L&T Beats Estimates, Sets Bigger Targets
Q4 NET RISES 69% Chairman AM Naik sees demand picking up soon on new govt’s infra push, expects 15% revenue growth in FY15
Larsen & Toubro has set healthylooking growth targets for 2014-15 after exceeding estimates for the past fiscal year, as the engineering major is confident of a recovery in demand from an expected infrastructure push by the new government.
“With the change in government, we see improvement coming sooner than we had expected,” chairman AM Naik said on Friday. “With impetus to infrastructure, efforts to boost other sectors and the possibility of privatisation of defence, we are well positioned to get or- ders,” Naik said.
Prime minister Narendra Modi has promised to work towards turning around the economy, and infrastructure is expected to be one of the focus areas to drive overall growth. Higher infrastructure spending would benefit L&T, the nation’s largest engineering and construction company.
Modi’s pro-business image has already started reflecting on market sentiment, with the benchmark stock index setting a record high after his election. The improved market sentiment has made the company to start working towards listing two of its units — L&T Infotech and L&T Technology Services — by 2016.
L&T expects new orders to grow 20% in the fiscal year that began on April 1, and revenue to expand 15%. Still, Naik cautioned that given the slowdown in the sector, the recovery would take time to set in. “It would be a few months, may be by August-September,” he said. Financing of new projects would be key given the deficit the government faces and its huge outstanding payments, Naik said, while asking the government to take care of these before starting the tendering process. Naik said the private sector may take longer to get back on its feet. “Private sector would take longer to start investing because we still need a lot of financial reforms. A lot of groups that are our customers are not in a mood to go ahead themselves as they are cleaning up their balance sheet.” Poor financial health of developers and delays in projects forced L&T to write off orders worth .` 15,000 crore in the last fiscal year, as reported by ET on April 3. The company said its order book of .` 1.63-lakh crore does not have any more slow-moving orders. Order execution picked up in the final quarter of fiscal 2014, helping L&T post net revenue of .` 20,079.10 crore, up 11% year-on-year despite challenging market conditions. Its net profit in the JanuaryMarch period soared 69% from a year earlier to .` 2,723.48 crore. According to Reuters, the average estimate was for a profit of .` 1,615 crore. During the fiscal year, L&T’s sales rose 10% to .` 56,598.92 crore, while net profit increased 25% to .` 5,493.13 crore. The company said it is working on a plan to list its toll road assets in Singapore via an initial public offering of a business trust. But the change in the government has boosted sentiment and led it to also revive the IPO plan for the two technology arms.