2015. He retained his medium-term outlook for a gradual recovery in the economy.

NEW ORDERS

Overseas orders helped L&T report a 10 percent rise in first-quarter revenue to 191.23 billion Indian rupees ($3.2 billion) for the three months ended June 30, 10 percent higher than the same period last year.

This compared compared with a 114.99 billion mean estimate by analysts, data from Thomson Reuters showed.

"The company weathered (the) domestic slowdown by strengthening its international presence in the select overseas markets," L&T said in a statement.

Shares in L&T have gained around 55 percent this year. They closed down 1 percent before the earnings announcement, compared with a 0.5 percent fall in the benchmark BSE Sensex.

(1 US dollar = 60.1300 Indian rupee)

(Reporting by Tommy Wilkes and Devidutta Tripathy; Editing by David Clarke)