L&T Does Not Expect Impact From Israel-Hamas War, Says CFO Shankar Raman

Larsen & Toubro Ltd. will not face any headwinds from the ongoing Israel- Hamas war as the supply zones are not in the conflict zone, according to R Shankar Raman.

"Our project size is working full clip to their schedule and the sponsors have not slowed down any bit," Raman, the group's chief financial officer, told BQ Prime's Sajeet Manghat in an interview. 

Even if the war spills over to the neighbouring regions, none of their supply chains are in the conflict zone, he said. “Fortunately for us, from both technical and risk management points of view, we have always looked at those regions as volatile regions.” 

However, given that it could be a potential risk, Raman said they will be watchful, "as we don't know how it will escalate". 

The company's profit rose in the second quarter, surpassing analysts' estimates, led by strong execution and accelerated progress in the projects and manufacturing portfolio.

L&T Q2 FY24 Earnings Highlights (Consolidated, YoY)

• Revenue from operations rose 19.3% to Rs 51,024 crore (Bloomberg estimate: Rs 50,670 crore).

• Ebitda up 15.1% at Rs 5,632 crore (Bloomberg estimate: Rs 5,449.8 crore).

• Ebitda margin at 11% (Bloomberg estimate: 10.8%).

Capex Momentum

While the infrastructure push in the Middle East was largely in the oil and gas space earlier, they are quite broad-based currently, he said.  

The capex momentum in Saudia Arabia in particular and the Middle East in general has been encouraging for the last 12 months, Raman said. “India's infrastructure gave us an opportunity on multiple fronts. At the current growth rate, the domestic capex—especially in the sectors that are currently active—will continue to grow and a lot might join in."

The company has about Rs 3 lakh crore of pipeline from the Middle Eastern countries and internationally, it stands at about Rs 4 lakh crore, the CFO said. In India, the current order win rate has been 15% and the margin in the third quarter will be better than the current quarter, he said. 

In terms of revenue and order flow, the company will outperform the guidance that was given at the beginning of the year, Raman said.

Larsen & Toubro will also be incorporating a fabless semiconductor chip arm for Rs 830 crore.

The company's board approved the incorporation of a wholly owned subsidiary to engage in the business of fabless semiconductor chip design and product ownership, it said in its exchange filing on Tuesday.

Watch the full conversation here: