L&T orders signal return of private capex

Engineering giant Larsen & Toubro Ltd has provided the first signs of a much-awaited recovery in India’s private capital spending, reporting a sharp rebound in domestic infrastructure orders in the September quarter.

The company’s infrastructure projects segment received domestic orders worth approximately 200 million TL. ₹27,400 crore during the quarter, almost 50% more than a year ago. Domestic order revenues related to this business segment, ₹20,000 crore mark after five financial quarters. L&T is by far India’s largest infrastructure developer.

“We see both private sector capital and infrastructure investments on the rise. We believe the trend will continue to move forward,” said R. Shankar Raman, full-time director and chief financial officer of L&T. Regarding private sector expenditures, he said that although there was an increase in order revenues in the second quarter, it is not yet clear whether this will turn into a trend.

L&T’s infrastructure segment builds factories, transportation infrastructure, heavy civil infrastructure, power transmission and distribution assets, renewable energy facilities, water and wastewater treatment plants, and mineral and metal refining plants. Received segment’s worth of orders ₹52,686 crore during the quarter, the rest came from abroad, primarily from the Middle East.

Senior government officials have frequently signaled a slowdown in capital spending and have repeatedly encouraged companies to invest and expand.

Analysts agreed that L&T’s figures painted a promising picture, but at least one analyst cautioned against jumping to conclusions.

“We saw good project completions in buildings, factories, metals and mining during the quarter,” said Amit Anwani, vice president and principal analyst for capital goods, industrial and defense sectors at Prabhudas Lilladher. However, he said Adani Group had received a large order for thermal power plants, which he estimated was worth approx. ₹20,000 crore. Without this order gain, private sector order flow remained normal in the second quarter.

Metro exit, electronic entrance

L&T said it is in advanced talks with the Telangana state government to divest its stake in Hyderabad Metro, a project it has developed and currently operates. The project caused a constant strain on the company’s financial situation due to low passenger numbers. The company has made it clear for the last few years that it wants to withdraw from the project.

Anwani said the exit will lead to a weaker balance sheet for L&T and will also improve its return on equity. However, the company will take a significant hit on its investments. An investment of approximately ₹7,000 crore and one-time payment of approx. ₹According to media reports, the company will receive Rs 2,000 crore from the state government ₹4,500- ₹5,000 crore for this project, he said.

The company confirmed his exit from one job and entry into another. CFO Shankar Raman said L&T is considering entering into electronics manufacturing.

“As part of our strategy to expand revenue streams, we are looking at electronics manufacturing in certain areas,” he said. He said the company may produce equipment for industries such as communications, aerospace and precision engineering, but will not produce consumer goods.

Solid Q2 earnings

L&T reports 10% increase in consolidated revenue ₹67,984 crore in the September quarter compared to the same period last year. This includes earnings from infrastructure development, manufacturing, IT outsourcing and lending, among other areas. Approximately 56% of this income came from abroad, while this rate was 52% in the same period last year. Profit increased by 16 percent ₹3,926 crore.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased by 7% annually ₹6,806 crore. EBITDA margin narrowed by 30 basis points to 7.3%.

L&T received orders worth ₹1.16 trillion on a consolidated level, the highest figure in all quarters. Order flow increased 44% year-on-year, driven by significant project wins in West Asia. The order book currently stands ₹6.67 trillion – another corporate record.

“The company reported an all-round financial performance across all parameters,” Chairman and Managing Director SN Subrahmanyan said in a press release. “Our ability to consistently secure large orders across segments and geographies is a true testament to the company’s leadership position in the EPC space.”

Raman said the company is well positioned to exceed its guidance of increasing order flow by 10% this fiscal compared to FY25. worth of orders. ₹3.5 trillion last year.

He said L&T is also on track to achieve its revenue growth target of 15% this fiscal. Meanwhile, achieving the 8.5% EBITDA margin expectation was “a work in progress.”

L&T shares started the close with a 0.53% loss. ₹On Wednesday, BSE gained 3,951.7 points, while benchmark Sensex closed 0.44% higher. Earnings were announced after trading hours.

The company on Wednesday announced the appointment of former Niti Aayog chief executive Amitabh Kant and former Saint-Gobain India chairman B. Santhanam as independent directors for a period of five years. Incumbent independent director Preetha Reddy has been reappointed for a five-year term.