The earnings for the April-June quarter of the main engineering, Larsen and Toubro (L&T) were a kind of mixed bag, mainly due to the slowdown in bidding activity by the central and state governments due to the second wave of Covid -19. As a result, L & T’s net income and operating income did not meet Bloomberg consensus estimates. Revenues, however, were in line with estimates.
The company reported a nearly fourfold year-on-year increase in its consolidated net profit to Rs 1,174 crore, which was below analyst estimates of Rs 1,503.43 crore. The healthy execution of the projects led to a 38% year-on-year increase in the company’s consolidated revenue from operations to Rs 29,335 crore. However, the project’s progress was affected by regional lockdowns, industrial oxygen shortages, and supply chain disruptions.
Furthermore, 38% of the total revenue came from international business which stood at Rs 11,186 crore.
Consolidated Ebitda (earnings before interest, taxes, depreciation and amortization) for the first quarter ended June 30, 2021, almost doubled year-on-year to Rs 3,171.49 crore, while Ebitda margins increased 320 basis points to 10.8% with better execution. The company has maintained its fiscal year 22 guidance of mid-teens growth in orders and revenue, and stable margins.
Speaking to the media on a post-earnings conference call, R Shankar Raman, L & T’s CFO, said: “The number of tenders that were postponed from the first quarter to subsequent quarters has been almost on the order of 40%. of the level that was expected, as we enter the year ”. The delay in decision-making due to the unavailability of government officials with the increase in Covid-19 infections during April and May pushed back the momentum of the tender, the company’s management said.
The results for the two quarters will not be strictly comparable, as COVID-19 disruptions resulting from the nationwide lockdown severely affected the company’s performance in the first quarter of last year. L&T net profit fell to Rs 303 crore, suffering a sharp 79% YoY decline for the April-June 2020 quarter. “In a way, the first quarter has been a start-stop-start quarter.
It has been more like an outdoor sport interrupted by rain. The company has done well to maintain its focus and purpose and delivered a satisfactory performance, ”he said.
Raman said that although the economy is regaining its growth momentum, the country was caught off guard by the second wave of the pandemic. “The second wave of the pandemic was much shorter compared to the first wave, but much more intense. The country’s lack of preparedness, as well as the lack of medical infrastructure, did not help the cause either. Ultimately, there was a significant disruption when the new quarter of the new financial year began, ”he said.
The heavy engineering and infrastructure company secured orders worth Rs 26,557 crore in the quarter ending in June, posting growth of 12.6% over the corresponding period a year earlier. During the quarter, orders were received in various segments such as subways, rural water supply, minerals and metals, residential, power transmission and distribution, energy and hydrocarbons in the offshore sectors. International orders of Rs 9,045 crore during the quarter accounted for 34% of total order intake. The group’s consolidated order book stood at Rs 3.24 lakh crore as of June 30, 2021, with international orders accounting for 20% of the total order book.
According to SN Subrahmanyan, CEO and Managing Director of L&T, while the tender shows signs of improvement, direct orders from the central and state government are expected to slow down as the central and state governments are also keeping up with the deficit, the spending on the pandemic and others. Social problems. “Multilateral funded projects and public sector spending will accelerate. I see that the private sector has lowered much of the leverage that they had in terms of debt, so we are seeing a certain amount of private sector spending on minerals and metals. , buildings and data centers, so we should be able to balance it in the short term, ”he said.
He added that the “greatest opportunity” in front of the government is job creation. “You cannot continue with the MNREGA schemes and other forms of direct transfers of benefits beyond a period of time, which is free money that is delivered with very little work to do. Therefore, it is imperative that projects recover. I believe that most of the central, state and public sector units take advantage of this opportunity. It is very clear that all attempts are being made to promote projects, ”he said.