A diplomatic standoff between Qatar and its neighbours in the Gulf might have repercussions for Indian engineering and construction companies, which bagged orders worth more than $55 million in the last financial year from five countries in the Middle East – Saudi Arabia, the United Arabs Emirates, Kuwait, Oman and Qatar.
Larsen and Toubro Ltd. is one such company, with close to 30 percent its order book coming from the abroad. The infrastructure and capital goods major gets bulk of its foreign orders from the Middle East, and had projected a growth of 12-14 percent in new orders for the current financial year.
Any major blowout in the Middle East would lead to a downside to the company's order inflow and revenue growth projections, said brokerage house Jefferies.
Also Read: Saudi-Led Alliance Moves to Isolate Qatar Over Iran Tensions
The Mumbai-headquartered company had won a $360 million contract for the Al Rayyan Stadium in Qatar, which will host the 2022 FIFA world cup, according to the company's stock exchange filings.
More Competition
Chinese and Kuwaiti firms are also looking to ramp up their presence in Qatar, making it tougher for L&T to bag new orders, said the brokerage house.
With domestic order book still remaining lean, Indian capital goods and construction majors have been looking for new orders abroad. L&T's Executive Chairman AM Naik has warned of a challenging year ahead for growth.
The government will have to spend otherwise there will be no growth in the economy. GDP may also come down if private sector doesn't invest and I don't see private sector investment coming anytime soon enough. At least not this year.AM Naik, Executive Chairman, L&T
Not All Is Lost
The brokerage house remains bullish on the company though, citing the existing order book and prudent capital management which will enhance medium-term return on equity. It has set a target price of Rs 2,300 per share.
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