Larsen & Toubro expects to win Rs 2-trillion order from Centre in FY24

The country’s largest infrastructure firm, Larsen and Toubro, is expecting to win Rs 2-trillion worth of new orders from the government’s mega capex spending on roads, highways and railways announced in the Budget this year.

R Shankar Raman, chief financial officer, L&T, said the Centre’s orders will play an important role in L&T’s guidance of 10-12 per cent growth in order inflows, which is expected in the ongoing financial year. The company ended the financial year 2022-23 with record orders of Rs 4 trillion.

“We have a win rate of 20 per cent in government orders, or about one in four projects. If Rs 10-trillion capex happens, there is a good chance that we will win Rs 2-trillion worth of these orders. Besides, our service orders in FY23 was Rs 58,000 crore and we expect 15-20 per cent growth orders in the ongoing financial year,” Raman said.

As of now, government orders make up for 65 per cent of L&T’s order book while the rest comes from the private sector, including overseas orders. “We expect the Indian government and overseas orders to remain robust for the rest of the financial year,” Raman said in an interview to this paper. “Orders from the Indian private sector are expected to remain muted when compared to government orders,” he said.

The company announced group revenues at Rs 1.83 trillion for the year — a growth of 17 per cent. It also posted a total consolidated profit after tax (PAT) of Rs 10,471 crore, registering a robust 21 per cent growth compared to the previous year.
 

But the company’s stock fell 5.39 per cent on Thursday as investors were worried over the company’s guidance of a muted 12-15 per cent revenue growth and a weaker 10-12 per cent ordering growth for FY2024. On margins, the company expects to reach closer to 9 per cent in FY24 versus 8.6 per cent achieved in FY23 and past five-year peak of 10.3 per cent.

“In 2020-21, the pandemic was a big disruptor and in 2021-22, the Ukraine war and supply chain disruption was the major worry. In the FY23, all of this was washed through as we completed those projects. So, of Rs 4-trillion order book, about Rs 2.3 trillion was won under known conditions, which did not go through the inflation spike like the previous orders. Of the Rs 1.75-trillion orders, about 60 per cent was already washed through in FY23 and that’s why margins dropped to 8.6 per cent. The balance will be cleared in the ongoing fiscal year and hence our guidance for the next two quarters will remain soft, but thereafter, as we start executing projects we won last year, the margin profile will change,” Raman explained. The next financial year (2024-25) will be normal in terms of margins.

Raman said next year’s general elections could play an important role as government orders may slow down. However, Raman said, government orders saw a spurt just before the 2019 elections.

On large projects, Raman said the Mumbai coastal road project from Marine Drive to Haji Ali will be completed by October and the trans-harbour sea link project will be ready at the same time. The work at the new Navi Mumbai airport project is going at a fast pace after its financial closure by the Adani group and will be ready in two years. The Mumbai Metro 3 project is expected to be ready by the end of 2023.

On the sale of Hyderabad Metro, Raman said the Telangana government has cleared a loan of Rs 3,000 crore at zero interest and development of commercial real estate will help the Metro project to reduce its Rs 13,000-crore loan. “Once the debt comes down to Rs 7,000 crore, it will be easier to sell the project,” Raman said. Talks to sell the Nabha Power project in Punjab are still on and efforts are underway to increase the plant’s efficiency.