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L&T net profit soars 71% on strong order inflows

LiveMint logoLiveMint 30-05-2014 Madhura Karnik

Mumbai: India’s biggest engineering and construction company Larsen and Toubro Ltd (L&T) on Friday reported a 71.2% increase in net profit for the quarter ended March, helped by strong order inflows, and said it expects the new government’s thrust on infrastructure to kick-start stalled projects and support its growth.

Net profit rose to a higher-than-expected `2,723.48 crore in the March quarter from `1,591.19 crore, excluding an extraordinary item of `18.72 crore, in the year-ago period.

Net sales rose 11.08% to `20,079.10 crore.

The company, a corporate proxy for the larger economy, had been expected to post a net profit of `1,648.7 crore on sales of `20,656.5 crore, according to Bloomberg analyst surveys.

L&T’s order inflows could be the first sign of a turnaround for the sluggish capital goods industry. India’s gross domestic product grew less than 5% in the year ended 31 March for the second year in a row, data released on Friday showed, as projects stalled by delayed government approvals, high borrowing costs and weak consumer demand took their toll on Asia’s third largest economy.

Boosting infrastructure is high on the agenda of the Narendra Modi government, which has pledged to speed up the process of approvals and revive stalled projects.

“The mood is upbeat and held-up projects will soon begin to move, so I see improvement come in sooner than what I had thought earlier,” group executive chairman A.M. Naik said. “We have been able to get over the storm and good days are ahead of us.”

L&T said its order book—a gauge of demand—grew 13% year-on-year to `1.63 trillion as of 31 March, and that order intake for the business year ending March 2015 was 20% up on the year just ended.

The L&T stock fell 0.1% to close at `1,548.90 on Friday on BSE, on a day the benchmark Sensex lost 0.07% to 24,217.34 points and the BSE Capital Goods index gained 0.17% to 14,716.81 points.

The results were declared after trading hours on Friday.

“The significant rise in fourth quarter net profit as well as sales has essentially been driven by infrastructure and heavy engineering businesses, and I expect L&T to continue focusing on these segments,” said Sandeep Upadhyay, senior vice-president and head of infrastructure solutions at Centrum Capital Ltd.

In January, L&T had slashed its forecast for growth in orders for the full fiscal year by five percentage points, citing an unpromising investment climate.

In its outlook statement, L&T said core sectors such as infrastructure, power, minerals, metals, defence, oil and gas, which hold business prospects for the company, await fresh impetus through “focused policy decisions and rigorous implementation”.

“The development agenda of the new government is expected to remove the bottle-necks presently stifling the growth in India and create an enabling business environment,” it said.

L&T benefited partly from an exceptional gain of `484.11 crore for the reporting quarter on the divestment of a part stake in a subsidiary.

International revenue, at `2,966 crore in the quarter ended 31 March, made up 15% of total revenue and rose 25% on a year-on-year basis.

For the full year ended 31 March, L&T reported a 27.36% rise in net profit to `5,493.13 crore against `4,312.88 crore in the year ago.

International revenue during the year, at `9,129 crore, made up 16% of total revenue and increased 22% from the previous year.

The company secured fresh orders worth `94,108 crore during the year ended 31 March, registering significant year-on-year growth of 15% on a large base.

The international order inflows during the year, at `30,752 crore, grew more than three times on a year-on-year basis, constituting 33% of the total order inflows. Major orders during the year were procured by the infrastructure segment.

“The order intake during the quarter ended 31 March, 2014 was steady at `26,737 crore. International order inflow during the quarter at `11,389 crore constituted 43% of the total order inflow for the quarter,” L&T said in a statement.

On the international front, the company said the Middle East offered promising prospects in the infrastructure and oil and gas sectors.

“To tackle the challenges surrounding such opportunities, the company is building its international organization, which aims at replicating the domestic success story in the Middle East,” it said.

L&T is looking at tapping the markets two years ahead.

Two of the company’s subsidiaries, L&T Infotech Ltd and L&T Technology Services, will start the process for an initial public offering (IPO) starting in July 2016.

Naik said the combined revenues of both these companies had crossed $1.1 billion (around `6,500 crore today), adding “both (IPOs) will be very well-taken”.

The company may consider selling its thermal power plant at Rajpura, Naik said. Mint had reported on 27 February that L&T is likely to sell its 1,400 megawatts thermal power plant worth `9,600 crore in Punjab once it becomes fully operational, as part of a plan to divest assets not central to its main businesses.

Malvika Joshi contributed to this story.

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