Mumbai, January 22, 2020 :
Company's strong position helps sustain in challenging times
Larsen & Toubro recorded Consolidated Gross Revenue of ₹36,243 crore from continuing operations for the quarter ended December 31, 2019, achieving y-o-y growth of 6%. The International revenue during the quarter at ₹12,871 crore constituted 36% of the total revenue.
For the period April-December 2019, the Consolidated Gross revenue at ₹101,207 crore recorded a y-o-y increase of 10%.
Consolidated Profit After Tax (PAT) from continuing operations for the quarter ended December 31, 2019 at ₹2,161 crore registered growth of 13.8% over the corresponding quarter of the previous year. The overall PAT at ₹2,352 crore, including the PAT from discontinued operations for the quarter ended December 31, 2019 grew by 15.2% over the corresponding quarter of the previous year.
For the nine-month ended December 31, 2019, overall PAT including the PAT from discontinued operations at ₹6,352 crore registered an increase of 15.8% over the profits for similar period last year.
The Company successfully won new orders worth ₹41,579 crore at the group level during the quarter ended December 31, 2019, amid subdued business environment. International orders during the quarter at ₹17,901 crore increased to 43% of the total order inflow, on large value order wins in Power Transmission & Distribution and Metallurgical and Material Handling business.
On a cumulative basis, the order inflow for the nine months period ended December 31, 2019 stood at ₹128,571 crore, growing at 11% over the corresponding period of the previous year.
The Consolidated Order Book of the group stood at ₹306,280 crore as at December 31, 2019, registering a reasonably high growth of 5% over March, 2019. International orders constitute 24% of the total Order Book.
Infrastructure Segment
Infrastructure Segment secured orders of ₹28,115 crore, during the quarter ended December 31, 2019, registering growth of 28% compared to previous year. Order wins were mainly in Power Transmission & Distribution business, Industrial water systems, Network management system and Freight facility package. International orders at ₹11,595 crore constituted 41% of the total order inflow of the segment during the quarter, with large value order wins in Africa and Middle East.
The Order Book of the Segment stood at ₹223,695 crore as at December 31, 2019, with the international order book constituting 20% of the total.
Infrastructure Segment recorded Customer Revenue of ₹17,249 crore for the quarter ended December 31, 2019 leading to a y-o-y decline of 5%. Challenges faced in projects in Andhra Pradesh and for a short duration in Maharashtra and Delhi, coupled with lower fund allocation in some states adversely impacted the execution progress. International revenue constituted 25% of the total customer revenue of the segment during the quarter.
The EBITDA margin of the segment during the quarter ended December 31, 2019 was 6.1% vis-à-vis 5.4% recorded in the corresponding quarter of the previous year, largely due to realisation of some variation claims and better job mix.
Power Segment
Power Segment secured orders of ₹816 crore for the quarter ended December 31, 2019 on receipt of an order for Flue Gas Desulphurisation (FGD).
The Order Book of the Segment grew to ₹12,933 crore as at December 31, 2019, with receipt of a major thermal power plant order and a slew of FGD orders during the year. The international order book constitutes 7% of the total. The Order Book now provides good forward revenue visibility.
Power Segment recorded customer revenue of ₹694 crore during the quarter ended December 31, 2019, registering a y-o-y decrease of 23% on a depleted opening order book and the new awards yet to pick up execution momentum. International revenue constituted 12% of the total customer revenue of the segment during the quarter.
The segment EBITDA margin for the quarter ended December 31, 2019 was at 3.4%, higher as compared to 2.9% recorded in corresponding quarter of the previous year.
Heavy Engineering Segment
Heavy Engineering Segment secured orders valued at ₹497 crore during the quarter ended December 31, 2019 representing a decline of 10% y-o-y mainly due to deferment of orders. International orders constituted 47% of the total order inflow of the segment during the quarter.
The Order Book of the Segment stood at ₹3,788 crore as at December 31, 2019, with 55% being international.
The Segment recorded Customer Revenue of ₹723 crore registering growth of 20% over the corresponding quarter of the previous year, with opening order book gaining execution momentum. International sales constituted 56% of the total customer revenue of the segment.
The EBITDA margin of the segment at a healthy 23.5% for the quarter ended December 31, 2019 registered improvement over similar quarter in the previous year at 20.5%, reflecting impact of operational efficiencies.
Defence Engineering Segment
Defence Engineering Segment received orders of ₹168 crore during the quarter ended December 31, 2019, representing a decline of 66% over the corresponding quarter of the previous year. International orders constituted 45% of the total order inflow of the segment. The gap between Government's aspiration and policy prescriptions, coupled with fund shortage continues to impact the order flows in this sector.
The Order Book of the Segment stood at ₹9,666 crore as on December 31, 2019, with the international order book constituting 18% of the total.
Defence Engineering Segment recorded customer revenue of ₹1,063 crore registering a y-o-y growth of 6% over the corresponding quarter of the previous year led by noteworthy progress in execution of a marquee order for tracked artillery guns. International Revenue constituted 9% of the total customer revenue of the segment.
The EBITDA margin of the segment at 20.5% was higher for the quarter ended December 31, 2019 as compared to corresponding quarter of the previous year at 9.0%, with operational efficiencies and better project mix.
Hydrocarbon Segment
Hydrocarbon Segment recorded Customer Revenue of ₹4,386 crore during the quarter ended December 31, 2019, registering a robust y-o-y growth of 17% on back of strong execution momentum in Onshore vertical. International Revenue constituted 51% of the total customer revenue of the segment for the quarter ended December 31, 2019.
The segment recorded improvement in the EBITDA Margin to 12.1% for the quarter ended December 31, 2019 as compared to the corresponding quarter of the previous year at 8.2%, on back of execution efficiencies and claim realisation.
The segment however did not secure any major order during the quarter ended December 31, 2019. The segment has a healthy order book of ₹46,441 crore crore as on December 31, 2019 with international orders comprising 49%.
IT & Technology Services (IT&TS) Segment
IT & Technology Services Segment achieved Customer Revenue of ₹6,090 crore during the quarter ended December 31, 2019 including ₹1,965 crore on account of the Mindtree acquisition. International sales constituted 92% of the total customer revenue of the segment for the quarter ended December 31, 2019. An array of business verticals has contributed to the strong growth which is above the industry average (CPG, Retail & Pharma, Energy & Utilities and Manufacturing in L&T Infotech Group, Transportation, Medical devices and Plant Engineering verticals in L&T Technology Services Group and Hi-Tech & Media, Travel & Hospitality and BFSI in Mindtree Limited). Due to consolidation of Mindtree limited from second quarter of current year, the resultant figures for the current periods are not comparable with the previous periods to that extent.
The EBITDA Margin for IT&TS Segment declined to 21.0% for the quarter ended December 31, 2019 as compared to the corresponding quarter of the previous year due to consolidation of Mindtree results coupled with increase in employee costs across the segment and increased composition of onsite work.
Financial Services Segment
Financial Services Segment recorded Customer Revenue of ₹3,550 crore during the quarter ended December 31, 2019, registering a y-o-y growth of 9%, driven by growth in loan assets of 'focussed' business lines.
The Loan Book grew from ₹94,711 crore to ₹99,453 crore registering a growth of 5% in a volatile and tight liquidity environment. The operating margin of the financial services segment for the quarter ended December 31, 2019 was lower at 21.3% as compared to the corresponding quarter of previous year on account of higher credit cost coupled with lower disbursements and prudent provisions. The business is focusing on retailisation of the loan book, sustaining healthy Net Interest Margins, improving the asset quality and broad-basing funding sources.
Developmental Projects Segment
During the current quarter, 1.5 km metro line from Hitec City station to Raidurg was inaugurated. Developmental Projects Segment registered Customer Revenue of ₹1,238 crore during the quarter ended December 31, 2019, recording 4% growth over the corresponding quarter of the previous year, consequent to progressive commissioning of metro rail in Hyderabad.
The EBITDA Margin of the Segment for the quarter ended December 31, 2019 consequently improved to 17.3% as compared with the margin during the corresponding quarter of the previous year.
Others Segment
Others segment comprises Realty, Construction & Mining Machinery, Industrial Machinery & Products and Valves businesses.
Customer Revenue of ❝Others❞ Segment during the quarter ended December 31, 2019 at ₹1,248 crore registered decline of 22% over corresponding quarter of the previous year since that period included revenue from a large value transaction pertaining to the sale of commercial property in Realty business. International sales constituted 12% of the total customer revenue of the segment.
During the quarter ended December 31, 2019, the segment EBITDA margin stood at 21.9%, lower as compared to margin in the corresponding quarter of the previous year, mainly on account of profits from lumpy commercial property sale in the previous year.
Electrical & Automation (E&A) Segment (Discontinued Operations)
Electrical & Automation Segment which has been classified as 'Discontinued Operations' in the financial statements pending divestment to Schneider Electric, has clocked Customer Revenue of ₹1,331 crore during the quarter ended December 31, 2019. International Revenue constituted 27% of the total customer revenue of the segment for the quarter ended December 31, 2019.
The segment recorded improvement in the EBITDA Margin to 19.3% for the quarter ended December 31, 2019 as compared to the corresponding quarter of the previous year with favourable sales mix and reduced input cost. Fulfilment of various pre-conditions to the divestment of the business is progressing satisfactorily and the sale transaction is expected to conclude in the next few months.
Outlook
The Indian economy has, over the last few quarters, been exhibiting signs of lacklustre growth in the backdrop of slowdown in consumption, lower tax collections, fiscal slippages in State and Central Government, muted private investment and a prolonged bout of tight credit conditions. To counter the challenges, the Government has initiated several measures, both monetary and fiscal viz. reduction in corporate tax rates, re-capitalisation of banks and consolidation within the banking sector, initiatives to improve credit availability, faster resolution of stressed assets and announcement of packages for reviving sectors like real estate and exports. The steps taken are expected to revive sentiment and spur domestic demand in the medium to long term.
During the quarter the Government released a document on National Infrastructure pipeline, detailing a plan to invest Rs.100+ lac crore on infrastructure over a six year period. This is expected to channelise resources into areas of infrastructure that currently act as impediments to growth and require resource augmentation. The forthcoming budget is expected to retain focus on potential near-term demand boosters from the Government.
On the global front, a synchronised slowdown in manufacturing and trade, lingering uncertainty over US-China trade, heightened geo-political tensions between US and Iran, OPEC curbs on crude output aimed at holding up oil prices coupled with protectionist measures adopted by various countries continues to wield pressure on the business world. On the positive side, resolution of Brexit, signs of a possible trade deal between US and China and easing of monetary policies augur well for the global economy.
The Company is able to tide over the challenging environment with its strong Balance Sheet, diversified portfolio and robust order book which act as a bulwark against short term economic cyclicality. The Company's proven execution leadership, ability to embrace new age digital technologies, strong talent pool, financial discipline and professional process-driven strategies places it in an advantageous position to effectively capture opportunities as and when they emerge. The Company continues to focus on cost efficiencies, resource optimisation, leveraging technology for productivity gains and efficient fund management with the ultimate aim of delivering shareholder value through superior return on equity.
Background
Larsen & Toubro is an Indian multinational engaged in technology, engineering, construction, manufacturing and financial services with over USD 21 billion in revenue. It operates in over 30 countries worldwide. A strong, customer-focused approach and the constant quest for top-class quality have enabled L&T to attain and sustain leadership in its major lines of business for eight decades.
Statement of consolidated unaudited financial results for the quarter and nine months ended December 31, 2019
Consolidated unaudited segment-wise Revenue, Result, Total assets and Total liabilities in terms of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended:
* Project Classification