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42% fall in orders worries L&T; Share slips 5% despite special dividend

Larsen & Toubro's management expects to bounce back to normalcy in the second half of this financial year with order inflow from railways and metro, NHAI and power and water sectors

twitter-logoNevin John | October 29, 2020 | Updated 19:33 IST
42% fall in orders worries L&T; Share slips 5% despite special dividend
L&T's share price, which rose 10 per cent in the last two weeks, has fallen by 5 per cent to Rs 934 on Thursday after the result

The unabated decline in the order inflow worries the engineering and construction behemoth Larsen & Toubro (L&T), which saw five per cent dip in share price despite offering Rs 18 special dividend to the shareholders. Due to the sharp reduction in new orders from the private sector, L&T's order inflow has fallen by 42 per cent in the second quarter.

It bagged Rs 28,039 crore worth new orders in the September quarter that increased by 19 per cent compared to the first quarter (April-June), which was completely under national lockdown. The company bagged orders worth Rs 23,574 crore during April-June, registering decline of 39 per cent year-on-year. The outstanding order book stood at Rs 2.98 lakh crore in September and 24 per cent of which is from overseas.

The management expects to bounce back to normalcy in the second half of this financial year (H2) with order inflow from railways and metro, National Highway Authority of India (NHAI) and power and water sectors. "Predominantly, we see orders coming from the Central government, like high-speed corridor, railway projects and national highways," said SN Subrahmanyan, managing director and CEO, L&T at the press conference.

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L&T's share price, which rose 10 per cent in the last two weeks, has fallen by 5 per cent to Rs 934 on Thursday after the result.

"There are also projects coming from public sector companies. The state government projects with multi-lateral funding are also coming up. We do see fair number of prospects in areas such as water, metro rail, power transmission and distribution and hydropower generation," he added.

L&T has recently bagged the 25,000-crore high-speed corridor for Ahmedabad-Mumbai Bullet Train Project. Subrahmanyan is not hopeful of the revival if private capital expenditure. "It is still another two years away," he added.

L&T's 73 per cent order book is in infrastructure sector, 13 per cent in hydrocarbon sector, and 5 per cent in power. The company's consolidated net profit fell 44.73 per cent year-on-year (YoY) to Rs 1,410.29 crore for the September quarter compared to Rs 2,551.67 crore in the same quarter last year. The revenue from operations dropped 12.15 per cent to Rs 31,034 crore.

Also Read: IndiGo Q2 results: Loss widens to Rs 1,195 crore, revenue plunges 65%

L&T has reduced the consolidated debt by Rs 9,000 crore in Q2 to Rs 1,46,000 crore, thanks to sale of its electrical and automation business to French major Schneider Electric for Rs 14,000 crore. The debt-equity ratio stands at 1.78 times in September.

"The company has reduced debt, reserved some capital for investments, restructured and refinanced capital structure in some projects. The remaining Rs 2,500 crore left in the divestment will be disbursed as dividend," said CFO R Shankar Raman.

"The Central government's plan to fund state governments is expected to revive the infrastructure development. The water and power transmission verticals see a lot of orders coming," said Raman.

Subrahmanyan said the work at L&T's project sites are not yet normal because of social distancing and other pandemic precautions. "However, we did the largest mobilisation in the history and got back around 1.8 lakh workers back to the sites. The number of labourers increased to 2.5 lakh from 70,000 in the last two-three months," he said.

Also Read: 'Rs 1 crore fine or 5-year jail': Punishment for Delhi air pollution

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