L&T Q4 Results: Profit Falls Even As Order Inflow Improves

Trainees at an L&T Construction Skills Training Institute. (Photographer: Adeel Halim/Bloomberg)

Larsen & Toubro Ltd. reported a decline in quarterly profit even as it bagged more orders in a quarter hit by the Covid-19 pandemic across the globe.

Net profit fell 6.5% year-on-year to Rs 3,197 crore in the quarter ended March, according to its exchange filing. Analysts' estimates compiled by Bloomberg had pegged profit at Rs 3,062 crore.

Revenue rose 2% over the same period last year to Rs 44,245 crore—higher than the estimated Rs 43,896 crore.
Operating profit fell 3% to Rs 5,121 crore.
Margin narrowed 60 basis points to 11.6%.

The conglomerate—seen as a barometer for private investments in India—received orders worth Rs 57,785 crore during the quarter. A majority of them came from the infrastructure segment.

While orders grew 5% over last year, L&T missed its order inflow target that it had guided for the full financial year 2020. L&T's total orders for the fiscal stood at Rs 1.86 lakh crore compared to its target of 10-12% growth, which translates to inflows of Rs 1.94-1.98 lakh crore. The consolidated orderbook stood 4 percent higher at Rs 3.03 lakh crore as of March 31.

The company also spent more on working capital as a portion of their sales due to payments to vendors, Chief Financial Officer R Shankar Raman said in a conference call after the earnings. That impacted financial performance. In FY20, it's working capital was 23% of the sales compared with 18% in the previous fiscal.

The last fortnight of the quarter was marked by challenges arising from the nationwide lockdown imposed to curb the spread of Covid-19, L&T said. With economic activity grinding to a halt, the company saw subdued business as the execution of projects was halted, it said.

To tackle the uncertainty due to the Covid-19 pandemic, L&T will take measures to build sufficient liquidity on its balance sheet, adapt work-at-home practices in its business model, optimise digital initiatives for site execution and engage with its stakeholders to revisit contract rights and obligations, it said.

While the initial quarters of FY 2020-21 are expected to be adversely affected by the current upheaval, we expect growth revival in the later part of the financial year assuming things get better from here.

L&T Outlook

L&T also refused to give guidance for the new financial year as it traditionally does. “April and May have been tough. We were the only country that was completely shut. We had budgets but that is of no relevance now. We will have to assess the situation and come back with the guidance post that,” Raman said.

Besides, the company is also staring at a shortage of workers. Raman said some of the labour force which had gone back home for Holi have still not returned. “Normally, we require 2.20 lakh labourers,” he said. At the moment, we have 1.2 lakh labourers at sites.”

The board of directors have recommended a final dividend of Rs 8 per share for the financial year.

Shares of L&T closed 2.61% higher, ahead of the results, while the benchmark S&P BSE Sensex ended trade 0.9% up.